JPMORGAN CHASE & CO - Quarter Report: 2022 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended | Commission file | |||||||||||||
June 30, 2022 | number | 1-5805 |
JPMorgan Chase & Co.
(Exact name of registrant as specified in its charter)
Delaware | 13-2624428 | ||||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) | ||||||||||
383 Madison Avenue, | |||||||||||
New York, | New York | 10179 | |||||||||
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 270-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Common stock | JPM | The New York Stock Exchange | ||||||
Depositary Shares, each representing a one-four hundredth interest in a share of 5.75% Non-Cumulative Preferred Stock, Series DD | JPM PR D | The New York Stock Exchange | ||||||
Depositary Shares, each representing a one-four hundredth interest in a share of 6.00% Non-Cumulative Preferred Stock, Series EE | JPM PR C | The New York Stock Exchange | ||||||
Depositary Shares, each representing a one-four hundredth interest in a share of 4.75% Non-Cumulative Preferred Stock, Series GG | JPM PR J | The New York Stock Exchange | ||||||
Depositary Shares, each representing a one-four hundredth interest in a share of 4.55% Non-Cumulative Preferred Stock, Series JJ | JPM PR K | The New York Stock Exchange | ||||||
Depositary Shares, each representing a one-four hundredth interest in a share of 4.625% Non-Cumulative Preferred Stock, Series LL | JPM PR L | The New York Stock Exchange | ||||||
Depositary Shares, each representing a one-four hundredth interest in a share of 4.20% Non-Cumulative Preferred Stock, Series MM | JPM PR M | The New York Stock Exchange | ||||||
Alerian MLP Index ETNs due May 24, 2024 | AMJ | NYSE Arca, Inc. | ||||||
Guarantee of Callable Fixed Rate Notes due June 10, 2032 of JPMorgan Chase Financial Company LLC | JPM/32 | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
Emerging growth company | ☐ | ||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Number of shares of common stock outstanding as of June 30, 2022: 2,932,572,390
FORM 10-Q
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2
JPMorgan Chase & Co.
Consolidated financial highlights (unaudited)
As of or for the period ended, (in millions, except per share, ratio, headcount data and where otherwise noted) | Six months ended June 30, | ||||||||||||||||||||||||||||
2Q22 | 1Q22 | 4Q21 | 3Q21 | 2Q21 | 2022 | 2021 | |||||||||||||||||||||||
Selected income statement data | |||||||||||||||||||||||||||||
Total net revenue | $ | 30,715 | $ | 30,717 | $ | 29,257 | $ | 29,647 | $ | 30,479 | $ | 61,432 | $ | 62,745 | |||||||||||||||
Total noninterest expense | 18,749 | 19,191 | 17,888 | 17,063 | 17,667 | 37,940 | 36,392 | ||||||||||||||||||||||
Pre-provision profit(a) | 11,966 | 11,526 | 11,369 | 12,584 | 12,812 | 23,492 | 26,353 | ||||||||||||||||||||||
Provision for credit losses | 1,101 | 1,463 | (1,288) | (1,527) | (2,285) | 2,564 | (6,441) | ||||||||||||||||||||||
Income before income tax expense | 10,865 | 10,063 | 12,657 | 14,111 | 15,097 | 20,928 | 32,794 | ||||||||||||||||||||||
Income tax expense | 2,216 | 1,781 | 2,258 | 2,424 | 3,149 | 3,997 | 6,546 | ||||||||||||||||||||||
Net income | $ | 8,649 | $ | 8,282 | $ | 10,399 | $ | 11,687 | $ | 11,948 | $ | 16,931 | $ | 26,248 | |||||||||||||||
Earnings per share data | |||||||||||||||||||||||||||||
Net income: Basic | $ | 2.77 | $ | 2.64 | $ | 3.33 | $ | 3.74 | $ | 3.79 | $ | 5.40 | $ | 8.30 | |||||||||||||||
Diluted | 2.76 | 2.63 | 3.33 | 3.74 | 3.78 | 5.39 | 8.28 | ||||||||||||||||||||||
Average shares: Basic | 2,962.2 | 2,977.0 | 2,977.3 | 2,999.9 | 3,036.6 | 2,969.6 | 3,054.9 | ||||||||||||||||||||||
Diluted | 2,966.3 | 2,981.0 | 2,981.8 | 3,005.1 | 3,041.9 | 2,973.7 | 3,060.3 | ||||||||||||||||||||||
Market and per common share data | |||||||||||||||||||||||||||||
Market capitalization | 330,237 | 400,379 | 466,206 | 483,748 | 464,778 | 330,237 | 464,778 | ||||||||||||||||||||||
Common shares at period-end | 2,932.6 | 2,937.1 | 2,944.1 | 2,955.3 | 2,988.2 | 2,932.6 | 2,988.2 | ||||||||||||||||||||||
Book value per share | 86.38 | 86.16 | 88.07 | 86.36 | 84.85 | 86.38 | 84.85 | ||||||||||||||||||||||
Tangible book value per share (“TBVPS”)(a) | 69.53 | 69.58 | 71.53 | 69.87 | 68.91 | 69.53 | 68.91 | ||||||||||||||||||||||
Cash dividends declared per share | 1.00 | 1.00 | 1.00 | 1.00 | 0.90 | 2.00 | 1.80 | ||||||||||||||||||||||
Selected ratios and metrics | |||||||||||||||||||||||||||||
Return on common equity (“ROE”)(b) | 13 | % | 13 | % | 16 | % | 18 | % | 18 | % | 13 | % | 21 | % | |||||||||||||||
Return on tangible common equity (“ROTCE”)(a)(b) | 17 | 16 | 19 | 22 | 23 | 16 | 26 | ||||||||||||||||||||||
Return on assets(b) | 0.89 | 0.86 | 1.08 | 1.24 | 1.29 | 0.87 | 1.44 | ||||||||||||||||||||||
Overhead ratio | 61 | 62 | 61 | 58 | 58 | 62 | 58 | ||||||||||||||||||||||
Loans-to-deposits ratio | 45 | 42 | 44 | 43 | 45 | 45 | 45 | ||||||||||||||||||||||
Firm Liquidity coverage ratio (“LCR”) (average)(c) | 110 | 110 | 111 | 112 | 111 | 110 | 111 | ||||||||||||||||||||||
JPMorgan Chase Bank, N.A. LCR (average)(c) | 169 | 181 | 178 | 174 | 171 | 169 | 171 | ||||||||||||||||||||||
Common equity Tier 1 (“CET1”) capital ratio(d) | 12.2 | 11.9 | 13.1 | 12.9 | 13.0 | 12.2 | 13.0 | ||||||||||||||||||||||
Tier 1 capital ratio(d) | 14.1 | 13.7 | 15.0 | 15.0 | 15.1 | 14.1 | 15.1 | ||||||||||||||||||||||
Total capital ratio(d) | 15.7 | 15.4 | 16.8 | 16.9 | 17.1 | 15.7 | 17.1 | ||||||||||||||||||||||
Tier 1 leverage ratio(c)(d) | 6.2 | 6.2 | 6.5 | 6.6 | 6.6 | 6.2 | 6.6 | ||||||||||||||||||||||
Supplementary leverage ratio (“SLR”)(c)(d) | 5.3 | 5.2 | 5.4 | 5.5 | 5.4 | 5.3 | 5.4 | ||||||||||||||||||||||
Selected balance sheet data (period-end) | |||||||||||||||||||||||||||||
Trading assets | $ | 465,577 | $ | 511,528 | $ | 433,575 | $ | 515,901 | $ | 520,588 | $ | 465,577 | $ | 520,588 | |||||||||||||||
Investment securities, net of allowance for credit losses | 663,718 | 679,460 | 672,232 | 595,132 | 573,637 | 663,718 | 573,637 | ||||||||||||||||||||||
Loans | 1,104,155 | 1,073,285 | 1,077,714 | 1,044,615 | 1,040,954 | 1,104,155 | 1,040,954 | ||||||||||||||||||||||
Total assets | 3,841,314 | 3,954,687 | 3,743,567 | 3,757,576 | 3,684,256 | 3,841,314 | 3,684,256 | ||||||||||||||||||||||
Deposits | 2,471,544 | 2,561,207 | 2,462,303 | 2,402,353 | 2,305,217 | 2,471,544 | 2,305,217 | ||||||||||||||||||||||
Long-term debt | 288,212 | 293,239 | 301,005 | 298,465 | 299,926 | 288,212 | 299,926 | ||||||||||||||||||||||
Common stockholders’ equity | 253,305 | 253,061 | 259,289 | 255,203 | 253,548 | 253,305 | 253,548 | ||||||||||||||||||||||
Total stockholders’ equity | 286,143 | 285,899 | 294,127 | 290,041 | 286,386 | 286,143 | 286,386 | ||||||||||||||||||||||
Headcount | 278,494 | 273,948 | 271,025 | 265,790 | 260,110 | 278,494 | 260,110 | ||||||||||||||||||||||
Credit quality metrics | |||||||||||||||||||||||||||||
Allowances for credit losses | $ | 20,019 | $ | 19,591 | $ | 18,689 | $ | 20,528 | $ | 22,585 | $ | 20,019 | $ | 22,585 | |||||||||||||||
Allowance for loan losses to total retained loans | 1.69 | % | 1.69 | % | 1.62 | % | 1.86 | % | 2.02 | % | 1.69 | % | 2.02 | % | |||||||||||||||
Nonperforming assets | $ | 7,845 | $ | 8,605 | $ | 8,346 | $ | 8,882 | $ | 9,802 | $ | 7,845 | $ | 9,802 | |||||||||||||||
Net charge-offs | 657 | 582 | 550 | 524 | 734 | 1,239 | 1,791 | ||||||||||||||||||||||
Net charge-off rate | 0.25 | % | 0.24 | % | 0.22 | % | 0.21 | % | 0.31 | % | 0.24 | % | 0.38 | % |
(a)Pre-provision profit, TBVPS and ROTCE are each non-GAAP financial measures. Tangible common equity (“TCE”) is also a non-GAAP financial measure. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 18-19 for a further discussion of these measures.
(b)Quarterly ratios are based upon annualized amounts.
(c)For the six months ended June 30, 2022 and 2021, the percentage represents average ratios for the three months ended June 30, 2022 and 2021.
(d)The capital metrics reflect the relief provided by the Federal Reserve Board in response to the COVID-19 pandemic, including the Current Expected Credit Losses (“CECL”) capital transition provisions. Refer to Capital Risk Management on pages 44-49 of this Form 10-Q and pages 86-96 of JPMorgan Chase’s 2021 Form 10-K for additional information.
3
INTRODUCTION |
The following is Management’s discussion and analysis of the financial condition and results of operations (“MD&A”) of JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) for the second quarter of 2022.
This Quarterly Report on Form 10-Q for the second quarter of 2022 (“Form 10-Q”) should be read together with JPMorgan Chase’s Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”). Refer to the Glossary of terms and acronyms and line of business (“LOB”) metrics on pages 182-190 for definitions of terms and acronyms used throughout this Form 10-Q.
This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the current beliefs and expectations of JPMorgan Chase’s management, speak only as of the date of this Form 10-Q and are subject to significant risks and uncertainties. Refer to Forward-looking Statements on page 87 of this Form 10-Q and Part I, Item 1A, Risk Factors, on pages 9-33 of the 2021 Form 10-K 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. There is no assurance that actual results will be in line with any outlook information set forth herein, and the Firm does not undertake to update any forward-looking statements.
JPMorgan Chase & Co. (NYSE: JPM), a financial holding company incorporated under Delaware law in 1968, is a leading financial services firm based in the United States of America (“U.S.”), with operations worldwide. JPMorgan Chase had $3.8 trillion in assets and $286.1 billion in stockholders’ equity as of June 30, 2022. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers predominantly in the U.S., and many of the world’s most prominent corporate, institutional and government clients globally.
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 48 states and Washington, D.C. as of June 30, 2022. JPMorgan Chase’s principal non-bank 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 subsidiaries outside the U.S. are J.P. Morgan Securities plc and J.P. Morgan SE (“JPMSE”), which are subsidiaries of JPMorgan Chase Bank, N.A. and are based in the United Kingdom (“U.K.”) and Germany, respectively.
For management reporting purposes, the Firm’s activities are organized into four major reportable business segments, as well as a Corporate segment. The Firm’s consumer business segment is Consumer & Community Banking (“CCB”). The Firm’s wholesale business segments are the Corporate & Investment Bank (“CIB”), Commercial Banking (“CB”), and Asset & Wealth Management (“AWM”). Refer to Note 25 of this Form 10-Q and Note 32 of JPMorgan Chase’s 2021 Form 10-K for a description of the Firm’s business segments and the products and services they provide to their respective client bases.
The Firm's website is www.jpmorganchase.com. JPMorgan Chase makes available on its website, free of charge, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after it electronically files or furnishes such material to the U.S. Securities and Exchange Commission (the “SEC”) at www.sec.gov. JPMorgan Chase makes new and important information about the Firm available on its website at https://www.jpmorganchase.com, including on the Investor Relations section of its website at https://www.jpmorganchase.com/ir. Information on the Firm's website is not incorporated by reference into this Form 10-Q or the Firm’s other filings with the SEC.
4
EXECUTIVE OVERVIEW |
This executive overview of the MD&A highlights selected information and does not contain all of the information that is important to readers of this Form 10-Q. For a complete description of the trends and uncertainties, as well as the risks and critical accounting estimates affecting the Firm, this Form 10-Q and the 2021 Form 10-K should be read together and in their entirety.
Financial performance of JPMorgan Chase | |||||||||||||||||||||||||||||||||||
(unaudited) As of or for the period ended, (in millions, except per share data and ratios) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||
2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||||||
Selected income statement data | |||||||||||||||||||||||||||||||||||
Noninterest revenue | $ | 15,587 | $ | 17,738 | (12) | % | $ | 32,432 | $ | 37,115 | (13) | % | |||||||||||||||||||||||
Net interest income | 15,128 | 12,741 | 19 | 29,000 | 25,630 | 13 | |||||||||||||||||||||||||||||
Total net revenue | $ | 30,715 | $ | 30,479 | 1 | $ | 61,432 | $ | 62,745 | (2) | |||||||||||||||||||||||||
Total noninterest expense | 18,749 | 17,667 | 6 | 37,940 | 36,392 | 4 | |||||||||||||||||||||||||||||
Pre-provision profit | 11,966 | 12,812 | (7) | 23,492 | 26,353 | (11) | |||||||||||||||||||||||||||||
Provision for credit losses | 1,101 | (2,285) | NM | 2,564 | (6,441) | NM | |||||||||||||||||||||||||||||
Net income | 8,649 | 11,948 | (28) | 16,931 | 26,248 | (35) | |||||||||||||||||||||||||||||
Diluted earnings per share | $ | 2.76 | $ | 3.78 | (27) | $ | 5.39 | $ | 8.28 | (35) | |||||||||||||||||||||||||
Selected ratios and metrics | |||||||||||||||||||||||||||||||||||
Return on common equity | 13% | 18% | 13% | 21% | |||||||||||||||||||||||||||||||
Return on tangible common equity | 17 | 23 | 16 | 26 | |||||||||||||||||||||||||||||||
Book value per share | $ | 86.38 | $ | 84.85 | 2 | $ | 86.38 | $ | 84.85 | 2 | |||||||||||||||||||||||||
Tangible book value per share | 69.53 | 68.91 | 1 | 69.53 | 68.91 | 1 | |||||||||||||||||||||||||||||
Capital ratios(a) | |||||||||||||||||||||||||||||||||||
CET1 capital | 12.2% | 13.0% | 12.2% | 13.0% | |||||||||||||||||||||||||||||||
Tier 1 capital | 14.1 | 15.1 | 14.1 | 15.1 | |||||||||||||||||||||||||||||||
Total capital | 15.7 | 17.1 | 15.7 | 17.1 | |||||||||||||||||||||||||||||||
Memo: | |||||||||||||||||||||||||||||||||||
NII excluding Markets(b) | $ | 13,682 | $ | 10,863 | 26 | $ | 25,434 | $ | 21,638 | 18 | |||||||||||||||||||||||||
NIR excluding Markets(b) | 10,158 | 13,745 | (26) | 21,243 | 27,039 | (21) | |||||||||||||||||||||||||||||
Markets(b) | 7,790 | 6,787 | 15 | 16,543 | 15,837 | 4 | |||||||||||||||||||||||||||||
Total net revenue - managed basis | $ | 31,630 | $ | 31,395 | 1 | $ | 63,220 | $ | 64,514 | (2) |
(a)The capital metrics reflect the relief provided by the Federal Reserve Board in response to the COVID-19 pandemic, including the CECL capital transition provisions. Refer to Capital Risk Management on pages 44-49 of this Form 10-Q and pages 86-96 of JPMorgan Chase’s 2021 Form 10-K for additional information.
(b)NII and NIR refer to net interest income and noninterest revenue, respectively. Markets consists of CIB's Fixed Income Markets and Equity Markets businesses.
Comparisons noted in the sections below are for the second quarter of 2022 versus the second quarter of 2021, unless otherwise specified.
Firmwide overview
For the second quarter of 2022, JPMorgan Chase reported net income of $8.6 billion, down 28%, earnings per share of $2.76, an ROE of 13% and ROTCE of 17%.
•Total net revenue was up 1%, and reflected:
–Net interest income of $15.1 billion, up 19%. Net interest income excluding Markets was $13.7 billion, up 26%, driven by higher rates and balance sheet growth.
–Noninterest revenue was $15.6 billion, down 12%, predominantly driven by:
◦lower Investment Banking fees, a loss in Credit Adjustments & Other compared to a gain in the prior year, and net losses on equity investments in CIB
◦lower Card income in CCB, and
◦$337 million of markdowns on held-for-sale positions, primarily unfunded commitments, in the bridge financing portfolio in CIB and CB,
partially offset by
◦higher CIB Markets revenue.
•Noninterest expense was up 6%, driven by continued investments in the business, including technology and marketing, and higher structural expense, primarily compensation, partially offset by lower revenue-related compensation.
•The provision for credit losses was $1.1 billion, driven by:
–a net addition of $428 million to the allowance for credit losses, primarily reflecting loan growth, as well as a modest deterioration in the Firm's macroeconomic forecast, and
5
–$657 million of net charge-offs, down $77 million, driven by Card.
The prior year provision was a net benefit of $2.3 billion, reflecting a net reduction in the allowance for credit losses of $3.0 billion.
•The total allowance for credit losses was $20.0 billion at June 30, 2022. The Firm had an allowance for loan losses to retained loans coverage ratio of 1.69%, compared with 2.02% in the prior year.
•The Firm’s nonperforming assets totaled $7.8 billion at June 30, 2022, a net decrease of $2.0 billion from the prior year, driven by lower nonaccrual loans, reflecting improved credit performance in consumer and net portfolio activity in wholesale.
•Firmwide average loans of $1.1 trillion were up 7%, driven by higher loans across the LOBs.
•Firmwide average deposits of $2.5 trillion were up 9%, reflecting the residual impact associated with government actions in the prior year. In CCB, the increase was also driven by growth from new and existing accounts across both consumer and small business customers. However, during the second quarter of 2022, there was a decline in deposits, including in CB due to migration of non-operating deposits into higher-yielding alternatives, and in CCB as consumer spending continued to grow.
Selected capital-related metrics
•The Firm’s CET1 capital was $207 billion, and the Standardized and Advanced CET1 ratios were 12.2% and 12.9%, respectively.
•The Firm’s SLR was 5.3%.
•The Firm grew TBVPS, ending the second quarter of 2022 at $69.53, up 1% versus the prior year.
Pre-provision profit, ROTCE, TCE, TBVPS, NII and NIR excluding Markets, and total net revenue on a managed basis are non-GAAP financial measures. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 18-19 for a further discussion of each of these measures.
6
Business segment highlights
Selected business metrics for each of the Firm’s four LOBs are presented below for the second quarter of 2022.
CCB ROE 24% | •Average deposits up 13%; client investment assets down 7% •Average loans up 2% year-over-year ("YoY") and up 2% quarter-over-quarter ("QoQ"); Card net charge-off rate of 1.47% •Debit and credit card sales volume(a) up 15% •Active mobile customers(b) up 11% | |||||||
CIB ROE 14% | •#1 ranking for Global Investment Banking fees with 8.1% wallet share year-to-date •Total Markets revenue of $7.8 billion, up 15%, with Fixed Income Markets up 15% and Equity Markets up 15% | |||||||
CB ROE 15% | •Gross Investment Banking revenue of $788 million, down 32% •Average loans up 7% YoY and up 4% QoQ; average deposits up 4% | |||||||
AWM ROE 23% | •Assets under management ("AUM") of $2.7 trillion, down 8% •Average loans up 11% YoY and 1% QoQ; average deposits up 22% |
(a)Excludes Commercial Card.
(b)Users of all mobile platforms who have logged in within the past 90 days.
Refer to the Business Segment Results on pages 20-42 for a detailed discussion of results by business segment.
Credit provided and capital raised
JPMorgan Chase continues to support consumers, businesses and communities around the globe. The Firm provided new and renewed credit and raised capital for wholesale and consumer clients during the first six months of 2022, consisting of:
$1.4 trillion | Total credit provided and capital raised (including loans and commitments)(a) | ||||||||||
$138 billion | Credit for consumers | ||||||||||
$16 billion | Credit for U.S. small businesses | ||||||||||
$553 billion | Credit for corporations | ||||||||||
$609 billion | Capital raised for corporate clients and non-U.S. government entities | ||||||||||
$36 billion | Credit and capital raised for nonprofit and U.S. government entities(a) |
(a)Includes states, municipalities, hospitals and universities.
7
Recent events
•On July 19, 2022, JPMorgan Chase announced that Alex Gorsky had been elected as a member of the Firm's Board of Directors, effective immediately. Mr. Gorsky serves as the Executive Chairman of Johnson & Johnson.
Outlook
These current expectations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs and expectations of JPMorgan Chase’s management, speak only as of the date of this Form 10-Q, and are subject to significant risks and uncertainties. Refer to Forward-Looking Statements on page 87 and page 155 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of certain of those risks and uncertainties and the other factors that could cause JPMorgan Chase’s actual results to differ materially because of those risks and uncertainties. There is no assurance that actual results will be in line with the outlook information set forth below, and the Firm does not undertake to update any forward-looking statements.
JPMorgan Chase’s current outlook for 2022 should be viewed against the backdrop of the global and U.S. economies, financial markets activity, the geopolitical environment, the competitive environment, client and customer activity levels, and regulatory and legislative developments in the U.S. and other countries where the Firm does business. Each of these factors will affect the performance of the Firm. The Firm will continue to make appropriate adjustments to its businesses and operations in response to ongoing developments in the business, economic, regulatory and legal environments in which it operates.
Full-year 2022
•Management expects net interest income excluding Markets to be in excess of $58 billion, market dependent.
•Management expects adjusted expense to be approximately $77 billion, which includes increased investments in technology, distribution and marketing, and higher structural expense.
•Management expects the net charge-off rate in Card to be less than 2%.
Net interest income excluding Markets and adjusted expense are non-GAAP financial measures. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 18-19.
8
Business Developments
War in Ukraine
The duration and potential outcomes of the war in Ukraine remain uncertain. The Firm has taken steps to close positions and reduce exposures connected with the war, and continues to assist clients with fulfilling or terminating pre-existing obligations and managing their Russia-related risks.
The Firm’s exposure to Russia and Russia-associated clients and counterparties is not material to its financial condition or results of operations. However, the secondary impacts of the war in Ukraine, including increased market volatility, inflationary pressures and the effects of financial and economic sanctions imposed by various governments, could have adverse effects on the Firm’s businesses.
The Firm also continues to monitor and manage the operational risks associated with the war, including compliance with the financial and economic sanctions and the increased risk of cyber attacks.
Refer to Wholesale Credit Portfolio on pages 62-70, Allowance for Credit Losses on pages 71-73, Market Risk Management on pages 75-79, Country Risk Management on pages 80-81 and Operational Risk Management on page 82 for additional information.
For purposes of this Form 10-Q, “Russia” refers to exposure to clients and counterparties of the Firm for which the largest proportion of their assets is located, or the largest proportion of their revenue is derived, in Russia, based on the Firm’s internal country risk management framework; and “Russia-associated” refers to exposure to clients and counterparties of the Firm with respect to which economic or financial sanctions relating to the war in Ukraine have been imposed or which have close association with Russia.
Interbank Offered Rate (“IBOR”) transition
JPMorgan Chase and other market participants continue to make progress with respect to the transition from the use of the London Interbank Offered Rate (“LIBOR”) and other IBORs to comply with the International Organization of Securities Commission's standards for transaction-based benchmark rates. The cessation of the publication of the principal tenors of the U.S. dollar LIBOR (i.e., overnight, one-month, three-month, six-month and 12-month LIBOR) is scheduled for June 30, 2023.
The Firm continues its client outreach with respect to U.S. dollar LIBOR-linked loans and continues to monitor and evaluate client, industry, market, regulatory and legislative developments. Refer to Business Developments on pages 50-51 of JPMorgan Chase's 2021 Form 10-K for additional information.
9
CONSOLIDATED RESULTS OF OPERATIONS |
This section provides a comparative discussion of JPMorgan Chase’s Consolidated Results of Operations on a reported basis for the three and six months ended June 30, 2022 and 2021, unless otherwise specified. Factors that relate primarily to a single business segment are discussed in more detail within that business segment's results. Refer to pages 83-85 of this Form 10-Q and pages 150-153 of JPMorgan Chase’s 2021 Form 10-K for a discussion of the Critical Accounting Estimates Used by the Firm that affect the Consolidated Results of Operations.
Revenue | |||||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Investment banking fees | $ | 1,586 | $ | 3,470 | (54) | % | $ | 3,594 | $ | 6,440 | (44) | % | |||||||||||||||||||||||
Principal transactions | 4,990 | 4,076 | 22 | 10,095 | 10,576 | (5) | |||||||||||||||||||||||||||||
Lending- and deposit-related fees | 1,873 | 1,760 | 6 | 3,712 | 3,447 | 8 | |||||||||||||||||||||||||||||
Asset management, administration and commissions | 5,240 | 5,194 | 1 | 10,602 | 10,223 | 4 | |||||||||||||||||||||||||||||
Investment securities losses | (153) | (155) | 1 | (547) | (141) | (288) | |||||||||||||||||||||||||||||
Mortgage fees and related income | 378 | 551 | (31) | 838 | 1,255 | (33) | |||||||||||||||||||||||||||||
Card income | 1,133 | 1,647 | (31) | 2,108 | 2,997 | (30) | |||||||||||||||||||||||||||||
Other income(a) | 540 | 1,195 | (55) | 2,030 | 2,318 | (12) | |||||||||||||||||||||||||||||
Noninterest revenue | 15,587 | 17,738 | (12) | 32,432 | 37,115 | (13) | |||||||||||||||||||||||||||||
Net interest income | 15,128 | 12,741 | 19 | 29,000 | 25,630 | 13 | |||||||||||||||||||||||||||||
Total net revenue | $ | 30,715 | $ | 30,479 | 1 | % | $ | 61,432 | $ | 62,745 | (2) | % |
(a) Included operating lease income of $945 million and $1.3 billion for the three months ended June 30, 2022 and 2021, respectively and $2.0 billion and $2.6 billion for the six months ended June 30, 2022 and 2021, respectively.
Quarterly results
Investment banking fees decreased in CIB, reflecting:
•lower debt and equity underwriting fees as volatile market conditions resulted in lower issuance activity, and
•lower advisory fees driven by a lower level of announced deals, starting in the first quarter of 2022.
Refer to CIB segment results on pages 27-32 and Note 5 for additional information.
Principal transactions revenue increased primarily in CIB, reflecting:
•higher revenue in Fixed Income Markets, driven by a strong performance in macro businesses amid a volatile market, particularly in Currencies & Emerging Markets, partially offset by lower revenue in Credit and Securitized Products, and
•higher revenue in Equity Markets predominantly driven by a strong performance in derivatives amid a volatile market,
partially offset by
•a $218 million loss in Credit Adjustments & Other, largely driven by funding spread widening, compared with a gain of $233 million in the prior year, and
•$337 million of markdowns on held-for-sale positions, primarily unfunded commitments, in the bridge financing portfolio in CIB and CB.
The increase in Principal transactions revenue also reflected net gains on certain legacy private equity investments in Corporate, compared with net losses in the prior year.
Principal transactions revenue in CIB may in certain cases have offsets across other revenue lines, including net
interest income. The Firm assesses the performance of its CIB Markets business on a total revenue basis.
Refer to CIB, CB and Corporate segment results on pages 27-32, pages 33-36 and pages 41-42, and Note 5 for additional information.
Lending- and deposit-related fees increased as a result of higher deposit-related fees in CCB.
Refer to CCB segment results on pages 22-26 and Note 5 for additional information.
Asset management, administration and commissions revenue was relatively flat, reflecting higher asset management fees in AWM resulting from the removal of most money market fund fee waivers, offset by lower market levels and performance fees. Refer to AWM segment results on pages 22-26 and Note 5 for additional information.
Investment securities losses were relatively flat, and reflected losses in both periods from repositioning the investment securities portfolios in Treasury and CIO. Refer to Corporate segment results on pages 41-42 and Note 9 for additional information.
Mortgage fees and related income decreased due to:
•lower production revenue from lower margins and volume,
largely offset by
•higher net mortgage servicing revenue resulting from
–an increase in MSR risk management results primarily driven by changes in prepayment expectations, and
–higher operating revenue on a higher level of third-party loans serviced.
10
Refer to CCB segment results on pages 22-26 Note 5 and 14 for additional information.
Card income decreased reflecting:
•higher amortization related to new account origination costs in Card, and
•lower net interchange income due to the impact from the renegotiation of a co-brand partner contract in Card in the fourth quarter of 2021.
Refer to CCB segment results on pages 22-26 and Note 5 for additional information.
Other income decreased reflecting:
•net losses on equity investments in CIB compared with net gains in the prior year, and
•lower auto operating lease income in CCB as a result of a decline in volume,
partially offset by
•a gain on an equity-method investment received in partial satisfaction of a loan in CB, and
•higher net gains related to certain other Corporate investments.
Net interest income increased driven by higher rates and balance sheet growth, partially offset by lower Markets NII, as well as lower NII from PPP loans.
The Firm’s average interest-earning assets were $3.4 trillion, up $209 billion, and the yield was 2.22%, up 43 basis points (“bps”). The net yield on these assets, on an FTE basis, was 1.80%, an increase of 18 bps. The net yield excluding Markets was 2.26%, up 36 bps.
Refer to the Consolidated average balance sheets, interest and rates schedule on page 180 for further details. Net yield excluding Markets is a non-GAAP financial measure. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 18-19 for a further discussion of Net interest yield excluding Markets.
Year-to-date results
Investment banking fees decreased in CIB, reflecting:
•lower equity and debt underwriting fees as volatile market conditions resulted in lower issuance activity, and
•lower advisory fees driven by a lower level of announced deals.
Principal transactions revenue decreased reflecting:
•a loss of $742 million in Credit Adjustments & Other in CIB, largely driven by funding spread widening and, to a lesser extent, losses on exposures relating to commodities and Russia and Russia-associated counterparties, compared with a gain of $230 million in the prior year,
•$337 million of markdowns in the second quarter of 2022 on held-for-sale positions, primarily unfunded commitments, in the bridge financing portfolio in CIB and CB, and
•net losses on certain legacy private equity investments in Corporate compared with net gains in the prior year,
partially offset by
•an increase in Markets, reflecting
–higher revenue in Fixed Income Markets, predominantly driven by higher revenue in the macro businesses, particularly in Currencies & Emerging Markets, partially offset by lower revenue in Securitized Products and Credit, and
–higher revenue in Equity Markets, driven by a strong performance in prime brokerage and derivatives, partially offset by lower revenue in Cash Equities.
Lending- and deposit-related fees increased as a result of:
•higher deposit-related fees in CCB, and
•higher cash management fees in CIB and CB driven by growth in transaction volume.
Refer to CCB, CIB and CB segment results on pages 22-26, pages 27-32 and pages 33-36, respectively, and Note 5 for additional information.
Asset management, administration and commissions revenue increased, predominantly driven by higher asset management fees in AWM, reflecting strong cumulative net inflows into long-term products, and the removal of most money market fund fee waivers in the second quarter of 2022, and net inflows in CCB. Refer to CCB and AWM segment results on pages 22-26, pages 37-40, respectively, and Note 5 for additional information.
Investment securities losses reflected higher net losses on sales of U.S. Treasuries and U.S. GSE and government agency MBS, associated with repositioning the investment securities portfolios in both periods in Treasury and CIO.
Mortgage fees and related income decreased due to:
•lower production revenue from lower margins and volume,
largely offset by
•higher net mortgage servicing revenue resulting from
–an increase in MSR risk management results primarily driven by changes in prepayment expectations, and
–higher operating revenue on a higher level of third-party loans serviced.
Card income decreased due to higher amortization related to new account origination costs in Card.
Other income decreased reflecting:
•lower auto operating lease income in CCB as a result of a decline in volume,
•net losses on several investments in AWM and CIB compared with net gains in the prior year,
partially offset by
•proceeds from an insurance settlement in the first quarter of 2022 in Corporate,
•higher net gains related to certain other Corporate investments in,
•a gain on an equity-method investment received in partial satisfaction of a loan in CB, and
11
•the absence of weather-related write-downs recorded in the prior year on certain renewable energy investments in CIB.
Net interest income increased driven by higher rates and balance sheet growth, partially offset by lower NII from PPP loans, as well as lower Markets NII.
The Firm’s average interest-earning assets were $3.4 trillion, up $242 billion, and the yield was 2.04%, up 21 basis points (“bps”). The net yield on these assets, on an FTE basis, was 1.74%, an increase of 9 bps. The net yield excluding Markets was 2.11%, up 19 bps.
12
Provision for credit losses | |||||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Consumer, excluding credit card | $ | 62 | $ | (808) | NM | $ | 235 | $ | (1,792) | NM | |||||||||||||||||||||||||
Credit card | 730 | (1,045) | NM | 1,236 | (3,562) | NM | |||||||||||||||||||||||||||||
Total consumer | 792 | (1,853) | NM | 1,471 | (5,354) | NM | |||||||||||||||||||||||||||||
Wholesale | 303 | (425) | NM | 1,088 | (1,096) | NM | |||||||||||||||||||||||||||||
Investment securities | 6 | (7) | NM | 5 | 9 | NM | |||||||||||||||||||||||||||||
Total provision for credit losses | $ | 1,101 | $ | (2,285) | NM | $ | 2,564 | $ | (6,441) | NM |
Quarterly results
The provision for credit losses was $1.1 billion, reflecting $657 million of net charge-offs and a net addition of $428 million to the allowance for credit losses, consisting of:
•$238 million in wholesale driven by a modest deterioration in the Firm's macroeconomic forecast, and loan growth largely in CB, partially offset by client-specific reductions in the allowance for credit losses, and
•$184 million in consumer predominantly driven by loan growth in Card.
Net charge-offs decreased $77 million driven by Card, reflecting the financial strength of U.S. consumers.
The prior year included a $3.0 billion net reduction in the allowance for credit losses and net charge-offs of $734 million.
Refer to CCB segment results on pages 22-26, CIB on pages 27-32, CB on pages 33-36, AWM on pages 37-40, the Allowance for Credit Losses on pages 71-73, and Notes 9 and 12 for additional information on the credit portfolio and the allowance for credit losses.
Year-to-date results
The provision for credit losses was $2.6 billion, reflecting a net addition of $1.3 billion to the allowance for credit losses and $1.2 billion of net charge-offs. The addition to the allowance primarily consisted of:
•$1.0 billion in wholesale reflecting the increased weight placed on the adverse scenarios in the current year due to the ongoing effects associated with higher inflation, changes in monetary policy, and geopolitical risks, including the war in Ukraine, and a modest deterioration in the Firm's macroeconomic forecast. The increase in the allowance was also driven by loan growth in CB in the second quarter of 2022, and client-specific Russia and Russia-associated downgrades in CIB and AWM in the first quarter of 2022, and
•$311 million in consumer primarily driven by Card, related to loan growth, and Home Lending due to the increased weight placed on the adverse scenarios in the first quarter of 2022.
Net charge-offs decreased $552 million driven by Card, reflecting the financial strength of U.S. consumers.
The prior year included an $8.2 billion net reduction in the allowance for credit losses and net charge-offs of $1.8 billion.
13
Noninterest expense | |||||||||||||||||||||||||||||||||||
(in millions) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||
2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||||||
Compensation expense | $ | 10,301 | $ | 9,814 | 5 | % | $ | 21,088 | $ | 20,415 | 3 | % | |||||||||||||||||||||||
Noncompensation expense: | |||||||||||||||||||||||||||||||||||
Occupancy | 1,129 | 1,090 | 4 | 2,263 | 2,205 | 3 | |||||||||||||||||||||||||||||
Technology, communications and equipment(a) | 2,376 | 2,488 | (5) | 4,736 | 5,007 | (5) | |||||||||||||||||||||||||||||
Professional and outside services | 2,469 | 2,385 | 4 | 5,041 | 4,588 | 10 | |||||||||||||||||||||||||||||
Marketing | 881 | 626 | 41 | 1,801 | 1,377 | 31 | |||||||||||||||||||||||||||||
Other expense(b) | 1,593 | 1,264 | 26 | 3,011 | 2,800 | 8 | |||||||||||||||||||||||||||||
Total noncompensation expense | 8,448 | 7,853 | 8 | 16,852 | 15,977 | 5 | |||||||||||||||||||||||||||||
Total noninterest expense | $ | 18,749 | $ | 17,667 | 6 | % | $ | 37,940 | $ | 36,392 | 4 | % |
(a)Includes depreciation expense associated with auto operating lease assets.
(b)Included Firmwide legal expense of $73 million and $185 million for the three months ended June 30, 2022 and 2021, respectively and $192 million and $213 million for the six months ended June 30, 2022 and 2021, respectively.
Quarterly results
Compensation expense increased driven by investments and higher structural expense across the LOBs, partially offset by lower revenue-related compensation in CIB.
Noncompensation expense increased as a result of:
•higher investments across the Firm, including marketing and technology, and
•higher structural expense, including travel and entertainment,
partially offset by
•lower volume-related expense, primarily depreciation expense in CCB on lower auto lease assets, and
•lower legal expense.
Year-to-date results
Compensation expense increased driven by investments and higher structural expense across the LOBs, largely offset by lower revenue-related compensation in CIB.
Noncompensation expense increased as a result of:
•higher investments across the Firm, including marketing and technology, and
•higher structural expense, including travel and entertainment and regulatory assessments. The prior year included a $550 million contribution to the Firm's Foundation,
partially offset by
•lower volume-related expense, reflecting a net decrease related to lower depreciation expense on lower auto lease assets and higher operating losses, both in CCB.
Income tax expense | |||||||||||||||||||||||||||||||||||
(in millions) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||
2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||||||
Income before income tax expense | $ | 10,865 | $ | 15,097 | (28) | % | $ | 20,928 | $ | 32,794 | (36) | % | |||||||||||||||||||||||
Income tax expense | 2,216 | 3,149 | (30) | 3,997 | 6,546 | (39) | |||||||||||||||||||||||||||||
Effective tax rate | 20.4 | % | 20.9 | % | 19.1 | % | 20.0 | % |
Quarterly results
The effective tax rate decreased driven by the impact of benefits related to tax audit settlements, partially offset by the change in the level and mix of income and expenses subject to U.S. federal and state and local taxes. The prior year included expenses related to tax audit settlements.
Year-to-date results
The effective tax rate decreased for the six months ended June 30, 2022, driven by benefits from tax audit settlements, as well as the relative net impact of certain tax benefits and expenses on a lower level of pretax income, partially offset by the change in the level and mix of income and expenses subject to U.S. federal and state and local taxes. The prior year included expenses related to tax audit settlements.
14
CONSOLIDATED BALANCE SHEETS AND CASH FLOWS ANALYSIS |
Consolidated balance sheets analysis
The following is a discussion of the significant changes between June 30, 2022, and December 31, 2021.
Selected Consolidated balance sheets data | ||||||||||||||
(in millions) | June 30, 2022 | December 31, 2021 | Change | |||||||||||
Assets | ||||||||||||||
Cash and due from banks | $ | 27,215 | $ | 26,438 | 3 | % | ||||||||
Deposits with banks | 642,045 | 714,396 | (10) | |||||||||||
Federal funds sold and securities purchased under resale agreements | 322,156 | 261,698 | 23 | |||||||||||
Securities borrowed | 202,393 | 206,071 | (2) | |||||||||||
Trading assets | 465,577 | 433,575 | 7 | |||||||||||
Available-for-sale securities | 222,069 | 308,525 | (28) | |||||||||||
Held-to-maturity securities, net of allowance for credit losses | 441,649 | 363,707 | 21 | |||||||||||
Investment securities, net of allowance for credit losses | 663,718 | 672,232 | (1) | |||||||||||
Loans | 1,104,155 | 1,077,714 | 2 | |||||||||||
Allowance for loan losses | (17,750) | (16,386) | 8 | |||||||||||
Loans, net of allowance for loan losses | 1,086,405 | 1,061,328 | 2 | |||||||||||
Accrued interest and accounts receivable | 145,442 | 102,570 | 42 | |||||||||||
Premises and equipment | 26,770 | 27,070 | (1) | |||||||||||
Goodwill, MSRs and other intangible assets | 59,360 | 56,691 | 5 | |||||||||||
Other assets | 200,233 | 181,498 | 10 | |||||||||||
Total assets | $ | 3,841,314 | $ | 3,743,567 | 3 | % | ||||||||
Cash and due from banks and deposits with banks decreased primarily as a result of Markets activities and loan growth. Deposits with banks reflect the Firm’s placements of its excess cash with various central banks, including the Federal Reserve Banks.
Federal funds sold and securities purchased under resale agreements increased driven by Markets, reflecting:
•higher collateral requirements, higher demand for securities to cover short positions, and
•the impact of netting on client-driven market-making activities.
Refer to Note 10 for additional information on securities purchased under resale agreements.
Trading assets increased driven by:
•higher foreign exchange and commodity derivative receivables as a result of market movements, as well as higher levels of debt instruments, partially offset by lower equity instruments, related to client-driven market-making activities in Markets, and
•higher deployment of funds in Treasury and CIO.
Refer to Notes 2 and 4 for additional information.
Investment securities included the transfer of $73.2 billion of securities from the available-for-sale (“AFS”) to the held-to-maturity (“HTM”) portfolio.
•The decrease in AFS securities was also due to paydowns, and unrealized losses, recognized in accumulated other comprehensive income (“AOCI”), predominantly offset by net purchases.
•The increase in HTM securities was also due to purchases predominantly offset by paydowns.
Refer to Corporate segment results on pages 41-42, Investment Portfolio Risk Management on page 74, and Notes 2 and 9 for additional information.
Loans increased, reflecting:
•higher loans in CB as a result of higher revolver utilization and originations,
•higher retained residential real estate loans in AWM and Home Lending as a result of originations, net of paydowns,
•higher balances in Card on higher consumer spending, and
•higher wholesale loans in CIB,
partially offset by
•lower mortgage warehouse loans in Home Lending as sales outpaced originations due to higher interest rates, and
•a decline in CBB due to the impact of PPP loan forgiveness.
The allowance for loan losses increased as a result of a net addition of $1.4 billion to the allowance for loan losses, consisting of $1.1 billion in wholesale and $314 million in consumer. The addition reflects the increased weight placed on the adverse scenarios in the current year, due to the ongoing effects associated with higher inflation, changes in monetary policy, and geopolitical risks, including the war in Ukraine, and a modest deterioration in the Firm's macroeconomic forecast. The increase in the allowance for loan losses was also driven by loan growth in Card and CB in the second quarter of 2022, and client-specific Russia and Russia-associated downgrades in CIB and AWM in the first quarter of 2022.
15
There was a $39 million reduction in the allowance for lending-related commitments recognized in other liabilities on the Consolidated balance sheets.
Refer to Credit and Investment Risk Management on pages 55-74, and Notes 2, 3, 11 and 12 for a more detailed discussion of loans and the allowance for loan losses.
Accrued interest and accounts receivable increased due to higher client receivables related to client-driven activities in Markets, including prime brokerage.
Goodwill, MSRs and other intangibles increased, reflecting:
•higher MSRs as a result of changes in market interest rates and net additions, partially offset by the realization of expected cash flows, and
•higher goodwill associated with the acquisitions of Frosch Travel Group, LLC in CCB and Volkswagen Payments S.A. in CIB.
Refer to Note 14 for additional information.
Other assets increased largely due to the higher cash collateral placed with counterparties, as well as higher securities financing transactions in Markets.
Selected Consolidated balance sheets data (continued) | ||||||||||||||
(in millions) | June 30, 2022 | December 31, 2021 | Change | |||||||||||
Liabilities | ||||||||||||||
Deposits | $ | 2,471,544 | $ | 2,462,303 | — | % | ||||||||
Federal funds purchased and securities loaned or sold under repurchase agreements | 222,719 | 194,340 | 15 | |||||||||||
Short-term borrowings | 58,422 | 53,594 | 9 | |||||||||||
Trading liabilities | 190,308 | 164,693 | 16 | |||||||||||
Accounts payable and other liabilities | 313,326 | 262,755 | 19 | |||||||||||
Beneficial interests issued by consolidated variable interest entities (“VIEs”) | 10,640 | 10,750 | (1) | |||||||||||
Long-term debt | 288,212 | 301,005 | (4) | |||||||||||
Total liabilities | 3,555,171 | 3,449,440 | 3 | |||||||||||
Stockholders’ equity | 286,143 | 294,127 | (3) | |||||||||||
Total liabilities and stockholders’ equity | $ | 3,841,314 | $ | 3,743,567 | 3 | % |
Deposits were relatively flat, reflecting:
•growth in new accounts in CCB that more than offset the decline in deposits in existing accounts across consumer and small business customers, as consumer spending continued to grow, and
•higher deposits in Securities Services and Payments primarily driven by client activities,
offset by
•a decline in CB due to the migration of non-operating deposits into higher-yielding alternatives; and additionally, in AWM and CB reflecting seasonality.
Refer to Liquidity Risk Management on pages 50-54 and Notes 2 and 15 for additional information.
Federal funds purchased and securities loaned or sold under repurchase agreements increased due to:
•higher secured financing of trading assets and the impact of netting on client-driven market-making activities in Markets,
partially offset by
•lower secured financing of AFS investment securities in Treasury and CIO. Refer to Liquidity Risk Management on pages 50-54 and Note 10 for additional information.
Short-term borrowings increased as a result of higher net issuance of commercial paper primarily for short-term liquidity management in Treasury and CIO. Refer to Liquidity Risk Management on pages 50-54 for additional information.
Trading liabilities increased due to client-driven market-making activities in Fixed Income Markets, which resulted in higher levels of short positions in debt instruments. Refer to Notes 2 and 4 for additional information.
Accounts payable and other liabilities increased due to higher client payables related to client-driven activities primarily in Markets, including prime brokerage. Refer to Note 10 for additional information on securities financing transactions.
Refer to Liquidity Risk Management on pages 50-54 and Notes 13 and 22 for additional information on Beneficial interests issued by consolidated VIEs, specifically Firm-sponsored VIEs and loan securitization trusts.
Long-term debt decreased driven by fair value hedge accounting adjustments in Treasury and CIO related to higher rates, and a decline in the fair value of structured notes in CIB. These were largely offset by net issuances in Treasury and CIO and CIB. Refer to Liquidity Risk Management on pages 50-54 for additional information.
Stockholders’ equity decreased as a result of a net unrealized loss in AOCI, which was predominantly driven by the impact of higher rates on the AFS portfolio and cash flow hedges in Treasury and CIO. Refer to Capital actions on page 48, Consolidated statements of changes in stockholders’ equity on page 91, and Note 19 for additional information.
16
Consolidated cash flows analysis
The following is a discussion of cash flow activities during the six months ended June 30, 2022 and 2021.
(in millions) | Six months ended June 30, | |||||||||||||
2022 | 2021 | |||||||||||||
Net cash provided by/(used in) | ||||||||||||||
Operating activities | $ | 24,101 | $ | (30,342) | ||||||||||
Investing activities | (125,811) | 33,089 | ||||||||||||
Financing activities | 48,970 | 180,968 | ||||||||||||
Effect of exchange rate changes on cash | (18,834) | (5,903) | ||||||||||||
Net increase/(decrease) in cash and due from banks and deposits with banks | $ | (71,574) | $ | 177,812 |
Operating activities
•In 2022, cash provided reflected higher accounts payable and other liabilities, trading liabilities, and net proceeds from loans held-for-sale, predominantly offset by higher trading assets and accrued interest and accounts receivable.
•In 2021, cash used resulted from higher accrued interest and accounts receivable and securities borrowed, partially offset by higher accounts payable and other liabilities.
Investing activities
•In 2022, cash used resulted from higher securities purchased under resale agreements, net originations of loans, and net purchases of investment securities.
•In 2021, cash provided reflected lower securities purchased under resale agreements, partially offset by net originations of loans.
Financing activities
•In 2022, cash provided reflected higher securities loaned or sold under repurchase agreements and net proceeds from long- and short-term borrowings.
•In 2021, cash provided reflected higher deposits and securities loaned or sold under repurchase agreements, and net proceeds from long- and short-term borrowings.
•For both periods, cash was used for repurchases of common stock and cash dividends on common and preferred stock.
* * *
Refer to Consolidated Balance Sheets Analysis on pages 15-16, Capital Risk Management on pages 44-49, and Liquidity Risk Management on pages 50-54 of this Form 10-Q, and pages 97-104 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of the activities affecting the Firm’s cash flows.
17
EXPLANATION AND RECONCILIATION OF THE FIRM’S USE OF NON-GAAP FINANCIAL MEASURES |
The Firm prepares its Consolidated Financial Statements in accordance with U.S. GAAP and this presentation is referred to as “reported” basis; these financial statements appear on page 88-92.
In addition to analyzing the Firm’s results on a reported basis, the Firm also reviews and uses certain non-GAAP financial measures at the Firmwide and segment level. These non-GAAP measures include:
•Firmwide “managed” basis results, including the overhead ratio, which include certain reclassifications to present total net revenue from investments that receive tax credits and tax-exempt securities on a basis comparable to taxable investments and securities (“FTE” basis);
•Pre-provision profit, which represents total net revenue less total noninterest expense;
•Net interest income, net yield, and noninterest revenue excluding Markets;
•TCE, ROTCE, and TBVPS;
•Adjusted expense, which represents noninterest expense excluding Firmwide legal expense; and
•Allowance for loan losses to period-end loans retained, excluding trade finance and conduits.
Refer to Explanation and Reconciliation of the Firm’s Use Of Non-GAAP Financial Measures and Key Performance Measures on pages 58-60 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of management’s use of non-GAAP financial measures.
The following summary tables provide a reconciliation from the Firm’s reported U.S. GAAP results to managed basis.
Three months ended June 30, | |||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | Reported | Fully taxable-equivalent adjustments(a) | Managed basis | Reported | Fully taxable-equivalent adjustments(a) | Managed basis | |||||||||||||||||||||||||||||||||||
Other income | $ | 540 | $ | 812 | $ | 1,352 | $ | 1,195 | $ | 807 | $ | 2,002 | |||||||||||||||||||||||||||||
Total noninterest revenue | 15,587 | 812 | 16,399 | 17,738 | 807 | 18,545 | |||||||||||||||||||||||||||||||||||
Net interest income | 15,128 | 103 | 15,231 | 12,741 | 109 | 12,850 | |||||||||||||||||||||||||||||||||||
Total net revenue | 30,715 | 915 | 31,630 | 30,479 | 916 | 31,395 | |||||||||||||||||||||||||||||||||||
Total noninterest expense | 18,749 | NA | 18,749 | 17,667 | NA | 17,667 | |||||||||||||||||||||||||||||||||||
Pre-provision profit | 11,966 | 915 | 12,881 | 12,812 | 916 | 13,728 | |||||||||||||||||||||||||||||||||||
Provision for credit losses | 1,101 | NA | 1,101 | (2,285) | NA | (2,285) | |||||||||||||||||||||||||||||||||||
Income before income tax expense | 10,865 | 915 | 11,780 | 15,097 | 916 | 16,013 | |||||||||||||||||||||||||||||||||||
Income tax expense | 2,216 | 915 | 3,131 | 3,149 | 916 | 4,065 | |||||||||||||||||||||||||||||||||||
Net income | $ | 8,649 | NA | $ | 8,649 | $ | 11,948 | NA | $ | 11,948 | |||||||||||||||||||||||||||||||
Overhead ratio | 61 | % | NM | 59 | % | 58 | % | NM | 56 | % | |||||||||||||||||||||||||||||||
Six months ended June 30, | |||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | Reported | Fully taxable-equivalent adjustments(a) | Managed basis | Reported | Fully taxable-equivalent adjustments(a) | Managed basis | |||||||||||||||||||||||||||||||||||
Other income | $ | 2,030 | $ | 1,587 | $ | 3,617 | $ | 2,318 | $ | 1,551 | $ | 3,869 | |||||||||||||||||||||||||||||
Total noninterest revenue | 32,432 | 1,587 | 34,019 | 37,115 | 1,551 | 38,666 | |||||||||||||||||||||||||||||||||||
Net interest income | 29,000 | 201 | 29,201 | 25,630 | 218 | 25,848 | |||||||||||||||||||||||||||||||||||
Total net revenue | 61,432 | 1,788 | 63,220 | 62,745 | 1,769 | 64,514 | |||||||||||||||||||||||||||||||||||
Total noninterest expense | 37,940 | NA | 37,940 | 36,392 | NA | 36,392 | |||||||||||||||||||||||||||||||||||
Pre-provision profit | 23,492 | 1,788 | 25,280 | 26,353 | 1,769 | 28,122 | |||||||||||||||||||||||||||||||||||
Provision for credit losses | 2,564 | NA | 2,564 | (6,441) | NA | (6,441) | |||||||||||||||||||||||||||||||||||
Income before income tax expense | 20,928 | 1,788 | 22,716 | 32,794 | 1,769 | 34,563 | |||||||||||||||||||||||||||||||||||
Income tax expense | 3,997 | 1,788 | 5,785 | 6,546 | 1,769 | 8,315 | |||||||||||||||||||||||||||||||||||
Net Income | $ | 16,931 | NA | $ | 16,931 | $ | 26,248 | NA | $ | 26,248 | |||||||||||||||||||||||||||||||
Overhead ratio | 62 | % | NM | 60 | % | 58 | % | NM | 56 | % |
(a)Predominantly recognized in CIB, CB and Corporate.
18
The following table provides information on net interest income, net yield, and noninterest revenue excluding Markets.
(in millions, except rates) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||
2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||
Net interest income – reported | $ | 15,128 | $ | 12,741 | 19 | % | $ | 29,000 | $ | 25,630 | 13 | % | |||||||||||||||||
Fully taxable-equivalent adjustments | 103 | 109 | (6) | 201 | 218 | (8) | |||||||||||||||||||||||
Net interest income – managed basis(a) | $ | 15,231 | $ | 12,850 | 19 | $ | 29,201 | $ | 25,848 | 13 | |||||||||||||||||||
Less: Markets net interest income(b) | 1,549 | 1,987 | (22) | 3,767 | 4,210 | (11) | |||||||||||||||||||||||
Net interest income excluding Markets(a) | $ | 13,682 | $ | 10,863 | 26 | $ | 25,434 | $ | 21,638 | 18 | |||||||||||||||||||
Average interest-earning assets | $ | 3,385,894 | $ | 3,177,195 | 7 | $ | 3,393,879 | $ | 3,152,022 | 8 | |||||||||||||||||||
Less: Average Markets interest-earning assets(b) | 957,304 | 882,848 | 8 | 960,556 | 874,764 | 10 | |||||||||||||||||||||||
Average interest-earning assets excluding Markets | $ | 2,428,590 | $ | 2,294,347 | 6 | % | $ | 2,433,323 | $ | 2,277,258 | 7 | % | |||||||||||||||||
Net yield on average interest-earning assets – managed basis | 1.80 | % | 1.62 | % | 1.74 | % | 1.65 | % | |||||||||||||||||||||
Net yield on average Markets interest-earning assets(b) | 0.65 | 0.90 | 0.79 | 0.97 | |||||||||||||||||||||||||
Net yield on average interest-earning assets excluding Markets | 2.26 | % | 1.90 | % | 2.11 | % | 1.92 | % |
Noninterest revenue – reported | $ | 15,587 | $ | 17,738 | (12) | % | $ | 32,432 | $ | 37,115 | (13) | % | |||||||||||||||||
Fully taxable-equivalent adjustments | 812 | 807 | 1 | 1,587 | 1,551 | 2 | |||||||||||||||||||||||
Noninterest revenue – managed basis | $ | 16,399 | $ | 18,545 | (12) | $ | 34,019 | $ | 38,666 | (12) | |||||||||||||||||||
Less: Markets noninterest revenue(b) | 6,241 | 4,800 | 30 | 12,776 | 11,627 | 10 | |||||||||||||||||||||||
Noninterest revenue excluding Markets | $ | 10,158 | $ | 13,745 | (26) | $ | 21,243 | $ | 27,039 | (21) | |||||||||||||||||||
Memo: Total Markets net revenue(b) | $ | 7,790 | $ | 6,787 | 15 | $ | 16,543 | $ | 15,837 | 4 |
(a)Interest includes the effect of related hedges. Taxable-equivalent amounts are used where applicable.
(b)Refer to page 31 for further information on Markets.
The following summary table provides a reconciliation from the Firm’s common stockholders’ equity to TCE.
Period-end | Average | |||||||||||||||||||||||||
(in millions, except per share and ratio data) | Jun 30, 2022 | Dec 31, 2021 | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
Common stockholders’ equity | $ | 253,305 | $ | 259,289 | $ | 247,986 | $ | 250,849 | $ | 250,234 | $ | 248,209 | ||||||||||||||
Less: Goodwill | 50,697 | 50,315 | 50,575 | 49,260 | 50,442 | 49,254 | ||||||||||||||||||||
Less: Other intangible assets | 1,224 | 882 | 1,119 | 864 | 1,007 | 877 | ||||||||||||||||||||
Add: Certain deferred tax liabilities(a) | 2,509 | 2,499 | 2,503 | 2,459 | 2,500 | 2,457 | ||||||||||||||||||||
Tangible common equity | $ | 203,893 | $ | 210,591 | $ | 198,795 | $ | 203,184 | $ | 201,285 | $ | 200,535 | ||||||||||||||
Return on tangible common equity | NA | NA | 17 | % | 23 | % | 16 | % | 26 | % | ||||||||||||||||
Tangible book value per share | $ | 69.53 | $ | 71.53 | NA | NA | NA | NA |
(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.
19
BUSINESS SEGMENT RESULTS |
The Firm is managed on an LOB basis. There are four major reportable business segments – Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking and Asset & Wealth Management. In addition, there is a Corporate segment.
The business segments are determined based on the products and services provided, or the type of customer served, and they reflect the manner in which financial information is currently evaluated by the Firm’s Operating Committee. Segment results are presented on a managed basis. Refer to Explanation and Reconciliation of the Firm’s use of Non-GAAP Financial Measures on pages 18-19 for a definition of managed basis.
Description of business segment reporting methodology
Results of the business segments are intended to present each segment as if it were a stand-alone business. The management reporting process that derives business segment results includes the allocation of certain income and expense items. The Firm periodically assesses the assumptions, methodologies and reporting classifications used for segment reporting, and further refinements may be implemented in future periods. The Firm also assesses the level of capital required for each LOB on at least an annual basis. The Firm’s LOBs also provide various business metrics which are utilized by the Firm and its investors and analysts in assessing performance.
Revenue sharing
When business segments join efforts to sell products and services to the Firm’s clients, the participating business segments may agree to share revenue from those transactions. Revenue is generally recognized in the segment responsible for the related product or service, with allocations to the other segment(s) involved in the transaction. The segment results reflect these revenue-sharing agreements.
Funds transfer pricing
Funds transfer pricing (“FTP”) is the process by which the Firm allocates interest income and expense to the LOBs and Other Corporate and transfers the primary interest rate risk and liquidity risk to Treasury and CIO.
The funds transfer pricing process considers the interest rate risk and liquidity risk characteristics of assets and liabilities and off-balance sheet products. Periodically the methodology and assumptions utilized in the FTP process are adjusted to reflect economic conditions and other factors, which may impact the allocation of net interest income to the segments.
Foreign exchange risk
Foreign exchange risk is transferred from the LOBs and Other Corporate to Treasury and CIO for certain revenues and expenses. Treasury and CIO manages these risks centrally and reports the impact of foreign exchange rate movements related to the transferred risk in its results.
Capital allocation
The amount of capital assigned to each business segment is referred to as equity. Periodically, the assumptions and methodologies used to allocate capital are reassessed and as a result, the capital allocated to the LOBs may change. Refer to Line of business equity on page 47, and page 93 of JPMorgan Chase’s 2021 Form 10-K for additional information on capital allocation.
Refer to Business Segment Results – Description of business segment reporting methodology on pages 61-62 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of those methodologies.
20
Segment results – managed basis
The following tables summarize the Firm’s results by segment for the periods indicated.
Three months ended June 30, | Consumer & Community Banking | Corporate & Investment Bank | Commercial Banking | ||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||||||||
Total net revenue | $ | 12,614 | $ | 12,760 | (1)% | $ | 11,947 | $ | 13,214 | (10)% | $ | 2,683 | $ | 2,483 | 8% | ||||||||||||||||||||||||||
Total noninterest expense | 7,723 | 7,062 | 9 | 6,745 | 6,523 | 3 | 1,156 | 981 | 18 | ||||||||||||||||||||||||||||||||
Pre-provision profit/(loss) | 4,891 | 5,698 | (14) | 5,202 | 6,691 | (22) | 1,527 | 1,502 | 2 | ||||||||||||||||||||||||||||||||
Provision for credit losses | 761 | (1,868) | NM | 59 | (79) | NM | 209 | (377) | NM | ||||||||||||||||||||||||||||||||
Net income/(loss) | 3,100 | 5,645 | (a) | (45) | 3,725 | 5,020 | (a) | (26) | 994 | 1,422 | (a) | (30) | |||||||||||||||||||||||||||||
Return on equity (“ROE”) | 24% | 44% | 14 | % | 23% | 15 | % | 23% |
Three months ended June 30, | Asset & Wealth Management | Corporate | Total | |||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||||||||
Total net revenue | $ | 4,306 | $ | 4,107 | 5% | $ | 80 | $ | (1,169) | NM | $ | 31,630 | $ | 31,395 | 1% | |||||||||||||||||||||||||||||
Total noninterest expense | 2,919 | 2,586 | 13 | 206 | 515 | (60) | 18,749 | 17,667 | 6 | |||||||||||||||||||||||||||||||||||
Pre-provision profit/(loss) | 1,387 | 1,521 | (9) | (126) | (1,684) | 93 | 12,881 | 13,728 | (6) | |||||||||||||||||||||||||||||||||||
Provision for credit losses | 44 | (10) | NM | 28 | 49 | (43) | 1,101 | (2,285) | NM | |||||||||||||||||||||||||||||||||||
Net income/(loss) | 1,004 | 1,156 | (a) | (13) | (174) | (1,295) | (a) | 87 | 8,649 | 11,948 | (28) | |||||||||||||||||||||||||||||||||
ROE | 23 | % | 32% | NM | NM | 13 | % | 18% |
Six months ended June 30, | Consumer & Community Banking | Corporate & Investment Bank | Commercial Banking | |||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||||||||
Total net revenue | $ | 24,843 | $ | 25,277 | (2)% | $ | 25,476 | $ | 27,819 | (8)% | $ | 5,081 | $ | 4,876 | 4% | |||||||||||||||||||||||||||||
Total noninterest expense | 15,443 | 14,264 | 8 | 14,043 | 13,627 | 3 | 2,285 | 1,950 | 17 | |||||||||||||||||||||||||||||||||||
Pre-provision profit/(loss) | 9,400 | 11,013 | (15) | 11,433 | 14,192 | (19) | 2,796 | 2,926 | (4) | |||||||||||||||||||||||||||||||||||
Provision for credit losses | 1,439 | (5,470) | NM | 504 | (410) | NM | 366 | (495) | NM | |||||||||||||||||||||||||||||||||||
Net income/(loss) | 5,995 | 12,432 | (a) | (52) | 8,110 | 10,944 | (a) | (26) | 1,844 | 2,603 | (a) | (29) | ||||||||||||||||||||||||||||||||
ROE | 23% | 49% | 15 | % | 26% | (a) | 14 | % | 21% |
Six months ended June 30, | Asset & Wealth Management | Corporate | Total | |||||||||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||||||||
Total net revenue | $ | 8,621 | $ | 8,184 | 5% | $ | (801) | $ | (1,642) | 51% | $ | 63,220 | $ | 64,514 | (2)% | |||||||||||||||||||||||||||||
Total noninterest expense | 5,779 | 5,160 | 12 | 390 | 1,391 | (72) | 37,940 | 36,392 | 4 | |||||||||||||||||||||||||||||||||||
Pre-provision profit/(loss) | 2,842 | 3,024 | (6) | (1,191) | (3,033) | 61 | 25,280 | 28,122 | (10) | |||||||||||||||||||||||||||||||||||
Provision for credit losses | 198 | (131) | NM | 57 | 65 | (12) | 2,564 | (6,441) | NM | |||||||||||||||||||||||||||||||||||
Net income/(loss) | 2,012 | 2,416 | (a) | (17) | (1,030) | (2,147) | (a) | 52 | 16,931 | 26,248 | (35) | |||||||||||||||||||||||||||||||||
ROE | 23 | % | 34% | NM | NM | 13 | % | 21% |
(a)In the first quarter of 2022, the Firm changed its methodology for allocating income taxes to the LOBs, with no impact to Firmwide net income. Prior-period amounts have been revised to conform with the current presentation.
The following sections provide a comparative discussion of the Firm’s results by segment as of or for the three and six months ended June 30, 2022 versus the corresponding period in the prior year, unless otherwise specified.
21
CONSUMER & COMMUNITY BANKING |
Refer to pages 63-66 of JPMorgan Chase's 2021 Form 10-K and Line of Business Metrics on page 188 for a further discussion of the business profile of CCB.
Selected income statement data | |||||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||||||
Lending- and deposit-related fees | $ | 855 | $ | 753 | 14% | $ | 1,660 | $ | 1,495 | 11 | % | ||||||||||||||||||||||||
Asset management, administration and commissions | 947 | 866 | 9 | 1,876 | 1,671 | 12 | |||||||||||||||||||||||||||||
Mortgage fees and related income | 377 | 548 | (31) | 833 | 1,251 | (33) | |||||||||||||||||||||||||||||
Card income | 678 | 1,238 | (45) | 1,268 | 2,237 | (43) | |||||||||||||||||||||||||||||
All other income | 1,049 | 1,321 | (21) | 2,171 | 2,660 | (18) | |||||||||||||||||||||||||||||
Noninterest revenue | 3,906 | 4,726 | (17) | 7,808 | 9,314 | (16) | |||||||||||||||||||||||||||||
Net interest income | 8,708 | 8,034 | 8 | 17,035 | 15,963 | 7 | |||||||||||||||||||||||||||||
Total net revenue | 12,614 | 12,760 | (1) | 24,843 | 25,277 | (2) | |||||||||||||||||||||||||||||
Provision for credit losses | 761 | (1,868) | NM | 1,439 | (5,470) | NM | |||||||||||||||||||||||||||||
Noninterest expense | |||||||||||||||||||||||||||||||||||
Compensation expense | 3,237 | 2,977 | 9 | 6,408 | 5,953 | 8 | |||||||||||||||||||||||||||||
Noncompensation expense(a) | 4,486 | 4,085 | 10 | 9,035 | 8,311 | 9 | |||||||||||||||||||||||||||||
Total noninterest expense | 7,723 | 7,062 | 9 | 15,443 | 14,264 | 8 | |||||||||||||||||||||||||||||
Income before income tax expense | 4,130 | 7,566 | (45) | 7,961 | 16,483 | (52) | |||||||||||||||||||||||||||||
Income tax expense | 1,030 | 1,921 | (c) | (46) | 1,966 | 4,051 | (c) | (51) | |||||||||||||||||||||||||||
Net income | $ | 3,100 | $ | 5,645 | (c) | (45) | $ | 5,995 | $ | 12,432 | (c) | (52) | |||||||||||||||||||||||
Revenue by line of business | |||||||||||||||||||||||||||||||||||
Consumer & Business Banking | $ | 6,558 | $ | 6,016 | 9 | $ | 12,620 | $ | 11,651 | 8 | |||||||||||||||||||||||||
Home Lending | 1,001 | 1,349 | (26) | 2,170 | 2,807 | (23) | |||||||||||||||||||||||||||||
Card & Auto | 5,055 | 5,395 | (6) | 10,053 | 10,819 | (7) | |||||||||||||||||||||||||||||
Mortgage fees and related income details: | |||||||||||||||||||||||||||||||||||
Production revenue | 150 | 517 | (71) | 361 | 1,274 | (72) | |||||||||||||||||||||||||||||
Net mortgage servicing revenue(b) | 227 | 31 | NM | 472 | (23) | NM | |||||||||||||||||||||||||||||
Mortgage fees and related income | $ | 377 | $ | 548 | (31)% | $ | 833 | $ | 1,251 | (33) | % | ||||||||||||||||||||||||
Financial ratios | |||||||||||||||||||||||||||||||||||
Return on equity | 24 | % | 44 | % | 23 | % | 49 | % | |||||||||||||||||||||||||||
Overhead ratio | 61 | 55 | 62 | 56 |
(a)Included depreciation expense on leased assets of $652 million and $856 million for the three months ended June 30, 2022 and 2021, respectively, and $1.3 billion and $1.8 billion for the six months ended June 30, 2022 and 2021, respectively.
(b)Included MSR risk management results of $28 million and $(103) million for the three months ended June 30, 2022 and 2021, respectively, and $137 million and $(218) million for the six months ended June 30, 2022 and 2021, respectively.
(c)In the first quarter of 2022, the Firm changed its methodology for allocating income taxes to the LOBs, with no impact to Firmwide net income. Prior-period amounts have been revised to conform with the current presentation.
22
Quarterly results
Net income was $3.1 billion, down 45%, reflecting an increase in the provision for credit losses compared with a net benefit in the prior year.
Net revenue was $12.6 billion, a decrease of 1%.
Net interest income was $8.7 billion, up 8%, driven by:
•growth in deposits in CBB, and higher revolving loans in Card,
partially offset by
•a reduction associated with PPP loan forgiveness in CBB, and lower NII in Home Lending primarily due to tighter loan spreads.
Noninterest revenue was $3.9 billion, down 17%, driven by:
•lower card income reflecting higher amortization related to new account origination costs and lower net interchange income due to the impact from the renegotiation of a co-brand partner contract in the fourth quarter of 2021,
•lower production revenue from lower margins and volume in Home Lending, and
•lower auto operating lease income as a result of a decline in volume,
partially offset by
•higher net mortgage servicing revenue from an increase in MSR risk management results primarily driven by changes in prepayment expectations, and higher operating revenue on a higher level of third-party loans serviced, and
•higher deposit-related fees.
Refer to Note 14 for further information regarding changes in the value of the MSR asset and related hedges, and mortgage fees and related income. Refer to Note 5 for additional information on card income.
Noninterest expense was $7.7 billion, up 9%, reflecting:
•investments in the business and increased structural expenses, predominantly driven by compensation, technology and marketing,
partially offset by
•lower volume- and revenue-related expenses primarily due to depreciation expense on lower auto lease assets.
The provision for credit losses was $761 million, reflecting:
•net charge-offs of $611 million, down $121 million, driven by Card reflecting the financial strength of U.S. consumers, and
•a $150 million addition to the allowance for credit losses in Card driven by loan growth.
The prior year included a $2.6 billion reduction in the allowance for credit losses across CCB.
Refer to Credit and Investment Risk Management on pages 55-74 and Allowance for Credit Losses on pages 71-73 for a further discussion of the credit portfolios and the allowance for credit losses.
Year-to-date results
Net income was $6.0 billion, down 52%, reflecting an increase in the provision for credit losses compared with a net benefit in the prior year.
Net revenue was $24.8 billion, a decrease of 2%.
Net interest income was $17.0 billion, up 7%, driven by:
•growth in deposits net of margin compression in CBB, and higher revolving loans in Card,
partially offset by
•a reduction associated with PPP loan forgiveness in CBB, and lower NII in Home Lending primarily due to tighter loan spreads.
Noninterest revenue was $7.8 billion, down 16%, driven by:
•lower production revenue from lower margins and volume in Home Lending,
•higher amortization related to new account origination costs in Card, and
•lower auto operating lease income as a result of a decline in volume,
partially offset by
•higher net mortgage servicing revenue from an increase in MSR risk management results primarily driven by changes in prepayment expectations, and higher operating revenue on a higher level of third-party loans serviced,
•higher commissions largely on travel, and higher asset management fees as a result of net inflows, and
•higher deposit-related fees.
Noninterest expense was $15.4 billion, up 8%, reflecting:
•investments in the business and increased structural expenses, predominantly driven by compensation, technology and marketing,
partially offset by
•lower volume- and revenue-related expenses, reflecting a net decrease related to lower depreciation expense on lower auto lease assets and higher operating losses.
The provision for credit losses was $1.4 billion, reflecting:
•net charge-offs of $1.2 billion, down $591 million, driven by Card reflecting the financial strength of U.S. consumers, and
•a $275 million addition to the allowance for credit losses in Card and Home Lending.
The prior year included a $7.2 billion reduction in the allowance for credit losses across CCB.
23
Selected metrics | |||||||||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions, except headcount) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Selected balance sheet data (period-end) | |||||||||||||||||||||||||||||||||||
Total assets | $ | 500,219 | $ | 494,305 | 1% | $ | 500,219 | $ | 494,305 | 1 | % | ||||||||||||||||||||||||
Loans: | |||||||||||||||||||||||||||||||||||
Consumer & Business Banking(a) | 31,494 | 46,228 | (32) | 31,494 | 46,228 | (32) | |||||||||||||||||||||||||||||
Home Lending(b) | 176,939 | 179,371 | (1) | 176,939 | 179,371 | (1) | |||||||||||||||||||||||||||||
Card | 165,494 | 141,802 | 17 | 165,494 | 141,802 | 17 | |||||||||||||||||||||||||||||
Auto | 67,842 | 67,598 | — | 67,842 | 67,598 | — | |||||||||||||||||||||||||||||
Total loans | 441,769 | 434,999 | 2 | 441,769 | 434,999 | 2 | |||||||||||||||||||||||||||||
Deposits | 1,178,825 | 1,056,507 | 12 | 1,178,825 | 1,056,507 | 12 | |||||||||||||||||||||||||||||
Equity | 50,000 | 50,000 | — | 50,000 | 50,000 | — | |||||||||||||||||||||||||||||
Selected balance sheet data (average) | |||||||||||||||||||||||||||||||||||
Total assets | $ | 496,177 | $ | 485,209 | 2 | $ | 492,592 | $ | 484,868 | 2 | |||||||||||||||||||||||||
Loans: | |||||||||||||||||||||||||||||||||||
Consumer & Business Banking | 32,294 | 49,356 | (35) | 33,014 | 49,611 | (33) | |||||||||||||||||||||||||||||
Home Lending(c) | 177,330 | 177,444 | — | 176,911 | 179,832 | (2) | |||||||||||||||||||||||||||||
Card | 158,434 | 136,149 | 16 | 153,941 | 135,520 | 14 | |||||||||||||||||||||||||||||
Auto | 68,569 | 67,183 | 2 | 68,908 | 67,072 | 3 | |||||||||||||||||||||||||||||
Total loans | 436,627 | 430,132 | 2 | 432,774 | 432,035 | — | |||||||||||||||||||||||||||||
Deposits | 1,180,453 | 1,047,771 | 13 | 1,167,057 | 1,013,917 | 15 | |||||||||||||||||||||||||||||
Equity | 50,000 | 50,000 | — | 50,000 | 50,000 | — | |||||||||||||||||||||||||||||
Headcount | 130,907 | 125,300 | 4% | 130,907 | 125,300 | 4 | % |
(a)At June 30, 2022 and 2021, included $1.5 billion and $16.7 billion of loans, respectively, in Business Banking under the PPP. Refer to Credit Portfolio on page 109 of JPMorgan Chase's 2021 Form 10-K for a further discussion on the PPP.
(b)At June 30, 2022 and 2021, Home Lending loans held-for-sale and loans at fair value were $5.2 billion and $16.5 billion, respectively.
(c)Average Home Lending loans held-for sale and loans at fair value were $8.1 billion and $14.2 billion for the three months ended June 30, 2022 and 2021, respectively, and $9.5 billion and $13.3 billion for the six months ended June 30, 2022 and 2021, respectively.
24
Selected metrics | ||||||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | |||||||||||||||||||||||||||||||
(in millions, except ratio data) | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||
Credit data and quality statistics | ||||||||||||||||||||||||||||||||
Nonaccrual loans(a)(b)(c) | $ | 4,217 | $ | 5,256 | (20)% | $ | 4,217 | $ | 5,256 | (20) | % | |||||||||||||||||||||
Net charge-offs/(recoveries) | ||||||||||||||||||||||||||||||||
Consumer & Business Banking | 81 | 72 | 13 | 170 | 137 | 24 | ||||||||||||||||||||||||||
Home Lending | (68) | (79) | 14 | (137) | (130) | (5) | ||||||||||||||||||||||||||
Card | 580 | 755 | (23) | 1,086 | 1,738 | (38) | ||||||||||||||||||||||||||
Auto | 18 | (16) | NM | 45 | 10 | 350 | ||||||||||||||||||||||||||
Total net charge-offs/(recoveries) | $ | 611 | $ | 732 | (17) | $ | 1,164 | $ | 1,755 | (34) | ||||||||||||||||||||||
Net charge-off/(recovery) rate | ||||||||||||||||||||||||||||||||
Consumer & Business Banking(d) | 1.01 | % | 0.59 | % | 1.04 | % | 0.56 | % | ||||||||||||||||||||||||
Home Lending | (0.16) | (0.19) | (0.16) | (0.16) | ||||||||||||||||||||||||||||
Card | 1.47 | 2.24 | 1.42 | 2.60 | ||||||||||||||||||||||||||||
Auto | 0.11 | (0.10) | 0.13 | 0.03 | ||||||||||||||||||||||||||||
Total net charge-off/(recovery) rate | 0.57 | % | 0.71 | % | 0.55 | % | 0.85 | % | ||||||||||||||||||||||||
30+ day delinquency rate | ||||||||||||||||||||||||||||||||
Home Lending(e)(f) | 0.85 | % | 1.08 | % | 0.85 | % | 1.08 | % | ||||||||||||||||||||||||
Card | 1.05 | 1.01 | 1.05 | 1.01 | ||||||||||||||||||||||||||||
Auto | 0.69 | 0.42 | 0.69 | 0.42 | ||||||||||||||||||||||||||||
90+ day delinquency rate - Card | 0.51 | % | 0.54 | % | 0.51 | % | 0.54 | % | ||||||||||||||||||||||||
Allowance for loan losses | ||||||||||||||||||||||||||||||||
Consumer & Business Banking | $ | 697 | $ | 897 | (22) | $ | 697 | $ | 897 | (22) | ||||||||||||||||||||||
Home Lending | 785 | 630 | 25 | 785 | 630 | 25 | ||||||||||||||||||||||||||
Card | 10,400 | 12,500 | (17) | 10,400 | 12,500 | (17) | ||||||||||||||||||||||||||
Auto | 740 | 817 | (9) | 740 | 817 | (9) | ||||||||||||||||||||||||||
Total allowance for loan losses | $ | 12,622 | $ | 14,844 | (15)% | $ | 12,622 | $ | 14,844 | (15) | % |
(a)At June 30, 2022 and 2021, nonaccrual loans excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $257 million and $397 million, respectively. These amounts have been excluded based upon the government guarantee. In addition, the Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance.
(b)At June 30, 2022 and 2021, generally excludes loans that were under payment deferral programs offered in response to the COVID-19 pandemic. Refer to Consumer Credit Portfolio on pages 110-116 of JPMorgan Chase's 2021 Form 10-K for further information on consumer payment assistance activity. Includes loans to customers that have exited COVID-19 related payment deferral programs and are 90 or more days past due, predominantly all of which were considered collateral-dependent at time of exit.
(c)At June 30, 2022, nonaccrual loans excluded $86 million of PPP loans 90 or more days past due and guaranteed by the SBA.
(d)At June 30, 2022 and 2021, included $1.5 billion and $16.7 billion of loans, respectively, in Business Banking under the PPP. The Firm does not expect to realize material credit losses on PPP loans because the loans are guaranteed by the SBA. Refer to Credit Portfolio on page 109 of JPMorgan Chase's 2021 Form 10-K for a further discussion of the PPP.
(e)At June 30, 2022 and 2021, the principal balance of loans under payment deferral programs offered in response to the COVID-19 pandemic was $513 million and $5.2 billion in Home Lending, respectively. Loans that are performing according to their modified terms are generally not considered delinquent. Refer to Consumer Credit Portfolio on pages 110-116 of JPMorgan Chase's 2021 Form 10-K for further information on consumer payment assistance activity.
(f)At June 30, 2022 and 2021, excluded mortgage loans insured by U.S. government agencies of $315 million and $483 million, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.
25
Selected metrics | |||||||||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in billions, except ratios and where otherwise noted) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Business Metrics | |||||||||||||||||||||||||||||||||||
Number of branches | 4,822 | 4,869 | (1)% | 4,822 | 4,869 | (1) | % | ||||||||||||||||||||||||||||
Active digital customers (in thousands)(a) | 60,735 | 56,915 | 7 | 60,735 | 56,915 | 7 | |||||||||||||||||||||||||||||
Active mobile customers (in thousands)(b) | 47,436 | 42,896 | 11 | 47,436 | 42,896 | 11 | |||||||||||||||||||||||||||||
Debit and credit card sales volume | $ | 397.0 | $ | 344.3 | 15 | $ | 748.5 | $ | 634.6 | 18 | |||||||||||||||||||||||||
Consumer & Business Banking | |||||||||||||||||||||||||||||||||||
Average deposits | $ | 1,163.4 | $ | 1,028.5 | 13 | $ | 1,149.8 | $ | 994.7 | 16 | |||||||||||||||||||||||||
Deposit margin | 1.31 | % | 1.28 | % | 1.27 | % | 1.29 | % | |||||||||||||||||||||||||||
Business banking origination volume(c) | $ | 1.2 | $ | 2.2 | (45) | $ | 2.2 | $ | 12.2 | (82) | |||||||||||||||||||||||||
Client investment assets(d) | 628.5 | 673.7 | (7) | 628.5 | 673.7 | (7) | |||||||||||||||||||||||||||||
Number of client advisors | 4,890 | 4,571 | 7 | 4,890 | 4,571 | 7 | |||||||||||||||||||||||||||||
Home Lending | |||||||||||||||||||||||||||||||||||
Mortgage origination volume by channel | |||||||||||||||||||||||||||||||||||
Retail | $ | 11.0 | $ | 22.7 | (52) | $ | 26.1 | $ | 45.7 | (43) | |||||||||||||||||||||||||
Correspondent | 10.9 | 16.9 | (36) | 20.5 | 33.2 | (38) | |||||||||||||||||||||||||||||
Total mortgage origination volume(e) | $ | 21.9 | $ | 39.6 | (45) | $ | 46.6 | $ | 78.9 | (41) | |||||||||||||||||||||||||
Third-party mortgage loans serviced (period-end) | $ | 575.6 | $ | 463.9 | 24 | 575.6 | $ | 463.9 | 24 | ||||||||||||||||||||||||||
MSR carrying value (period-end) | 7.4 | 4.5 | 64 | 7.4 | 4.5 | 64 | |||||||||||||||||||||||||||||
Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end) | 1.29 | % | 0.97 | % | 1.29 | % | 0.97 | % | |||||||||||||||||||||||||||
MSR revenue multiple(f) | 4.45 | x | 3.59 | x | 4.61 | x | 3.59 | x | |||||||||||||||||||||||||||
Credit Card | |||||||||||||||||||||||||||||||||||
Credit card sales volume, excluding commercial card | $ | 271.2 | $ | 223.7 | 21 | $ | 507.6 | $ | 407.4 | 25 | |||||||||||||||||||||||||
Net revenue rate | 9.59 | % | 11.32 | % | 9.72 | % | 11.43 | % | |||||||||||||||||||||||||||
Auto | |||||||||||||||||||||||||||||||||||
Loan and lease origination volume | $ | 7.0 | $ | 12.4 | (44) | $ | 15.4 | $ | 23.6 | (35) | |||||||||||||||||||||||||
Average auto operating lease assets | 14.9 | 19.6 | (24)% | 15.6 | 20.0 | (22) | % |
(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)Included origination volume under the PPP of $1.3 billion and $10.6 billion for the three and six months ended June 30, 2021, respectively. The program ended on May 31, 2021 for new applications.
(d)Includes assets invested in managed accounts and J.P. Morgan mutual funds where AWM is the investment manager. Refer to AWM segment results on pages 37-40 for additional information.
(e)Firmwide mortgage origination volume was $27.9 billion and $44.9 billion for the three months ended June 30, 2022 and 2021, respectively, and $58.1 billion and $88.1 billion for the six months ended June 30, 2022 and 2021, respectively.
(f)Represents the ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end) divided by the ratio of annualized loan servicing-related revenue to third-party mortgage loans serviced (average).
26
CORPORATE & INVESTMENT BANK |
Refer to pages 67-72 of JPMorgan Chase’s 2021 Form 10-K and Line of Business Metrics on page 188 for a further discussion of the business profile of CIB.
Selected income statement data | |||||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||||||
Investment banking fees | $ | 1,650 | $ | 3,572 | (54) | % | $ | 3,700 | $ | 6,560 | (44) | % | |||||||||||||||||||||||
Principal transactions | 5,048 | 4,026 | 25 | 10,271 | 10,071 | 2 | |||||||||||||||||||||||||||||
Lending- and deposit-related fees | 641 | 633 | 1 | 1,282 | 1,226 | 5 | |||||||||||||||||||||||||||||
Asset management, administration and commissions | 1,330 | 1,246 | 7 | 2,669 | 2,532 | 5 | |||||||||||||||||||||||||||||
All other income | 80 | 435 | (82) | 784 | 611 | 28 | |||||||||||||||||||||||||||||
Noninterest revenue | 8,749 | 9,912 | (12) | 18,706 | 21,000 | (11) | |||||||||||||||||||||||||||||
Net interest income | 3,198 | 3,302 | (3) | 6,770 | 6,819 | (1) | |||||||||||||||||||||||||||||
Total net revenue(a) | 11,947 | 13,214 | (10) | 25,476 | 27,819 | (8) | |||||||||||||||||||||||||||||
Provision for credit losses | 59 | (79) | NM | 504 | (410) | NM | |||||||||||||||||||||||||||||
Noninterest expense | |||||||||||||||||||||||||||||||||||
Compensation expense | 3,510 | 3,582 | (2) | 7,516 | 7,911 | (5) | |||||||||||||||||||||||||||||
Noncompensation expense | 3,235 | 2,941 | 10 | 6,527 | 5,716 | 14 | |||||||||||||||||||||||||||||
Total noninterest expense | 6,745 | 6,523 | 3 | 14,043 | 13,627 | 3 | |||||||||||||||||||||||||||||
Income before income tax expense | 5,143 | 6,770 | (24) | 10,929 | 14,602 | (25) | |||||||||||||||||||||||||||||
Income tax expense | 1,418 | 1,750 | (b) | (19) | 2,819 | 3,658 | (b) | (23) | |||||||||||||||||||||||||||
Net income | $ | 3,725 | $ | 5,020 | (b) | (26) | % | $ | 8,110 | $ | 10,944 | (b) | (26) | % | |||||||||||||||||||||
Financial ratios | |||||||||||||||||||||||||||||||||||
Return on equity | 14 | % | 23 | % | 15 | % | 26 | % | (b) | ||||||||||||||||||||||||||
Overhead ratio | 56 | 49 | 55 | 49 | |||||||||||||||||||||||||||||||
Compensation expense as percentage of total net revenue | 29 | 27 | 30 | 28 |
(a)Includes tax-equivalent adjustments, predominantly due to income tax credits and other tax benefits related to alternative energy investments; income tax credits and amortization of the cost of investments in affordable housing projects; and tax-exempt income from municipal bonds of $772 million and $763 million for the three months ended June 30, 2022 and 2021, respectively, and $1.5 billion for both the six months ended June 30, 2022 and 2021.
(b)In the first quarter of 2022, the Firm changed its methodology for allocating income taxes to the LOBs, with no impact to Firmwide net income. Prior-period amounts have been revised to conform with the current presentation.
Selected income statement data | ||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||
Revenue by business | ||||||||||||||||||||||||||
Investment Banking | $ | 1,351 | $ | 3,424 | (61) | % | $ | 3,408 | $ | 6,275 | (46) | % | ||||||||||||||
Payments | 1,463 | 1,453 | 1 | 3,317 | 2,845 | 17 | ||||||||||||||||||||
Lending | 410 | 229 | 79 | 731 | 494 | 48 | ||||||||||||||||||||
Total Banking | 3,224 | 5,106 | (37) | 7,456 | 9,614 | (22) | ||||||||||||||||||||
Fixed Income Markets | 4,711 | 4,098 | 15 | 10,409 | 9,859 | 6 | ||||||||||||||||||||
Equity Markets | 3,079 | 2,689 | 15 | 6,134 | 5,978 | 3 | ||||||||||||||||||||
Securities Services | 1,151 | 1,088 | 6 | 2,219 | 2,138 | 4 | ||||||||||||||||||||
Credit Adjustments & Other(a) | (218) | 233 | NM | (742) | 230 | NM | ||||||||||||||||||||
Total Markets & Securities Services | 8,723 | 8,108 | 8 | 18,020 | 18,205 | (1) | ||||||||||||||||||||
Total net revenue | $ | 11,947 | $ | 13,214 | (10) | % | $ | 25,476 | $ | 27,819 | (8) | % |
(a)Consists primarily of centrally managed credit valuation adjustments (“CVA”), funding valuation adjustments (“FVA”) on derivatives, other valuation adjustments, and certain components of fair value option elected liabilities, which are primarily reported in principal transactions revenue. Results are presented net of associated hedging activities and net of CVA and FVA amounts allocated to Fixed Income Markets and Equity Markets.
27
Quarterly results
Net income was $3.7 billion, down 26%.
Net revenue was $11.9 billion, down 10%.
Banking revenue was $3.2 billion, down 37%.
•Investment Banking revenue was $1.4 billion, down 61%, driven by lower Investment Banking fees, down 54%, reflecting lower fees across products, and $257 million of markdowns on held-for-sale positions, primarily unfunded commitments, in the bridge financing portfolio.
–Debt underwriting fees were $741 million, down 53%, and Equity underwriting fees were $245 million, down 77%, as volatile market conditions resulted in lower issuance activity.
–Advisory fees were $664 million, down 28%, driven by a lower level of announced deals starting in the first quarter of 2022.
•Payments revenue was $1.5 billion, up 1%, and included markdowns on equity investments. Excluding these markdowns, revenue was $1.8 billion, up 25%, predominantly driven by improved deposit margins and fees.
•Lending revenue was $410 million, up 79%, driven by fair value gains on hedges of accrual loans, compared to losses in the prior year, and higher net interest income on higher loans.
Markets & Securities Services revenue was $8.7 billion, up 8%. Markets revenue was $7.8 billion, up 15%.
•Fixed Income Markets revenue was $4.7 billion, up 15%, driven by a strong performance in macro businesses amid a volatile market, particularly in Currencies & Emerging Markets, partially offset by lower revenue in Credit and Securitized Products.
•Equity Markets revenue was $3.1 billion, up 15%, driven by a strong performance in derivatives amid a volatile market.
•Securities Services revenue was $1.2 billion, up 6%, predominantly driven by growth in fees, and to a lesser extent improved deposit margins, partially offset by lower market levels.
•Credit Adjustments & Other was a loss of $218 million, largely driven by funding spread widening, compared with a gain of $233 million in the prior year.
Noninterest expense was $6.7 billion, up 3%, reflecting higher structural expense and investments in the business, largely offset by lower revenue-related compensation.
The provision for credit losses was $59 million, driven by an addition to the allowance for credit losses, associated with a modest deterioration in the Firm’s macroeconomic forecast, predominantly offset by client-specific reductions in the allowance for credit losses.
The prior year was a net benefit of $79 million.
Refer to Credit and Investment Risk Management on pages 55-74 and Allowance for Credit Losses on pages 71-73 for further discussions of the credit portfolios and the allowance for credit losses.
Year-to-date results
Net income was $8.1 billion, down 26%.
Net revenue was $25.5 billion, down 8%.
Banking revenue was $7.5 billion, down 22%.
•Investment Banking revenue was $3.4 billion, down 46%, driven by lower Investment Banking fees, down 44%, reflecting lower fees across products, and $257 million of markdowns on held-for-sale positions, primarily unfunded commitments, in the bridge financing portfolio in the second quarter of 2022. The Firm ranked #1 for Global Investment Banking fees, according to Dealogic.
–Equity underwriting fees were $494 million, down 77%, and Debt underwriting fees were $1.7 billion, down 39%, as volatile market conditions resulted in lower issuance activity.
–Advisory fees were $1.5 billion, down 8%, driven by a lower level of announced deals.
•Payments revenue was $3.3 billion, up 17%, driven by improved deposit margins, as well as higher fees and deposits.
•Lending revenue was $731 million, up 48%, driven by fair value gains on hedges of accrual loans, compared to losses in the prior year, and higher net interest income on higher loans.
Markets & Securities Services revenue was $18.0 billion, down 1%. Markets revenue was $16.5 billion, up 4%.
•Fixed Income Markets revenue was $10.4 billion, up 6%, driven by higher revenue in macro businesses particularly in Currencies & Emerging Markets, largely offset by lower revenue in Securitized Products and Credit.
•Equity Markets revenue was $6.1 billion, up 3%, predominantly driven by a strong performance in derivatives and prime brokerage, partially offset by lower revenue in Cash Equities.
•Securities Services revenue was $2.2 billion, up 4%, predominantly driven by growth in fees and improved deposit margins, partially offset by lower market levels.
•Credit Adjustments & Other was a loss of $742 million, predominantly driven by funding spread widening, and to a lesser extent losses on exposure relating to commodities and Russia and Russia-associated counterparties, compared with a gain of $230 million in the prior year.
Noninterest expense was $14.0 billion, up 3%, predominantly driven by higher structural expense, investments in the business and legal expense, largely offset by lower volume- and revenue-related expense including revenue-related compensation.
The provision for credit losses was $504 million, predominantly driven by a net addition to the allowance for credit losses, reflecting the increased weight placed on the adverse scenarios and a modest deterioration in the Firm’s macroeconomic forecast. The increase in the allowance also included client-specific Russia and Russia-associated downgrades in the first quarter of 2022.
The prior year was a net benefit of $410 million, driven by a net reduction in the allowance for credit losses.
28
Selected metrics | |||||||||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions, except headcount) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Selected balance sheet data (period-end) | |||||||||||||||||||||||||||||||||||
Total assets | $ | 1,403,558 | $ | 1,363,992 | 3 | % | $ | 1,403,558 | $ | 1,363,992 | 3 | % | |||||||||||||||||||||||
Loans: | |||||||||||||||||||||||||||||||||||
Loans retained(a) | 171,219 | 144,764 | 18 | 171,219 | 144,764 | 18 | |||||||||||||||||||||||||||||
Loans held-for-sale and loans at fair value(b) | 46,032 | 56,668 | (19) | 46,032 | 56,668 | (19) | |||||||||||||||||||||||||||||
Total loans | 217,251 | 201,432 | 8 | 217,251 | 201,432 | 8 | |||||||||||||||||||||||||||||
Equity | 103,000 | 83,000 | 24 | 103,000 | 83,000 | 24 | |||||||||||||||||||||||||||||
Selected balance sheet data (average) | |||||||||||||||||||||||||||||||||||
Total assets | $ | 1,429,953 | $ | 1,371,218 | 4 | $ | 1,418,955 | $ | 1,332,755 | 6 | |||||||||||||||||||||||||
Trading assets-debt and equity instruments | 411,079 | 473,875 | (13) | 415,190 | 471,439 | (12) | |||||||||||||||||||||||||||||
Trading assets-derivative receivables | 83,582 | 69,392 | 20 | 75,184 | 71,411 | 5 | |||||||||||||||||||||||||||||
Loans: | |||||||||||||||||||||||||||||||||||
Loans retained(a) | $ | 169,909 | $ | 140,096 | 21 | $ | 165,467 | $ | 138,454 | 20 | |||||||||||||||||||||||||
Loans held-for-sale and loans at fair value(b) | 48,048 | 52,376 | (8) | 49,714 | 49,042 | 1 | |||||||||||||||||||||||||||||
Total loans | $ | 217,957 | $ | 192,472 | 13 | $ | 215,181 | $ | 187,496 | 15 | |||||||||||||||||||||||||
Equity | 103,000 | 83,000 | 24 | 103,000 | 83,000 | 24 | |||||||||||||||||||||||||||||
Headcount | 69,447 | 64,261 | 8 | % | 69,447 | 64,261 | 8 | % |
(a)Loans retained includes credit portfolio loans, loans held by consolidated Firm-administered multi-seller conduits, trade finance loans, other held-for-investment loans and overdrafts.
(b)Loans held-for-sale and loans at fair value primarily reflect lending related positions originated and purchased in CIB Markets, including loans held for securitization.
Selected metrics | |||||||||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Credit data and quality statistics | |||||||||||||||||||||||||||||||||||
Net charge-offs/(recoveries) | $ | 38 | $ | (12) | NM | $ | 58 | $ | (19) | NM | |||||||||||||||||||||||||
Nonperforming assets: | |||||||||||||||||||||||||||||||||||
Nonaccrual loans: | |||||||||||||||||||||||||||||||||||
Nonaccrual loans retained(a) | $ | 697 | $ | 783 | (11) | $ | 697 | $ | 783 | (11) | |||||||||||||||||||||||||
Nonaccrual loans held-for-sale and loans at fair value(b) | 840 | 1,187 | (29) | 840 | 1,187 | (29) | |||||||||||||||||||||||||||||
Total nonaccrual loans | 1,537 | 1,970 | (22) | 1,537 | 1,970 | (22) | |||||||||||||||||||||||||||||
Derivative receivables | 447 | 481 | (7) | 447 | 481 | (7) | |||||||||||||||||||||||||||||
Assets acquired in loan satisfactions | 84 | 95 | (12) | 84 | 95 | (12) | |||||||||||||||||||||||||||||
Total nonperforming assets | $ | 2,068 | $ | 2,546 | (19) | $ | 2,068 | $ | 2,546 | (19) | |||||||||||||||||||||||||
Allowance for credit losses: | |||||||||||||||||||||||||||||||||||
Allowance for loan losses | $ | 1,809 | $ | 1,607 | 13 | $ | 1,809 | $ | 1,607 | 13 | |||||||||||||||||||||||||
Allowance for lending-related commitments | 1,358 | 1,902 | (29) | 1,358 | 1,902 | (29) | |||||||||||||||||||||||||||||
Total allowance for credit losses | $ | 3,167 | $ | 3,509 | (10) | % | $ | 3,167 | $ | 3,509 | (10) | % | |||||||||||||||||||||||
Net charge-off/(recovery) rate(c) | 0.09 | % | (0.03) | % | 0.07 | % | (0.03) | % | |||||||||||||||||||||||||||
Allowance for loan losses to period-end loans retained | 1.06 | 1.11 | 1.06 | 1.11 | |||||||||||||||||||||||||||||||
Allowance for loan losses to period-end loans retained, excluding trade finance and conduits(d) | 1.38 | 1.53 | 1.38 | 1.53 | |||||||||||||||||||||||||||||||
Allowance for loan losses to nonaccrual loans retained(a) | 260 | 205 | 260 | 205 | |||||||||||||||||||||||||||||||
Nonaccrual loans to total period-end loans | 0.71 | % | 0.98 | % | 0.71 | % | 0.98 | % |
(a)Allowance for loan losses of $130 million and $180 million were held against these nonaccrual loans at June 30, 2022 and 2021, respectively.
(b)At June 30, 2022 and 2021, nonaccrual loans excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $196 million and $316 million, respectively. These amounts have been excluded based upon the government guarantee.
(c)Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.
(d)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.
29
Investment banking fees | |||||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Advisory | $ | 664 | $ | 916 | (28) | % | $ | 1,465 | $ | 1,596 | (8) | % | |||||||||||||||||||||||
Equity underwriting | 245 | 1,063 | (77) | 494 | 2,119 | (77) | |||||||||||||||||||||||||||||
Debt underwriting(a) | 741 | 1,593 | (53) | 1,741 | 2,845 | (39) | |||||||||||||||||||||||||||||
Total investment banking fees | $ | 1,650 | $ | 3,572 | (54) | % | $ | 3,700 | $ | 6,560 | (44) | % |
(a)Represents long-term debt and loan syndications.
League table results – wallet share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | Full-year 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rank | Share | Rank | Share | Rank | Share | Rank | Share | Rank | Share | ||||||||||||||||||||||||||||||||||||||||||||||||||
Based on fees(a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
M&A(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Global | # | 2 | 8.3 | % | # | 2 | 9.5 | % | # | 2 | 8.0 | % | # | 2 | 8.8 | % | # | 2 | 9.6 | % | |||||||||||||||||||||||||||||||||||||||
U.S. | 2 | 8.9 | 2 | 10.2 | 2 | 8.8 | 2 | 9.5 | 2 | 10.8 | |||||||||||||||||||||||||||||||||||||||||||||||||
Equity and equity-related(c) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Global | 1 | 6.2 | 2 | 10.6 | 1 | 5.8 | 3 | 9.2 | 2 | 8.8 | |||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | 1 | 15.1 | 1 | 14.3 | 1 | 13.1 | 2 | 11.4 | 2 | 11.7 | |||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt(d) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Global | 1 | 7.8 | 1 | 9.3 | 1 | 8.0 | 1 | 9.2 | 1 | 8.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | 1 | 12.8 | 1 | 14.0 | 1 | 12.5 | 1 | 13.3 | 1 | 12.1 | |||||||||||||||||||||||||||||||||||||||||||||||||
Loan syndications | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Global | 1 | 11.2 | 1 | 11.8 | 1 | 10.8 | 1 | 12.5 | 1 | 10.7 | |||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | 1 | 12.0 | 1 | 13.6 | 2 | 10.6 | 1 | 14.5 | 1 | 12.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
Global investment banking fees(e) | # | 2 | 8.4 | % | # | 1 | 10.1 | % | # | 1 | 8.1 | % | # | 1 | 9.6 | % | # | 1 | 9.3 | % |
(a)Source: Dealogic as of July 1, 2022. Reflects the ranking of revenue wallet and market share.
(b)Global M&A excludes any withdrawn transactions. U.S. M&A revenue wallet represents wallet from client parents based in the U.S.
(c)Global equity and equity-related ranking includes rights offerings and Chinese A-Shares.
(d)Long-term debt rankings include investment-grade, high-yield, supranationals, sovereigns, agencies, covered bonds, asset-backed securities (“ABS”) and mortgage-backed securities (“MBS”); and exclude money market, short-term debt, and U.S. municipal securities.
(e)Global investment banking fees exclude money market, short-term debt and shelf securities.
30
Markets revenue
The following table summarizes selected income statement data for the Markets businesses. Markets includes both Fixed Income Markets and Equity Markets. Markets revenue consists of principal transactions, fees, commissions and other income, as well as net interest income. The Firm assesses its Markets business performance on a total revenue basis, as offsets may occur across revenue line items. For example, securities that generate net interest income may be risk-managed by derivatives that are
reflected at fair value in principal transactions revenue. Refer to Notes 5 and 6 for a description of the composition of these income statement line items. Refer to Markets revenue on page 70 of JPMorgan Chase’s 2021 Form 10-K for further information.
For the periods presented below, the predominant source of principal transactions revenue was the amount recognized upon executing new transactions.
Three months ended June 30, | Three months ended June 30, | ||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
(in millions) | Fixed Income Markets | Equity Markets | Total Markets | Fixed Income Markets | Equity Markets | Total Markets | |||||||||||||||||
Principal transactions | $ | 2,934 | $ | 2,448 | $ | 5,382 | $ | 1,925 | $ | 1,879 | $ | 3,804 | |||||||||||
Lending- and deposit-related fees | 76 | 4 | 80 | 82 | 4 | 86 | |||||||||||||||||
Asset management, administration and commissions | 128 | 526 | 654 | 121 | 485 | 606 | |||||||||||||||||
All other income | 166 | (41) | 125 | 293 | 11 | 304 | |||||||||||||||||
Noninterest revenue | 3,304 | 2,937 | 6,241 | 2,421 | 2,379 | 4,800 | |||||||||||||||||
Net interest income | 1,407 | 142 | 1,549 | 1,677 | 310 | 1,987 | |||||||||||||||||
Total net revenue | $ | 4,711 | $ | 3,079 | $ | 7,790 | $ | 4,098 | $ | 2,689 | $ | 6,787 | |||||||||||
Six months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
(in millions) | Fixed Income Markets | Equity Markets | Total Markets | Fixed Income Markets | Equity Markets | Total Markets | |||||||||||||||||
Principal transactions | $ | 6,323 | $ | 4,732 | $ | 11,055 | $ | 5,489 | $ | 4,361 | $ | 9,850 | |||||||||||
Lending- and deposit-related fees | 154 | 8 | 162 | 151 | 8 | 159 | |||||||||||||||||
Asset management, administration and commissions | 284 | 1,077 | 1,361 | 250 | 1,029 | 1,279 | |||||||||||||||||
All other income | 283 | (85) | 198 | 359 | (20) | 339 | |||||||||||||||||
Noninterest revenue | 7,044 | 5,732 | 12,776 | 6,249 | 5,378 | 11,627 | |||||||||||||||||
Net interest income | 3,365 | 402 | 3,767 | 3,610 | 600 | 4,210 | |||||||||||||||||
Total net revenue | $ | 10,409 | $ | 6,134 | $ | 16,543 | $ | 9,859 | $ | 5,978 | $ | 15,837 |
Selected metrics | |||||||||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions, except where otherwise noted) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Assets under custody (“AUC”) by asset class (period-end) (in billions): | |||||||||||||||||||||||||||||||||||
Fixed Income | $ | 14,720 | $ | 15,720 | (6) | % | $ | 14,720 | $ | 15,720 | (6) | % | |||||||||||||||||||||||
Equity | 10,359 | 12,505 | (17) | 10,359 | 12,505 | (17) | |||||||||||||||||||||||||||||
Other(a) | 3,500 | 3,897 | (10) | 3,500 | 3,897 | (10) | |||||||||||||||||||||||||||||
Total AUC | $ | 28,579 | $ | 32,122 | (11) | $ | 28,579 | $ | 32,122 | (11) | |||||||||||||||||||||||||
Merchant processing volume (in billions)(b) | $ | 539.6 | $ | 475.2 | 14 | $ | 1,029.8 | $ | 900.9 | 14 | |||||||||||||||||||||||||
Client deposits and other third-party liabilities (average)(c) | $ | 722,388 | $ | 721,882 | — | % | $ | 715,791 | $ | 713,868 | — | % |
(a)Consists of mutual funds, unit investment trusts, currencies, annuities, insurance contracts, options and other contracts.
(b)Represents total merchant processing volume across CIB, CCB and CB.
(c)Client deposits and other third-party liabilities pertain to the Payments and Securities Services businesses.
31
International metrics | |||||||||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions, except where otherwise noted) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Total net revenue(a) | |||||||||||||||||||||||||||||||||||
Europe/Middle East/Africa | $ | 4,280 | $ | 3,784 | 13 | % | $ | 8,972 | $ | 7,844 | 14 | % | |||||||||||||||||||||||
Asia-Pacific | 2,023 | 1,792 | 13 | 4,008 | 4,053 | (1) | |||||||||||||||||||||||||||||
Latin America/Caribbean | 464 | 460 | 1 | 1,141 | 954 | 20 | |||||||||||||||||||||||||||||
Total international net revenue | 6,767 | 6,036 | 12 | 14,121 | 12,851 | 10 | |||||||||||||||||||||||||||||
North America | 5,180 | 7,178 | (28) | 11,355 | 14,968 | (24) | |||||||||||||||||||||||||||||
Total net revenue | $ | 11,947 | $ | 13,214 | (10) | $ | 25,476 | $ | 27,819 | (8) | |||||||||||||||||||||||||
Loans retained (period-end)(a) | |||||||||||||||||||||||||||||||||||
Europe/Middle East/Africa | $ | 35,524 | $ | 31,534 | 13 | $ | 35,524 | $ | 31,534 | 13 | |||||||||||||||||||||||||
Asia-Pacific | 16,427 | 14,262 | 15 | 16,427 | 14,262 | 15 | |||||||||||||||||||||||||||||
Latin America/Caribbean | 7,961 | 5,456 | 46 | 7,961 | 5,456 | 46 | |||||||||||||||||||||||||||||
Total international loans | 59,912 | 51,252 | 17 | 59,912 | 51,252 | 17 | |||||||||||||||||||||||||||||
North America | 111,307 | 93,512 | 19 | 111,307 | 93,512 | 19 | |||||||||||||||||||||||||||||
Total loans retained | $ | 171,219 | $ | 144,764 | 18 | $ | 171,219 | $ | 144,764 | 18 | |||||||||||||||||||||||||
Client deposits and other third-party liabilities (average)(b) | |||||||||||||||||||||||||||||||||||
Europe/Middle East/Africa | $ | 272,919 | $ | 246,949 | 11 | $ | 259,781 | $ | 241,593 | 8 | |||||||||||||||||||||||||
Asia-Pacific | 129,514 | 132,438 | (2) | 132,126 | 132,284 | — | |||||||||||||||||||||||||||||
Latin America/Caribbean | 41,785 | 47,502 | (12) | 42,720 | 45,891 | (7) | |||||||||||||||||||||||||||||
Total international | $ | 444,218 | $ | 426,889 | 4 | $ | 434,627 | $ | 419,768 | 4 | |||||||||||||||||||||||||
North America | 278,170 | 294,993 | (6) | 281,164 | 294,100 | (4) | |||||||||||||||||||||||||||||
Total client deposits and other third-party liabilities | $ | 722,388 | $ | 721,882 | — | $ | 715,791 | $ | 713,868 | — | |||||||||||||||||||||||||
AUC (period-end)(b) (in billions) | |||||||||||||||||||||||||||||||||||
North America | $ | 18,816 | $ | 20,864 | (10) | $ | 18,816 | $ | 20,864 | (10) | |||||||||||||||||||||||||
All other regions | 9,763 | 11,258 | (13) | 9,763 | 11,258 | (13) | |||||||||||||||||||||||||||||
Total AUC | $ | 28,579 | $ | 32,122 | (11) | % | $ | 28,579 | $ | 32,122 | (11) | % |
(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 Payments and Securities Services businesses, and AUC, are based on the domicile of the client.
32
COMMERCIAL BANKING |
Refer to pages 73-75 of JPMorgan Chase’s 2021 Form 10-K and Line of Business Metrics on page 189 for a discussion of the business profile of CB.
Selected income statement data | ||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||
Lending- and deposit-related fees | $ | 348 | $ | 350 | (1) | % | $ | 712 | $ | 681 | 5 | % | ||||||||||||||||||||
All other income | 556 | 600 | (7) | 1,059 | 1,186 | (11) | ||||||||||||||||||||||||||
Noninterest revenue | 904 | 950 | (5) | 1,771 | 1,867 | (5) | ||||||||||||||||||||||||||
Net interest income | 1,779 | 1,533 | 16 | 3,310 | 3,009 | 10 | ||||||||||||||||||||||||||
Total net revenue(a) | 2,683 | 2,483 | 8 | 5,081 | 4,876 | 4 | ||||||||||||||||||||||||||
Provision for credit losses | 209 | (377) | NM | 366 | (495) | NM | ||||||||||||||||||||||||||
Noninterest expense | ||||||||||||||||||||||||||||||||
Compensation expense | 559 | 484 | 15 | 1,112 | 966 | 15 | ||||||||||||||||||||||||||
Noncompensation expense | 597 | 497 | 20 | 1,173 | 984 | 19 | ||||||||||||||||||||||||||
Total noninterest expense | 1,156 | 981 | 18 | 2,285 | 1,950 | 17 | ||||||||||||||||||||||||||
Income before income tax expense | 1,318 | 1,879 | (30) | 2,430 | 3,421 | (29) | ||||||||||||||||||||||||||
Income tax expense | 324 | 457 | (b) | (29) | 586 | 818 | (b) | (28) | ||||||||||||||||||||||||
Net income | $ | 994 | $ | 1,422 | (b) | (30) | % | $ | 1,844 | $ | 2,603 | (b) | (29) | % |
(a)Total net revenue included tax-equivalent adjustments from income tax credits related to equity investments in designated community development entities and in entities established for rehabilitation of historic properties, as well as tax-exempt income related to municipal financing activities of $73 million and $78 million for the three months ended June 30, 2022 and 2021, respectively and $142 million and $151 million for the six months ended June 30, 2022 and 2021, respectively.
(b)In the first quarter of 2022, the Firm changed its methodology for allocating income taxes to the LOBs, with no impact to Firmwide net income. Prior-period amounts have been revised to conform with the current presentation.
Selected income statement data (continued) | |||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||
Revenue by product | |||||||||||||||||||||||||||||
Lending | $ | 1,058 | $ | 1,172 | (10) | % | $ | 2,163 | $ | 2,340 | (8) | % | |||||||||||||||||
Payments | 1,205 | 914 | 32 | 2,186 | 1,757 | 24 | |||||||||||||||||||||||
Investment banking(a) | 282 | 370 | (24) | 542 | 720 | (25) | |||||||||||||||||||||||
Other | 138 | 27 | 411 | 190 | 59 | 222 | |||||||||||||||||||||||
Total net revenue | $ | 2,683 | $ | 2,483 | 8 | $ | 5,081 | $ | 4,876 | 4 | |||||||||||||||||||
Investment banking revenue, gross(b) | $ | 788 | $ | 1,164 | (32) | $ | 1,517 | $ | 2,293 | (34) | |||||||||||||||||||
Revenue by client segments | |||||||||||||||||||||||||||||
Middle Market Banking | $ | 1,169 | $ | 1,009 | 16 | $ | 2,149 | $ | 1,925 | 12 | |||||||||||||||||||
Corporate Client Banking | 927 | 851 | 9 | 1,757 | 1,702 | 3 | |||||||||||||||||||||||
Commercial Real Estate Banking | 590 | 599 | (2) | 1,171 | 1,203 | (3) | |||||||||||||||||||||||
Other | (3) | 24 | NM | 4 | 46 | (91) | |||||||||||||||||||||||
Total net revenue | $ | 2,683 | $ | 2,483 | 8 | % | $ | 5,081 | $ | 4,876 | 4 | % | |||||||||||||||||
Financial ratios | |||||||||||||||||||||||||||||
Return on equity | 15 | % | 23 | % | 14 | % | 21 | % | |||||||||||||||||||||
Overhead ratio | 43 | 40 | 45 | 40 |
(a)Includes CB’s share of revenue from investment banking products sold to CB clients through the CIB.
(b)Refer to Business Segment Results on page 20 for discussion of revenue sharing.
33
Quarterly results
Net income was $994 million, down 30%, reflecting a net increase in the provision for credit losses compared with a net benefit in the prior year.
Net revenue was $2.7 billion, up 8% compared to the prior year. Net interest income was $1.8 billion, up 16%, driven by the impact of higher deposit margins and growth in loans, largely offset by the impact of higher funding costs.
Noninterest revenue was $904 million, down 5%, driven by:
•lower investment banking revenue and markdowns on held-for-sale positions, primarily unfunded commitments, in the bridge financing portfolio,
predominantly offset by
•a gain on an equity method investment received in partial satisfaction of a loan and higher payments revenue.
Noninterest expense was $1.2 billion, up 18%, predominantly driven by higher structural and volume- and revenue-related expense.
The provision for credit losses was $209 million, reflecting a net addition to the allowance for credit losses, largely driven by loan growth, compared with a net benefit of $377 million in the prior year.
Refer to Credit and Investment Risk Management on pages 55-74 and Allowance for Credit Losses on pages 71-73 for further discussions of the credit portfolios and the allowance for credit losses.
Year-to-date results
Net income was $1.8 billion, down 29%, reflecting a net increase in the provision for credit losses compared with a net benefit in the prior year.
Net revenue was $5.1 billion, up 4% compared to the prior year. Net interest income was $3.3 billion, up 10%, driven by the impact of higher deposit margins and growth in loans, partially offset by the impact of higher funding costs.
Noninterest revenue was $1.8 billion, down 5%, driven by:
•lower investment banking revenue and markdowns on held-for-sale positions, primarily unfunded commitments, in the bridge financing portfolio,
predominantly offset by
•a gain on an equity method investment received in partial satisfaction of a loan and higher payments revenue.
Noninterest expense was $2.3 billion, up 17%, predominantly driven by higher structural and volume- and revenue-related expense.
The provision for credit losses was $366 million, reflecting a net addition to the allowance for credit losses, predominantly driven by loan growth, compared with a net benefit of $495 million in the prior year.
34
Selected metrics | |||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||
(in millions, except headcount) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||
Selected balance sheet data (period-end) | |||||||||||||||||||||||||||||
Total assets | $ | 242,456 | $ | 226,022 | 7 | % | $ | 242,456 | $ | 226,022 | 7 | % | |||||||||||||||||
Loans: | |||||||||||||||||||||||||||||
Loans retained | 223,541 | 200,929 | 11 | 223,541 | 200,929 | 11 | |||||||||||||||||||||||
Loans held-for-sale and loans at fair value | 566 | 3,381 | (83) | 566 | 3,381 | (83) | |||||||||||||||||||||||
Total loans | $ | 224,107 | $ | 204,310 | 10 | $ | 224,107 | $ | 204,310 | 10 | |||||||||||||||||||
Equity | 25,000 | 24,000 | 4 | 25,000 | 24,000 | 4 | |||||||||||||||||||||||
Period-end loans by client segment | |||||||||||||||||||||||||||||
Middle Market Banking(a) | $ | 68,535 | $ | 59,314 | 16 | $ | 68,535 | $ | 59,314 | 16 | |||||||||||||||||||
Corporate Client Banking | 49,503 | 44,866 | 10 | 49,503 | 44,866 | 10 | |||||||||||||||||||||||
Commercial Real Estate Banking | 105,982 | 99,858 | 6 | 105,982 | 99,858 | 6 | |||||||||||||||||||||||
Other | 87 | 272 | (68) | 87 | 272 | (68) | |||||||||||||||||||||||
Total loans(a) | $ | 224,107 | $ | 204,310 | 10 | $ | 224,107 | $ | 204,310 | 10 | |||||||||||||||||||
Selected balance sheet data (average) | |||||||||||||||||||||||||||||
Total assets | $ | 239,381 | $ | 226,562 | 6 | $ | 236,444 | $ | 226,071 | 5 | |||||||||||||||||||
Loans: | |||||||||||||||||||||||||||||
Loans retained | 218,478 | 202,102 | 8 | 213,536 | 203,127 | 5 | |||||||||||||||||||||||
Loans held-for-sale and loans at fair value | 1,004 | 3,150 | (68) | 1,572 | 2,866 | (45) | |||||||||||||||||||||||
Total loans | $ | 219,482 | $ | 205,252 | 7 | $ | 215,108 | $ | 205,993 | 4 | |||||||||||||||||||
Average loans by client segment | |||||||||||||||||||||||||||||
Middle Market Banking | $ | 66,640 | $ | 61,698 | 8 | $ | 64,550 | $ | 60,859 | 6 | |||||||||||||||||||
Corporate Client Banking | 47,832 | 43,440 | 10 | 46,720 | 44,573 | 5 | |||||||||||||||||||||||
Commercial Real Estate Banking | 104,890 | 99,864 | 5 | 103,701 | 100,260 | 3 | |||||||||||||||||||||||
Other | 120 | 250 | (52) | 137 | 301 | (54) | |||||||||||||||||||||||
Total loans | $ | 219,482 | $ | 205,252 | 7 | $ | 215,108 | $ | 205,993 | 4 | |||||||||||||||||||
Client deposits and other third-party liabilities | $ | 300,425 | $ | 290,250 | 4 | $ | 308,627 | $ | 290,619 | 6 | |||||||||||||||||||
Equity | 25,000 | 24,000 | 4 | 25,000 | 24,000 | 4 | |||||||||||||||||||||||
Headcount | 13,811 | 12,163 | 14 | % | 13,811 | 12,163 | 14 | % |
(a)At June 30, 2022 and 2021, total loans included $335 million and $5.0 billion of loans, respectively, under the PPP, of which $306 million and $4.9 billion were in Middle Market Banking, respectively. Refer to Credit Portfolio on page 109 of JPMorgan Chase's 2021 Form 10-K for a further discussion of the PPP.
35
Selected metrics (continued) | ||||||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | |||||||||||||||||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||
Credit data and quality statistics | ||||||||||||||||||||||||||||||||
Net charge-offs/(recoveries) | $ | 1 | $ | 3 | (67) | % | $ | 7 | $ | 32 | (78) | % | ||||||||||||||||||||
Nonperforming assets | ||||||||||||||||||||||||||||||||
Nonaccrual loans: | ||||||||||||||||||||||||||||||||
Nonaccrual loans retained(a) | $ | 761 | (c) | $ | 1,006 | (24) | % | $ | 761 | $ | 1,006 | (24) | % | |||||||||||||||||||
Nonaccrual loans held-for-sale and loans at fair value | — | 2 | NM | — | 2 | NM | ||||||||||||||||||||||||||
Total nonaccrual loans | $ | 761 | $ | 1,008 | (25) | $ | 761 | $ | 1,008 | (25) | ||||||||||||||||||||||
Assets acquired in loan satisfactions | 8 | 17 | (53) | 8 | 17 | (53) | ||||||||||||||||||||||||||
Total nonperforming assets | $ | 769 | $ | 1,025 | (25) | $ | 769 | $ | 1,025 | (25) | ||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||
Allowance for loan losses | $ | 2,602 | $ | 2,589 | 1 | $ | 2,602 | $ | 2,589 | 1 | ||||||||||||||||||||||
Allowance for lending-related commitments | 725 | 870 | (17) | 725 | 870 | (17) | ||||||||||||||||||||||||||
Total allowance for credit losses | $ | 3,327 | $ | 3,459 | (4) | % | $ | 3,327 | $ | 3,459 | (4) | % | ||||||||||||||||||||
Net charge-off/(recovery) rate(b) | — | % | 0.01 | % | 0.01 | % | 0.03 | % | ||||||||||||||||||||||||
Allowance for loan losses to period-end loans retained | 1.16 | 1.29 | 1.16 | 1.29 | ||||||||||||||||||||||||||||
Allowance for loan losses to nonaccrual loans retained(a) | 342 | 257 | 342 | 257 | ||||||||||||||||||||||||||||
Nonaccrual loans to period-end total loans | 0.34 | 0.49 | 0.34 | 0.49 |
(a)Allowance for loan losses of $74 million and $188 million was held against nonaccrual loans retained at June 30, 2022 and 2021, respectively.
(b)Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.
(c)At June 30, 2022, nonaccrual loans excluded $32 million of PPP loans 90 or more days past due and guaranteed by the SBA.
36
ASSET & WEALTH MANAGEMENT |
Refer to pages 76-78 of JPMorgan Chase’s 2021 Form 10-K and Line of Business Metrics on pages 189-190 for a discussion of the business profile of AWM.
Selected income statement data | |||||||||||||||||||||||||||||
(in millions, except ratios) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||
2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||
Asset management, administration and commissions | $ | 3,037 | $ | 3,019 | 1 | % | $ | 6,152 | $ | 5,907 | 4 | % | |||||||||||||||||
All other income | 47 | 146 | (68) | 171 | 404 | (58) | |||||||||||||||||||||||
Noninterest revenue | 3,084 | 3,165 | (3) | 6,323 | 6,311 | — | |||||||||||||||||||||||
Net interest income | 1,222 | 942 | 30 | 2,298 | 1,873 | 23 | |||||||||||||||||||||||
Total net revenue | 4,306 | 4,107 | 5 | 8,621 | 8,184 | 5 | |||||||||||||||||||||||
Provision for credit losses | 44 | (10) | NM | 198 | (131) | NM | |||||||||||||||||||||||
Noninterest expense | |||||||||||||||||||||||||||||
Compensation expense | 1,508 | 1,356 | 11 | 3,038 | 2,745 | 11 | |||||||||||||||||||||||
Noncompensation expense | 1,411 | 1,230 | 15 | 2,741 | 2,415 | 13 | |||||||||||||||||||||||
Total noninterest expense | 2,919 | 2,586 | 13 | 5,779 | 5,160 | 12 | |||||||||||||||||||||||
Income before income tax expense | 1,343 | 1,531 | (12) | 2,644 | 3,155 | (16) | |||||||||||||||||||||||
Income tax expense | 339 | 375 | (a) | (10) | 632 | 739 | (a) | (14) | |||||||||||||||||||||
Net income | $ | 1,004 | $ | 1,156 | (a) | (13) | $ | 2,012 | $ | 2,416 | (a) | (17) | |||||||||||||||||
Revenue by line of business | |||||||||||||||||||||||||||||
Asset Management | $ | 2,137 | $ | 2,236 | (4) | $ | 4,451 | $ | 4,421 | 1 | |||||||||||||||||||
Global Private Bank | 2,169 | 1,871 | 16 | 4,170 | 3,763 | 11 | |||||||||||||||||||||||
Total net revenue | $ | 4,306 | $ | 4,107 | 5 | % | $ | 8,621 | $ | 8,184 | 5 | % | |||||||||||||||||
Financial ratios | |||||||||||||||||||||||||||||
Return on equity | 23 | % | 32 | % | 23 | % | 34 | % | |||||||||||||||||||||
Overhead ratio | 68 | 63 | 67 | 63 | |||||||||||||||||||||||||
Pre-tax margin ratio: | |||||||||||||||||||||||||||||
Asset Management | 29 | 37 | 31 | 36 | |||||||||||||||||||||||||
Global Private Bank | 33 | 38 | 30 | 41 | |||||||||||||||||||||||||
Asset & Wealth Management | 31 | 37 | 31 | 39 |
(a)In the first quarter of 2022, the Firm changed its methodology for allocating income taxes to the LOBs, with no impact to Firmwide net income. Prior-period amounts have been revised to conform with the current presentation.
Quarterly results
Net income was $1.0 billion, down 13%.
Net revenue was $4.3 billion, up 5%. Net interest income was $1.2 billion, up 30%. Noninterest revenue was $3.1 billion, down 3%.
Revenue from Asset Management was $2.1 billion, down 4% predominantly driven by:
•investment valuation net losses compared to net gains in the prior year and lower performance fees,
partially offset by
•higher asset management fees reflecting the removal of most money market fund fee waivers, partially offset by the decline in market levels.
Revenue from Global Private Bank was $2.2 billion, up 16% predominantly driven by:
•growth in deposits and loans as well as improved margins,
partially offset by
•lower placement fees.
Noninterest expense was $2.9 billion, up 13%, driven by higher structural expense and investments in the business, including compensation, and higher volume- and revenue-related expense.
The provision for credit losses was $44 million.
Refer to Credit and Investment Risk Management on pages 55-74 and Allowance for Credit Losses on pages 71-73 for further discussions of the credit portfolios and the allowance for credit losses.
Year-to-date results
Net income was $2.0 billion, down 17%.
Net revenue was $8.6 billion, up 5%. Net interest income was $2.3 billion, up 23%. Noninterest revenue was flat at $6.3 billion.
Revenue from Asset Management was $4.5 billion, up 1%, driven by:
•higher asset management fees reflecting the removal of most money market fund fee waivers in the second quarter of 2022, and strong cumulative net inflows into
37
long-term products, partially offset by the decline in market levels, and
•higher performance fees,
predominantly offset by
•investment valuation net losses compared to net gains in the prior year.
Revenue from Global Private Bank was $4.2 billion, up 11%, driven by:
•higher loans and wider spreads, and
•growth in deposits, net of margin compression,
partially offset by
•lower brokerage fees on reduced volume, and
•lower performance fees.
Noninterest expense was $5.8 billion, up 12%, driven by higher structural expense and investments in the business, including compensation, and higher volume- and revenue-related expense.
The provision for credit losses was $198 million, driven by a net addition to the allowance for credit losses, compared with a net benefit of $131 million in the prior year.
Selected metrics | |||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||
(in millions, except ranking data, headcount and ratios) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||
% of JPM mutual fund assets rated as 4- or 5-star(a) | 72 | % | 68 | % | 72 | % | 68 | % | |||||||||||||||
% of JPM mutual fund assets ranked in 1st or 2nd quartile:(b) | |||||||||||||||||||||||
1 year | 64 | 69 | 64 | 69 | |||||||||||||||||||
3 years | 73 | 78 | 73 | 78 | |||||||||||||||||||
5 years | 79 | 79 | 79 | 79 | |||||||||||||||||||
Selected balance sheet data (period-end)(c) | |||||||||||||||||||||||
Total assets | $ | 235,553 | $ | 217,284 | 8 | % | $ | 235,553 | $ | 217,284 | 8 | % | |||||||||||
Loans | 218,841 | 198,683 | 10 | 218,841 | 198,683 | 10 | |||||||||||||||||
Deposits | 257,437 | 217,488 | 18 | 257,437 | 217,488 | 18 | |||||||||||||||||
Equity | 17,000 | 14,000 | 21 | 17,000 | 14,000 | 21 | |||||||||||||||||
Selected balance sheet data (average)(c) | |||||||||||||||||||||||
Total assets | $ | 234,565 | $ | 214,384 | 9 | $ | 233,444 | $ | 210,963 | 11 | |||||||||||||
Loans | 216,846 | 195,171 | 11 | 215,735 | 191,966 | 12 | |||||||||||||||||
Deposits | 268,861 | 219,699 | 22 | 278,256 | 213,167 | 31 | |||||||||||||||||
Equity | 17,000 | 14,000 | 21 | 17,000 | 14,000 | 21 | |||||||||||||||||
Headcount | 23,981 | 20,866 | 15 | 23,981 | 20,866 | 15 | |||||||||||||||||
Number of Global Private Bank client advisors | 2,866 | 2,435 | 18 | 2,866 | 2,435 | 18 | |||||||||||||||||
Credit data and quality statistics(c) | |||||||||||||||||||||||
Net charge-offs/(recoveries) | $ | 9 | $ | 12 | (25) | $ | 8 | $ | 23 | (65) | |||||||||||||
Nonaccrual loans | 620 | 792 | (22) | 620 | 792 | (22) | |||||||||||||||||
Allowance for credit losses: | |||||||||||||||||||||||
Allowance for loan losses | $ | 547 | $ | 458 | 19 | $ | 547 | $ | 458 | 19 | |||||||||||||
Allowance for lending-related commitments | 22 | 25 | (12) | 22 | 25 | (12) | |||||||||||||||||
Total allowance for credit losses | $ | 569 | $ | 483 | 18% | $ | 569 | $ | 483 | 18 | % | ||||||||||||
Net charge-off/(recovery) rate | 0.02 | % | 0.02 | % | 0.01 | % | 0.02 | % | |||||||||||||||
Allowance for loan losses to period-end loans | 0.25 | 0.23 | 0.25 | 0.23 | |||||||||||||||||||
Allowance for loan losses to nonaccrual loans | 88 | 58 | 88 | 58 | |||||||||||||||||||
Nonaccrual loans to period-end loans | 0.28 | 0.40 | 0.28 | 0.40 |
(a)Represents the Morningstar Rating for all domiciled funds except for Japan domiciled funds which use Nomura. Includes only Asset Management retail open-ended mutual funds that have a rating. Excludes money market funds, Undiscovered Managers Fund, and Brazil domiciled funds. Prior-period amounts were revised to conform with the current period presentation.
(b)Quartile ranking sourced from Morningstar, Lipper and Nomura based on country of domicile. Includes only Asset Management retail open-ended mutual funds that are ranked by the aforementioned sources. Excludes money market funds, Undiscovered Managers Fund, and Brazil domiciled funds. Prior-period amounts were revised to conform with the current period presentation.
(c)Loans, deposits and related credit data and quality statistics relate to the Global Private Bank business.
38
Client assets
Client assets of $3.8 trillion and assets under management of $2.7 trillion were down 6% and 8%, respectively, driven by lower market levels, partially offset by cumulative net inflows.
Client assets | |||||||||||
As of June 30, | |||||||||||
(in billions) | 2022 | 2021 | Change | ||||||||
Assets by asset class | |||||||||||
Liquidity | $ | 654 | $ | 698 | (6) | % | |||||
Fixed income | 624 | 688 | (9) | ||||||||
Equity | 641 | 725 | (12) | ||||||||
Multi-asset | 615 | 702 | (12) | ||||||||
Alternatives | 209 | 174 | 20 | ||||||||
Total assets under management | 2,743 | 2,987 | (8) | ||||||||
Custody/brokerage/administration/deposits | 1,055 | 1,057 | — | ||||||||
Total client assets(a) | $ | 3,798 | $ | 4,044 | (6) | ||||||
Assets by client segment | |||||||||||
Private Banking | $ | 712 | $ | 752 | (5) | ||||||
Global Institutional | 1,294 | 1,383 | (6) | ||||||||
Global Funds | 737 | 852 | (13) | ||||||||
Total assets under management | $ | 2,743 | $ | 2,987 | (8) | ||||||
Private Banking | $ | 1,715 | $ | 1,755 | (2) | ||||||
Global Institutional | 1,339 | 1,430 | (6) | ||||||||
Global Funds | 744 | 859 | (13) | ||||||||
Total client assets(a) | $ | 3,798 | $ | 4,044 | (6) | % |
(a)Includes CCB client investment assets invested in managed accounts and J.P. Morgan mutual funds where AWM is the investment manager.
Client assets (continued) | |||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||
(in billions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Assets under management rollforward | |||||||||||||||||
Beginning balance | $ | 2,960 | $ | 2,833 | $ | 3,113 | $ | 2,716 | |||||||||
Net asset flows: | |||||||||||||||||
Liquidity | — | 15 | (52) | 59 | |||||||||||||
Fixed income | (1) | 17 | (4) | 25 | |||||||||||||
Equity | 9 | 20 | 20 | 51 | |||||||||||||
Multi-asset | (3) | 2 | 3 | 8 | |||||||||||||
Alternatives | 1 | 10 | 6 | 13 | |||||||||||||
Market/performance/other impacts | (223) | 90 | (343) | 115 | |||||||||||||
Ending balance, June 30 | $ | 2,743 | $ | 2,987 | $ | 2,743 | $ | 2,987 | |||||||||
Client assets rollforward | |||||||||||||||||
Beginning balance | $ | 4,116 | $ | 3,828 | $ | 4,295 | $ | 3,652 | |||||||||
Net asset flows | (1) | 75 | (6) | 205 | |||||||||||||
Market/performance/other impacts | (317) | 141 | (491) | 187 | |||||||||||||
Ending balance, June 30 | $ | 3,798 | $ | 4,044 | $ | 3,798 | $ | 4,044 |
39
International | |||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||
Total net revenue (a) | |||||||||||||||||||||||
Europe/Middle East/Africa | $ | 719 | $ | 888 | (19) | % | $ | 1,489 | $ | 1,722 | (14) | % | |||||||||||
Asia-Pacific | 452 | 496 | (9) | 912 | 1,010 | (10) | |||||||||||||||||
Latin America/Caribbean | 248 | 216 | 15 | 499 | 430 | 16 | |||||||||||||||||
Total international net revenue | 1,419 | 1,600 | (11) | 2,900 | 3,162 | (8) | |||||||||||||||||
North America | 2,887 | 2,507 | 15 | 5,721 | 5,022 | 14 | |||||||||||||||||
Total net revenue(a) | $ | 4,306 | $ | 4,107 | 5 | % | $ | 8,621 | $ | 8,184 | 5 | % |
(a)Regional revenue is based on the domicile of the client.
As of June 30, | As of June 30, | ||||||||||||||||||||||
(in billions) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||
Assets under management | |||||||||||||||||||||||
Europe/Middle East/Africa | $ | 481 | $ | 558 | (14) | % | $ | 481 | $ | 558 | (14) | % | |||||||||||
Asia-Pacific | 214 | 245 | (13) | 214 | 245 | (13) | |||||||||||||||||
Latin America/Caribbean | 68 | 75 | (9) | 68 | 75 | (9) | |||||||||||||||||
Total international assets under management | 763 | 878 | (13) | 763 | 878 | (13) | |||||||||||||||||
North America | 1,980 | 2,109 | (6) | 1,980 | 2,109 | (6) | |||||||||||||||||
Total assets under management | $ | 2,743 | $ | 2,987 | (8) | $ | 2,743 | $ | 2,987 | (8) | |||||||||||||
Client assets | |||||||||||||||||||||||
Europe/Middle East/Africa | $ | 595 | $ | 674 | (12) | $ | 595 | $ | 674 | (12) | |||||||||||||
Asia-Pacific | 324 | 363 | (11) | 324 | 363 | (11) | |||||||||||||||||
Latin America/Caribbean | 184 | 176 | 5 | 184 | 176 | 5 | |||||||||||||||||
Total international client assets | 1,103 | 1,213 | (9) | 1,103 | 1,213 | (9) | |||||||||||||||||
North America | 2,695 | 2,831 | (5) | 2,695 | 2,831 | (5) | |||||||||||||||||
Total client assets | $ | 3,798 | $ | 4,044 | (6) | % | $ | 3,798 | $ | 4,044 | (6) | % |
40
CORPORATE |
Refer to pages 79-80 of JPMorgan Chase’s 2021 Form 10-K for a discussion of Corporate.
Selected income statement and balance sheet data | |||||||||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions, except headcount) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||||||
Principal transactions | $ | 17 | $ | (8) | NM | $ | (144) | $ | 264 | NM | |||||||||||||||||||||||||
Investment securities losses | (153) | (155) | 1 | % | (547) | (141) | (288) | % | |||||||||||||||||||||||||||
All other income | (108) | (45) | (140) | 102 | 51 | 100 | |||||||||||||||||||||||||||||
Noninterest revenue | (244) | (208) | (17) | (589) | 174 | NM | |||||||||||||||||||||||||||||
Net interest income | 324 | (961) | NM | (212) | (1,816) | 88 | |||||||||||||||||||||||||||||
Total net revenue(a) | 80 | (1,169) | NM | (801) | (1,642) | 51 | |||||||||||||||||||||||||||||
Provision for credit losses | 28 | 49 | (43) | 57 | 65 | (12) | |||||||||||||||||||||||||||||
Noninterest expense | 206 | 515 | (60) | 390 | 1,391 | (72) | |||||||||||||||||||||||||||||
Income/(loss) before income tax expense/(benefit) | (154) | (1,733) | 91 | (1,248) | (3,098) | 60 | |||||||||||||||||||||||||||||
Income tax expense/(benefit) | 20 | (438) | (c) | NM | (218) | (951) | (c) | 77 | |||||||||||||||||||||||||||
Net income/(loss) | $ | (174) | $ | (1,295) | (c) | 87 | $ | (1,030) | $ | (2,147) | (c) | 52 | |||||||||||||||||||||||
Total net revenue | |||||||||||||||||||||||||||||||||||
Treasury and CIO | $ | 82 | $ | (1,081) | NM | $ | (862) | $ | (1,786) | 52 | |||||||||||||||||||||||||
Other Corporate | (2) | (88) | 98 | 61 | 144 | (58) | |||||||||||||||||||||||||||||
Total net revenue | $ | 80 | $ | (1,169) | NM | $ | (801) | $ | (1,642) | 51 | |||||||||||||||||||||||||
Net income/(loss) | |||||||||||||||||||||||||||||||||||
Treasury and CIO | $ | 88 | $ | (956) | NM | $ | (660) | $ | (1,631) | 60 | |||||||||||||||||||||||||
Other Corporate | (262) | (339) | (c) | 23 | (370) | (516) | (c) | 28 | |||||||||||||||||||||||||||
Total net income/(loss) | $ | (174) | $ | (1,295) | (c) | 87 | $ | (1,030) | $ | (2,147) | (c) | 52 | |||||||||||||||||||||||
Total assets (period-end) | $ | 1,459,528 | $ | 1,382,653 | 6 | $ | 1,459,528 | $ | 1,382,653 | 6 | |||||||||||||||||||||||||
Loans (period-end) | 2,187 | 1,530 | 43 | 2,187 | 1,530 | 43 | |||||||||||||||||||||||||||||
Deposits (period-end) | 13,191 | (b) | 372 | NM | 13,191 | (b) | 372 | NM | |||||||||||||||||||||||||||
Headcount | 40,348 | 37,520 | 8 | % | 40,348 | 37,520 | 8 | % |
(a)Included tax-equivalent adjustments, driven by tax-exempt income from municipal bonds, of $60 million and $66 million for the three months ended June 30, 2022 and 2021, respectively, and $118 million and $133 million for the six months ended June 30, 2022 and 2021, respectively.
(b)Predominantly relates to the Firm's international consumer growth initiatives.
(c)In the first quarter of 2022, the Firm changed its methodology for allocating income taxes to the LOBs, with no impact to Firmwide net income. Prior-period amounts have been revised to conform with the current presentation.
Quarterly results
Net loss was $174 million, compared with a net loss of $1.3 billion in the prior year.
Net revenue was $80 million, compared with a loss of $1.2 billion in the prior year, driven by higher net interest income predominantly due to higher rates, including the impact of slower prepayments.
Noninterest revenue decreased driven by:
•the impact of movements in foreign exchange rates on certain revenues, primarily as a result of the U.S. dollar strengthening, and
•net losses, including hedging costs on an equity method investment related to the Firm's international consumer growth initiatives,
largely offset by
•net gains on certain legacy private equity investments, compared with net losses in the prior year, and
•higher net gains related to certain other Corporate investments.
Noninterest expense of $206 million was down $309 million driven by:
•lower structural expense, including the impact of movements in foreign exchange rates on certain expenses, primarily as a result of the U.S. dollar strengthening, as well as lower technology expense, and
•lower legal expense,
partially offset by
•higher investments, including the costs associated with the Firm's international consumer growth initiatives.
The net impact of movements in foreign exchange rates associated with the foreign exchange risk that is transferred to Treasury and CIO on certain revenues and expenses was not material to net income.
41
The current period income tax expense was driven by the change in the level and mix of income and expenses subject to U.S. federal and state and local taxes that also impacted the Firm's tax reserves, largely offset by the resolution of tax audits.
Year-to-date results
Net loss was $1.0 billion, compared with a net loss of $2.1 billion in the prior year.
Net revenue was a loss of $801 million, compared with a loss of $1.6 billion in the prior year, driven by higher net interest income due to higher rates, including the impact of slower prepayments.
Noninterest revenue decreased driven by:
•higher net investment securities losses related to the sales of U.S. Treasuries and U.S. GSE and government agency MBS, associated with repositioning the investment securities portfolios in both periods,
•the impact of movements in foreign exchange on certain revenues, primarily as result of the U.S. dollar strengthening,
•net losses on certain legacy private equity investments compared with net gains in prior year, and
•net losses, including hedging costs on an equity method investment related to the Firm's international consumer growth initiatives,
partially offset by
•proceeds from an insurance settlement in the first quarter of 2022, and
•higher net gains related to certain other Corporate investments.
Noninterest expense of $390 million was down $1.0 billion driven by:
•lower structural expense reflecting the absence of the contribution to the Firm's Foundation recorded in the prior year, the impact of movements in foreign exchange on certain expenses primarily as a result of the U.S. dollar strengthening, as well as lower technology expense, and
•lower legal expense,
partially offset by
•higher investments, including the costs associated with the Firm's international consumer growth initiatives.
The net impact of movements in foreign exchange rates associated with the foreign exchange risk that is transferred to Treasury and CIO on certain revenues and expenses was not material to net income.
The current period income tax benefit was driven by the change in the level and mix of income and expenses subject to U.S. federal and state and local taxes and the resolution of tax audits.
Other Corporate also reflects the Firm's international consumer growth initiatives, which includes Chase U.K., the Firm's digital retail bank in the U.K.; Nutmeg, a digital wealth manager in the U.K.; and a 40% ownership stake in C6 Bank, a digital bank in Brazil, which closed in the first quarter of 2022.
Treasury and CIO overview
At June 30, 2022, the average credit rating of the Treasury and CIO investment securities comprising the portfolio in the table below was AA+ (based upon external ratings where available and, where not available, based primarily upon internal risk ratings). Refer to Note 9 for further information on the Firm’s investment securities portfolio and internal risk ratings.
Refer to Liquidity Risk Management on pages 50-54 for further information on liquidity and funding risk. Refer to Market Risk Management on pages 75-79 for information on interest rate and foreign exchange risks.
Selected income statement and balance sheet data | |||||||||||||||||||||||||||||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||||||||||
Investment securities losses | $ | (153) | $ | (155) | 1 | % | $ | (547) | $ | (141) | (288) | % | |||||||||||||||||||||||
Available-for-sale securities (average) | $ | 252,121 | $ | 342,338 | (26) | $ | 278,073 | $ | 357,307 | (22) | |||||||||||||||||||||||||
Held-to-maturity securities (average)(a) | 418,843 | 240,696 | 74 | 391,978 | 224,417 | 75 | |||||||||||||||||||||||||||||
Investment securities portfolio (average) | $ | 670,964 | $ | 583,034 | 15 | $ | 670,051 | $ | 581,724 | 15 | |||||||||||||||||||||||||
Available-for-sale securities (period-end) | $ | 220,213 | $ | 230,127 | (4) | $ | 220,213 | $ | 230,127 | (4) | |||||||||||||||||||||||||
Held-to-maturity securities, net of allowance for credit losses (period-end)(a) | 441,649 | 341,476 | 29 | 441,649 | 341,476 | 29 | |||||||||||||||||||||||||||||
Investment securities portfolio, net of allowance for credit losses (period-end)(b) | $ | 661,862 | $ | 571,603 | 16 | % | $ | 661,862 | $ | 571,603 | 16 | % |
(a)During the second quarter of 2022 and 2021, the Firm transferred $73.2 billion and $104.5 billion of investment securities, respectively, from AFS to HTM for capital management purposes.
(b)At June 30, 2022 and 2021, the allowance for credit losses on investment securities was $47 million and $87 million, respectively.
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FIRMWIDE RISK MANAGEMENT |
Risk is an inherent part of JPMorgan Chase’s business activities. When the Firm extends a consumer or wholesale loan, advises customers and clients on their investment decisions, makes markets in securities, or offers other products or services, the Firm takes on some degree of risk. The Firm’s overall objective is to manage its businesses, and the associated risks, in a manner that balances serving the interests of its clients, customers and investors and protects the safety and soundness of the Firm.
The Firm believes that effective risk management requires, among other things:
•Acceptance of responsibility, including identification and escalation of risks by all individuals within the Firm;
•Ownership of risk identification, assessment, data and management within each of the LOBs and Corporate; and
•Firmwide structures for risk governance.
The Firm follows a disciplined and balanced compensation framework with strong internal governance and independent oversight by the Board of Directors (the “Board”). The impact of risk and control issues is carefully considered in the Firm’s performance evaluation and incentive compensation processes.
Risk governance and oversight framework
The Firm’s risk management governance and oversight framework involves understanding drivers of risks, types of risks, and impacts of risks.

Refer to pages 81-84 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of Firmwide risk management governance and oversight.
Risk governance and oversight functions
The following sections of this Form 10-Q and the 2021 Form 10-K discuss the risk governance and oversight functions in place to manage the risks inherent in the Firm’s business activities.
Risk governance and oversight functions | Form 10-Q page reference | Form 10-K page reference | ||||||
Strategic risk | 85 | |||||||
Capital risk | 44-49 | 86-96 | ||||||
Liquidity risk | 50-54 | 97-104 | ||||||
Reputation risk | 105 | |||||||
Consumer credit risk | 57-61 | 110-116 | ||||||
Wholesale credit risk | 62-70 | 117-128 | ||||||
Investment portfolio risk | 74 | 132 | ||||||
Market risk | 75-79 | 133-140 | ||||||
Country risk | 80-81 | 141-142 | ||||||
Operational risk | 82 | 143-149 | ||||||
Compliance risk | 146 | |||||||
Conduct risk | 147 | |||||||
Legal risk | 148 | |||||||
Estimations and Model risk | 149 |
43
CAPITAL RISK MANAGEMENT |
Capital risk is the risk the Firm has an insufficient level or composition of capital to support the Firm’s business activities and associated risks during normal economic environments and under stressed conditions.
Refer to pages 86-96 of JPMorgan Chase’s 2021 Form 10-K, Note 21 of this Form 10-Q and the Firm’s Pillar 3 Regulatory Capital Disclosures reports, which are available on the Firm’s website, for a further discussion of the Firm’s capital risk.
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. Bank Holding Companies (“BHCs”) and banks, including the Firm and its insured depository institution (“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-balance sheet assets and off-balance sheet exposures, weighted according to risk. Two comprehensive approaches are prescribed for calculating RWA: a standardized approach (“Basel III Standardized”), and an advanced approach (“Basel III Advanced”). For each of the risk-based capital ratios, the capital adequacy of the Firm is evaluated against the lower of the Standardized or Advanced approaches compared to their respective regulatory capital ratio requirements. The Firm’s Basel III Standardized-risk-based ratios are currently more binding than the Basel III Advanced-risk-based ratios.
Basel III also includes a requirement for Advanced Approaches banking organizations, including the Firm, to calculate the SLR. The Firm’s SLR is currently more binding than the Basel III Standardized-risk-based ratios. Refer to SLR on page 47 for additional information.
Key Regulatory Developments
CECL regulatory capital transition. On December 31, 2021, the CECL capital transition provisions, which delayed the effects of CECL on regulatory capital for two years, expired. Beginning January 1, 2022, the $2.9 billion CECL capital benefit recognized as of December 31, 2021, is being phased out at 25% per year over a three-year period. As of June 30, 2022, CET1 capital reflected the remaining $2.2 billion, benefit associated with the CECL capital transition provisions.
Additionally, effective January 1, 2022, the Firm phased out 25% of the other relevant CECL capital transition provisions recognized as of December 31, 2021, from Tier 2 capital, adjusted average assets, and total leverage exposure.
Refer to Capital Risk Management on pages 86-96 and Note 1 of JPMorgan Chase’s 2021 Form 10-K for further information on CECL capital transition provisions and the CECL accounting guidance.
Standardized Approach for Counterparty Credit Risk. On January 1, 2022, the Firm adopted “Standardized Approach for Counterparty Credit Risk” (“SA-CCR”), which replaced the Current Exposure Method used to measure derivatives counterparty exposure under the Standardized and Advanced approach RWA where internal models are not used, as well as leverage exposure used to calculate the SLR in the regulatory capital framework. The rule issued by the U.S. banking regulators in November 2019 applies to Basel III Advanced Approaches banking organizations, such as the Firm and JPMorgan Chase Bank, N.A.
The adoption of SA-CCR on January 1, 2022 increased the Firm’s Standardized RWA by approximately $40 billion based on the Firm's derivatives exposure as of December 31, 2021, which resulted in a decrease of approximately 30 bps to the Firm's CET1 capital ratio and a modest decrease in its total leverage exposure. In addition, the adoption of SA-CCR increased the Firm's Advanced RWA, but to a lesser extent than Standardized.
Risk-based Capital Regulatory Requirements
The Firm's current target for its Basel III Standardized CET1 capital ratio is 12.5% by the end of the fourth quarter of 2022. This target is based on the Basel III capital rules currently in effect, and taking into account the expected increase in the Firm's Stress Capital Buffer (“SCB”) requirement.
44
The following tables present the Firm’s risk-based capital metrics under both the Basel III Standardized and Advanced approaches and leverage-based capital metrics. Refer to Capital Risk Management on pages 86-96 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of these capital metrics. Refer to Note 21 for JPMorgan Chase Bank, N.A.’s risk-based and leverage-based capital metrics.
Standardized | Advanced | |||||||||||||||||||||||||||||||
(in millions, except ratios) | June 30, 2022 | December 31, 2021 | Capital ratio requirements(b) | June 30, 2022 | December 31, 2021 | Capital ratio requirements(b) | ||||||||||||||||||||||||||
Risk-based capital metrics:(a) | ||||||||||||||||||||||||||||||||
CET1 capital | $ | 207,436 | $ | 213,942 | $ | 207,436 | $ | 213,942 | ||||||||||||||||||||||||
Tier 1 capital | 239,705 | 246,162 | 239,705 | 246,162 | ||||||||||||||||||||||||||||
Total capital | 268,339 | 274,900 | 257,329 | 265,796 | ||||||||||||||||||||||||||||
Risk-weighted assets | 1,704,893 | 1,638,900 | 1,613,210 | 1,547,920 | ||||||||||||||||||||||||||||
CET1 capital ratio | 12.2 | % | 13.1 | % | 11.2 | % | 12.9 | % | 13.8 | % | 10.5 | % | ||||||||||||||||||||
Tier 1 capital ratio | 14.1 | 15.0 | 12.7 | 14.9 | 15.9 | 12.0 | ||||||||||||||||||||||||||
Total capital ratio | 15.7 | 16.8 | 14.7 | 16.0 | 17.2 | 14.0 | ||||||||||||||||||||||||||
(a)The capital metrics reflect the CECL capital transition provisions. Additionally, loans originated under the PPP receive a zero percent risk weight.
(b)Represents minimum requirements and regulatory buffers applicable to the Firm. Refer to Note 21 for additional information.
Three months ended (in millions, except ratios) | June 30, 2022 | December 31, 2021 | Capital ratio requirements(c) | |||||||||||
Leverage-based capital metrics:(a) | ||||||||||||||
Adjusted average assets(b) | $ | 3,861,979 | $ | 3,782,035 | ||||||||||
Tier 1 leverage ratio | 6.2 | % | 6.5 | % | 4.0 | % | ||||||||
Total leverage exposure | $ | 4,563,099 | $ | 4,571,789 | ||||||||||
SLR | 5.3 | % | 5.4 | % | 5.0 | % |
(a)The capital metrics reflect the CECL capital transition provisions.
(b)Adjusted average assets, for purposes of calculating the leverage ratios, includes quarterly average assets adjusted for on-balance sheet assets that are subject to deduction from Tier 1 capital, predominantly goodwill, inclusive of estimated equity method goodwill, and other intangible assets.
(c)Represents minimum requirements and regulatory buffers applicable to the Firm. Refer to Note 21 for additional information.
45
Capital components
The following table presents reconciliations of total stockholders’ equity to Basel III CET1 capital, Tier 1 capital and Total capital as of June 30, 2022 and December 31, 2021.
(in millions) | June 30, 2022 | December 31, 2021 | ||||||||||||
Total stockholders’ equity | $ | 286,143 | $ | 294,127 | ||||||||||
Less: Preferred stock | 32,838 | 34,838 | ||||||||||||
Common stockholders’ equity | 253,305 | 259,289 | ||||||||||||
Add: | ||||||||||||||
Certain deferred tax liabilities(a) | 2,509 | 2,499 | ||||||||||||
Other CET1 capital adjustments(b) | 4,702 | 3,351 | ||||||||||||
Less: | ||||||||||||||
Goodwill | 51,856 | (e) | 50,315 | |||||||||||
Other intangible assets | 1,224 | 882 | ||||||||||||
Standardized/Advanced CET1 capital | $ | 207,436 | $ | 213,942 | ||||||||||
Preferred stock | 32,838 | 34,838 | ||||||||||||
Less: Other Tier 1 adjustments | 569 | 2,618 | (f) | |||||||||||
Standardized/Advanced Tier 1 capital | $ | 239,705 | $ | 246,162 | ||||||||||
Long-term debt and other instruments qualifying as Tier 2 capital | $ | 12,176 | $ | 14,106 | ||||||||||
Qualifying allowance for credit losses(c) | 17,093 | 15,012 | ||||||||||||
Other | (635) | (380) | ||||||||||||
Standardized Tier 2 capital | $ | 28,634 | $ | 28,738 | ||||||||||
Standardized Total capital | $ | 268,339 | $ | 274,900 | ||||||||||
Adjustment in qualifying allowance for credit losses for Advanced Tier 2 capital(d) | (11,010) | (9,104) | ||||||||||||
Advanced Tier 2 capital | $ | 17,624 | $ | 19,634 | ||||||||||
Advanced Total capital | $ | 257,329 | $ | 265,796 |
(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 CET1 capital.
(b)As of June 30, 2022 and December 31, 2021, the impact of the CECL capital transition provision was a benefit to CET1 capital of $2.2 billion and $2.9 billion, respectively.
(c)Represents the allowance for credit losses eligible for inclusion in Tier 2 capital up to 1.25% of credit risk RWA, including the impact of the CECL capital transition provision with any excess deducted from RWA.
(d)Represents an adjustment to qualifying allowance for credit losses for the excess of eligible credit reserves over expected credit losses up to 0.6% of credit risk RWA, including the impact of the CECL capital transition provision with any excess deducted from RWA.
(e)Includes estimated equity method goodwill related to the Firm's investment in C6 Bank.
(f)Other Tier 1 Capital adjustments included $2.0 billion of Series Z preferred stock called for redemption on December 31, 2021 and subsequently redeemed on February 1, 2022.
Capital rollforward
The following table presents the changes in Basel III CET1 capital, Tier 1 capital and Tier 2 capital for the six months ended June 30, 2022.
Six months ended June 30, (in millions) | 2022 | ||||
Standardized/Advanced CET1 capital at December 31, 2021 | $ | 213,942 | |||
Net income applicable to common equity | 16,124 | ||||
Dividends declared on common stock | (5,947) | ||||
Net purchase of treasury stock | (2,075) | ||||
Changes in additional paid-in capital | 199 | ||||
Changes related to AOCI | (14,285) | ||||
Adjustment related to AOCI(a) | 2,308 | ||||
Changes related to other CET1 capital adjustments(b) | (2,830) | ||||
Change in Standardized/Advanced CET1 capital | (6,506) | ||||
Standardized/Advanced CET1 capital at June 30, 2022 | $ | 207,436 | |||
Standardized/Advanced Tier 1 capital at December 31, 2021 | $ | 246,162 | |||
Change in CET1 capital(b) | (6,506) | ||||
Net issuance of noncumulative perpetual preferred stock | — | ||||
Other | 49 | ||||
Change in Standardized/Advanced Tier 1 capital | (6,457) | ||||
Standardized/Advanced Tier 1 capital at June 30, 2022 | $ | 239,705 | |||
Standardized Tier 2 capital at December 31, 2021 | $ | 28,738 | |||
Change in long-term debt and other instruments qualifying as Tier 2 | (1,930) | ||||
Change in qualifying allowance for credit losses(b) | 2,081 | ||||
Other | (255) | ||||
Change in Standardized Tier 2 capital | (104) | ||||
Standardized Tier 2 capital at June 30, 2022 | $ | 28,634 | |||
Standardized Total capital at June 30, 2022 | $ | 268,339 | |||
Advanced Tier 2 capital at December 31, 2021 | $ | 19,634 | |||
Change in long-term debt and other instruments qualifying as Tier 2 | (1,930) | ||||
Change in qualifying allowance for credit losses(b) | 175 | ||||
Other | (255) | ||||
Change in Advanced Tier 2 capital | (2,010) | ||||
Advanced Tier 2 capital at June 30, 2022 | $ | 17,624 | |||
Advanced Total capital at June 30, 2022 | $ | 257,329 |
(a)Includes cash flow hedges and debit valuation adjustment (“DVA”) related to structured notes recorded in AOCI.
(b)Includes the impact of the CECL capital transition provisions.
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RWA rollforward
The following table presents changes in the components of RWA under Basel III Standardized and Advanced approaches for the six months ended June 30, 2022. The amounts in the rollforward categories are estimates, based on the predominant driver of the change.
Standardized | Advanced | |||||||||||||||||||||||||
Six months ended June 30, 2022 (in millions) | Credit risk RWA(c) | Market risk RWA | Total RWA | Credit risk RWA(c) | Market risk RWA | Operational risk RWA | Total RWA | |||||||||||||||||||
December 31, 2021 | $ | 1,543,452 | $ | 95,448 | $ | 1,638,900 | $ | 1,047,042 | $ | 95,506 | $ | 405,372 | $ | 1,547,920 | ||||||||||||
Model & data changes(a) | (9,114) | (1,382) | (10,496) | (603) | (1,382) | — | (1,985) | |||||||||||||||||||
Movement in portfolio levels(b) | 62,440 | 14,049 | 76,489 | 33,354 | 14,168 | 19,753 | 67,275 | |||||||||||||||||||
Changes in RWA | 53,326 | 12,667 | 65,993 | 32,751 | 12,786 | 19,753 | 65,290 | |||||||||||||||||||
June 30, 2022 | $ | 1,596,778 | $ | 108,115 | $ | 1,704,893 | $ | 1,079,793 | $ | 108,292 | $ | 425,125 | $ | 1,613,210 |
(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).
(b)Movement in portfolio levels (inclusive of rule changes) refers to: for Credit risk RWA, impact of SA-CCR adoption on January 1, 2022, changes in book size including position rolloffs in legacy portfolios in Home Lending, changes in composition and credit quality, market movements, and deductions for excess eligible credit reserves not eligible for inclusion in Tier 2 capital; for Market risk RWA, changes in position and market movements; and for Operational risk RWA, updates to cumulative losses and macroeconomic model inputs.
(c)As of June 30, 2022 and December 31, 2021, the Basel III Standardized Credit risk RWA included wholesale and retail off balance-sheet RWA of $212.4 billion and $218.5 billion, respectively; and the Basel III Advanced Credit risk RWA included wholesale and retail off balance-sheet RWA of $181.6 billion and $188.5 billion, respectively.
Refer to the Firm’s Pillar 3 Regulatory Capital Disclosures reports, which are available on the Firm’s website, for further information on Credit risk RWA, Market risk RWA and Operational risk RWA.
Supplementary leverage ratio
Refer to Supplementary Leverage Ratio on page 90 of JPMorgan Chase’s 2021 Form 10-K for additional information.
The following table presents the components of the Firm’s SLR.
Three months ended (in millions, except ratio) | June 30, 2022 | December 31, 2021 | ||||||
Tier 1 capital | $ | 239,705 | $ | 246,162 | ||||
Total average assets | 3,911,643 | 3,831,655 | ||||||
Less: Regulatory capital adjustments(a) | 49,664 | 49,620 | ||||||
Total adjusted average assets(b) | 3,861,979 | 3,782,035 | ||||||
Add: Off-balance sheet exposures(c) | 701,120 | 789,754 | ||||||
Total leverage exposure | $ | 4,563,099 | $ | 4,571,789 | ||||
SLR | 5.3 | % | 5.4 | % |
(a)For purposes of calculating the SLR, includes quarterly average assets adjusted for on-balance sheet assets that are subject to deduction from Tier 1 capital, predominantly goodwill, inclusive of estimated equity method goodwill, other intangible assets and adjustments for the CECL capital transition provisions.
(b)Adjusted average assets used for the calculation of Tier 1 leverage ratio.
(c)Off-balance sheet exposures are calculated as the average of the three month-end spot balances on applicable regulatory exposures during the reporting quarter. Effective January 1, 2022, includes the impact of the SA-CCR adoption. Refer to the Firm’s Pillar 3 Regulatory Capital Disclosures reports for additional information.
Line of business equity
Each business segment is allocated capital by taking into consideration a variety of factors including capital levels of similarly rated peers and applicable regulatory capital requirements. Refer to line of business equity on page 93 of JPMorgan Chase’s 2021 Form 10-K for additional information on capital allocation.
The following table presents the capital allocated to each business segment.
Line of business equity (Allocated capital) | |||||||||||
(in billions) | June 30, 2022 | December 31, 2021 | |||||||||
Consumer & Community Banking | $ | 50.0 | $ | 50.0 | |||||||
Corporate & Investment Bank | 103.0 | 83.0 | |||||||||
Commercial Banking | 25.0 | 24.0 | |||||||||
Asset & Wealth Management | 17.0 | 14.0 | |||||||||
Corporate | 58.3 | 88.3 | |||||||||
Total common stockholders’ equity | $ | 253.3 | $ | 259.3 |
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Capital actions
Common stock dividends
The Firm’s quarterly common stock dividend is currently $1.00 per share. The Firm’s dividends are subject to approval by the Board of Directors on a quarterly basis.
Common stock
Through April 30, 2022, the Firm was authorized to repurchase up to $30 billion of common shares under its previously approved common share repurchase program, that was announced on December 18, 2020. Effective May 1, 2022, the Firm is authorized to purchase up to $30 billion of common shares under a new equity repurchase program.
As a result of the expected increase in the SCB in the fourth quarter of 2022 and GSIB surcharge in the first quarter of 2023, the Firm has temporarily suspended share repurchases.
The following table sets forth the Firm’s repurchases of common stock for the three and six months ended June 30, 2022 and 2021.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||
(in millions) | 2022 | 2021(a) | 2022 | 2021(a) | |||||||||||||
Total number of shares of common stock repurchased | 5.0 | 39.5 | 23.1 | 74.2 | |||||||||||||
Aggregate purchase price of common stock repurchases | $ | 622 | $ | 6,201 | $ | 3,122 | $ | 11,200 |
(a) As directed by the Federal Reserve, total net repurchases and common stock dividends in the first and second quarter of 2021 were restricted and could not exceed the average of the Firm’s net income for the four preceding calendar quarters.
Refer to Capital actions on page 94 of JPMorgan Chase’s 2021 Form 10-K for additional information.
Refer to Part II, Item 2: Unregistered Sales of Equity Securities and Use of Proceeds and Part II, Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities on pages 191-192 of this Form 10-Q and page 35 of JPMorgan Chase’s 2021 Form 10-K, respectively, for additional information regarding repurchases of the Firm’s equity securities.
Preferred stock
Preferred stock dividends declared were $410 million and $393 million, and $807 million and $772 million for the three and six months ended June 30, 2022 and 2021, respectively.
Refer to Note 17 of this Form 10-Q and Note 21 of JPMorgan Chase’s 2021 Form 10-K for additional information on the Firm’s preferred stock, including the issuance and redemption of preferred stock.
Capital planning and stress testing
Comprehensive Capital Analysis and Review
On April 5, 2022, the Firm submitted its 2022 Capital Plan to the Federal Reserve. On June 27, 2022, the Firm announced that it had completed the Federal Reserve's 2022 Comprehensive Capital Analysis and Review (“CCAR”) stress test process. The Firm's indicative SCB requirement is 4.0% (up from the current 3.2%), which will result in a Standardized CET1 capital ratio requirement, including regulatory buffers, of 12.0% (up from the current 11.2%). The Federal Reserve will provide the Firm with its final SCB requirement by August 31, 2022, and that requirement will become effective on October 1, 2022, and will remain in effect until September 30, 2023.
Refer to Capital planning and stress testing on pages 86-87 of JPMorgan Chase’s 2021 Form 10-K for additional information on CCAR.
Other capital requirements
Total Loss-Absorbing Capacity
The Federal Reserve’s TLAC rule requires the U.S. global systemically important bank (“GSIB”) top-tier holding companies, including the Firm, to maintain minimum levels of external TLAC and eligible long-term debt (“eligible LTD”).
Refer to other capital requirements on page 95 of JPMorgan Chase’s 2021 Form 10-K for additional information on TLAC.
The following table presents the eligible external TLAC and eligible LTD amounts, as well as a representation of the amounts as a percentage of the Firm’s total RWA and total leverage exposure applying the impact of the CECL capital transition provisions as of June 30, 2022 and December 31, 2021.
June 30, 2022 | December 31, 2021 | |||||||||||||
(in billions, except ratio) | External TLAC | LTD | External TLAC | LTD | ||||||||||
Total eligible amount | $ | 466.7 | $ | 218.9 | $ | 464.6 | $ | 210.4 | ||||||
% of RWA | 27.4 | % | 12.8 | % | 28.4 | % | 12.8 | % | ||||||
Regulatory requirements | 22.5 | 9.5 | 22.5 | 9.5 | ||||||||||
Surplus/(shortfall) | $ | 83.1 | $ | 56.9 | $ | 95.9 | $ | 54.7 | ||||||
% of total leverage exposure | 10.2 | % | 4.8 | % | 10.2 | % | 4.6 | % | ||||||
Regulatory requirements | 9.5 | 4.5 | 9.5 | 4.5 | ||||||||||
Surplus/(shortfall) | $ | 33.2 | $ | 13.5 | $ | 30.3 | $ | 4.6 |
Refer to Liquidity Risk Management on pages 50-54 for further information on long-term debt issued by the Parent Company.
Refer to Part I, Item 1A: Risk Factors on pages 9-33 of JPMorgan Chase’s 2021 Form 10-K for information on the financial consequences to holders of the Firm’s debt and equity securities in a resolution scenario.
48
U.S. broker-dealer regulatory capital
J.P. Morgan Securities
JPMorgan Chase’s principal U.S. broker-dealer subsidiary is J.P. Morgan Securities. J.P. Morgan Securities is subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the “Net Capital Rule”). J.P. Morgan Securities is also registered as a futures commission merchant and is subject to regulatory capital requirements, including those imposed by the SEC, Commodity Futures Trading Commission (“CFTC”), Financial Industry Regulatory Authority (“FINRA”) and the National Futures Association (“NFA”).
Refer to Broker-dealer regulatory capital on page 96 of JPMorgan Chase’s 2021 Form 10-K for a discussion on J.P. Morgan Securities’ capital requirements.
The following table presents J.P. Morgan Securities’ net capital:
June 30, 2022 | ||||||||
(in millions) | Actual | Minimum | ||||||
Net Capital | $ | 20,481 | $ | 6,007 |
Non-U.S. subsidiary regulatory capital
J.P. Morgan Securities plc
J.P. Morgan Securities plc is a wholly-owned subsidiary of JPMorgan Chase Bank, N.A. and has authority to engage in banking, investment banking and broker-dealer activities. J.P. Morgan Securities plc is jointly regulated by the U.K. Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”). J.P. Morgan Securities plc is subject to the European Union (“EU”) Capital Requirements Regulation (“CRR”), as adopted in the U.K., and the PRA capital rules, each of which have implemented Basel III and thereby subject J.P. Morgan Securities plc to its requirements.
Refer to Broker-dealer regulatory capital on page 96 of JPMorgan Chase’s 2021 Form 10-K for a further discussion on J.P. Morgan Securities plc.
The Bank of England requires that U.K. banks, including U.K. regulated subsidiaries of overseas groups, maintain minimum requirements for own funds and eligible liabilities (“MREL”). As of June 30, 2022, J.P. Morgan Securities plc was compliant with the MREL requirements, that became fully phased-in on January 1, 2022.
The following table presents J.P. Morgan Securities plc’s capital metrics:
June 30, 2022 | Regulatory Minimum ratios(a) | |||||||
(in millions, except ratios) | Estimated | |||||||
Total capital | $ | 53,979 | ||||||
CET1 ratio | 21.9 | % | 4.5 | % | ||||
Total capital ratio | 28.1 | % | 8.0 | % |
(a)Represents minimum Pillar 1 requirements specified by the PRA. J.P. Morgan Securities plc's capital ratios as of June 30, 2022 exceeded the minimum requirements, including the additional capital requirements specified by the PRA.
J.P. Morgan SE
JPMSE is a wholly-owned subsidiary of JPMorgan Chase Bank, N.A. and has authority to engage in banking, investment banking and markets activities. JPMSE is regulated by the European Central Bank as well as the local regulators in each of the countries in which it operates, and it is subject to EU capital requirements under Basel III.
JPMSE is required by the EU Single Resolution Board to maintain MREL. As of June 30, 2022, JPMSE was compliant with the MREL requirements.
The following table presents JPMSE’s capital metrics:
June 30, 2022 | Regulatory Minimum ratios(a) | |||||||
(in millions, except ratios) | Estimated | |||||||
Total capital | $ | 35,630 | ||||||
CET1 ratio | 18.2 | % | 4.5 | % | ||||
Total capital ratio | 29.1 | % | 8.0 | % |
(a)Represents minimum Pillar 1 requirements specified by the EU CRR. J.P. Morgan SE’s capital ratios as of June 30, 2022 exceeded the minimum requirements, including the additional capital requirements specified by the European Banking Authority.
49
LIQUIDITY RISK MANAGEMENT |
Liquidity risk is the risk that the Firm will be unable to meet its contractual and contingent financial obligations as they arise or that it does not have the appropriate amount, composition and tenor of funding and liquidity to support its assets and liabilities. Refer to pages 97-104 of JPMorgan Chase’s 2021 Form 10-K and the Firm’s U.S. LCR Disclosure reports, which are available on the Firm’s website for a further discussion of the Firm’s liquidity risk.
LCR and HQLA
The LCR rule requires that the Firm and JPMorgan Chase Bank, N.A. maintain an amount of eligible HQLA that is sufficient to meet their respective estimated total net cash outflows over a prospective 30 calendar-day period of significant stress. Under the LCR rule, the amount of eligible HQLA held by JPMorgan Chase Bank, N.A. that is in excess of its stand-alone 100% minimum LCR requirement, and that is not transferable to non-bank affiliates, must be excluded from the Firm’s reported eligible HQLA. The LCR for both the Firm and JPMorgan Chase Bank, N.A. is required to be a minimum of 100%. Refer to page 98 of JPMorgan Chase’s 2021 Form 10-K and the Firm’s U.S. LCR Disclosure reports for additional information on HQLA and net cash outflows.
The following table summarizes the Firm and JPMorgan Chase Bank, N.A.’s average LCR for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021 based on the Firm’s interpretation of the LCR framework.
Three months ended | |||||||||||
Average amount (in millions) | June 30, 2022 | March 31, 2022 | June 30, 2021 | ||||||||
JPMorgan Chase & Co.: | |||||||||||
HQLA | |||||||||||
Eligible cash(a) | $ | 634,480 | $ | 680,003 | $ | 673,724 | |||||
Eligible securities(b)(c) | 107,473 | 42,512 | 42,832 | ||||||||
Total HQLA(d) | $ | 741,953 | $ | 722,515 | $ | 716,556 | |||||
Net cash outflows | $ | 676,234 | $ | 658,998 | $ | 647,757 | |||||
LCR | 110 | % | 110 | % | 111 | % | |||||
Net excess eligible HQLA(d) | $ | 65,719 | $ | 63,517 | $ | 68,799 | |||||
JPMorgan Chase Bank N.A.: | |||||||||||
LCR | 169 | % | 181 | % | 171 | % | |||||
Net excess eligible HQLA | $ | 487,867 | $ | 560,987 | $ | 489,311 |
(a)Represents cash on deposit at central banks, primarily the Federal Reserve Banks.
(b)Predominantly U.S. Treasuries, U.S. GSE and government agency MBS, and sovereign bonds net of applicable haircuts under the LCR rule.
(c)Eligible HQLA securities may be reported in securities borrowed or purchased under resale agreements, trading assets, or investment securities on the Firm’s Consolidated balance sheets.
(d)Excludes average excess eligible HQLA at JPMorgan Chase Bank, N.A. that are not transferable to non-bank affiliates.
JPMorgan Chase Bank, N.A.'s average LCR decreased during the three months ended June 30, 2022, compared with the three-month period ended March 31, 2022 due to a decrease in JPMorgan Chase Bank, N.A.'s HQLA primarily from a reduction in cash from loan growth and a decline in the market value of HQLA-eligible investment securities in
Treasury and CIO. Refer to Note 9 for additional information regarding gross unrealized gains and losses on the investment securities portfolio.
The Firm and JPMorgan Chase Bank, N.A.'s average LCR fluctuates from period to period, due to changes in its eligible HQLA and estimated net cash outflows as a result of ongoing business activity.
Other liquidity sources
In addition to the assets reported in the Firm’s eligible HQLA discussed above, the Firm had unencumbered marketable securities, such as equity and debt securities, that the Firm believes would be available to raise liquidity. This includes excess eligible HQLA securities at JPMorgan Chase Bank, N.A. that are not transferable to non-bank affiliates. The fair value of these securities was approximately $826 billion and $914 billion as of June 30, 2022 and December 31, 2021, respectively, although the amount of liquidity that could be raised at any particular time would be dependent on prevailing market conditions. The fair value decreased compared to December 31, 2021, primarily due to a decrease in excess eligible HQLA at JPMorgan Chase Bank, N.A., as noted above.
The Firm also had available borrowing capacity at the Federal Home Loan Banks (“FHLBs”) and the discount window at the Federal Reserve Bank as a result of collateral pledged by the Firm to such banks of approximately $308 billion as of June 30, 2022 and December 31, 2021. This borrowing capacity excludes the benefit of cash and securities reported in the Firm’s eligible HQLA or other unencumbered securities that are currently pledged at the Federal Reserve Bank discount window and other central banks. Although available, the Firm does not view this borrowing capacity at the Federal Reserve Bank discount window and the other central banks as a primary source of liquidity.
NSFR
The net stable funding ratio (“NSFR”) rule requires that the Firm and JPMorgan Chase Bank, N.A. maintain an amount of “available” stable funding that is sufficient to meet their “required” amounts of stable funding over a one-year horizon.
As of June 30, 2022, the Firm and JPMorgan Chase Bank, N.A. were compliant with the 100% minimum NSFR requirement, based on the Firm's current understanding of the final rule. The Firm will be required to publicly disclose its quarterly average NSFR semi annually beginning in 2023.
50
Funding
Sources of funds
Management believes that the Firm’s unsecured and secured funding capacity is sufficient to meet its on- and off-balance sheet obligations, which includes both short- and long-term cash requirements.
The Firm funds its global balance sheet through diverse sources of funding including stable deposits, secured and unsecured funding in the capital markets and stockholders’ equity. Deposits are the primary funding source for JPMorgan Chase Bank, N.A. Additionally, JPMorgan Chase Bank, N.A. may access funding through short- or long-term secured borrowings, through the issuance of unsecured
long-term debt, or from borrowings from the Intermediate Holding Company (“IHC”). The Firm’s non-bank subsidiaries are primarily funded from long-term unsecured borrowings and short-term secured borrowings, primarily securities loaned or sold under repurchase agreements. Excess funding is invested by Treasury and CIO in the Firm’s investment securities portfolio or deployed in cash or other short-term liquid investments based on their interest rate and liquidity risk characteristics.
Refer to Note 22 for additional information on off-balance sheet obligations.
Deposits
The table below summarizes, by LOB and Corporate, the period-end deposit balances as of June 30, 2022, and December 31, 2021, and the average deposit balances for the three and six months ended June 30, 2022 and 2021, respectively.
June 30, 2022 | December 31, 2021 | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
Deposits | Average | Average | ||||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||
Consumer & Community Banking | $ | 1,178,825 | $ | 1,148,110 | $ | 1,180,453 | $ | 1,047,771 | $ | 1,167,057 | $ | 1,013,917 | ||||||||||||||||||||
Corporate & Investment Bank | 738,795 | 707,791 | 773,664 | 765,807 | 765,200 | 756,499 | ||||||||||||||||||||||||||
Commercial Banking | 283,296 | 323,954 | 300,339 | 290,095 | 308,518 | 290,455 | ||||||||||||||||||||||||||
Asset & Wealth Management | 257,437 | 282,052 | 268,861 | 219,699 | 278,256 | 213,167 | ||||||||||||||||||||||||||
Corporate | 13,191 | 396 | 8,995 | 423 | 4,948 | 450 | ||||||||||||||||||||||||||
Total Firm | $ | 2,471,544 | $ | 2,462,303 | $ | 2,532,312 | $ | 2,323,795 | $ | 2,523,979 | $ | 2,274,488 |
Deposits provide a stable source of funding and reduce the Firm’s reliance on the wholesale funding markets. A significant portion of the Firm’s deposits are consumer deposits and wholesale operating deposits, which are both considered to be stable sources of liquidity. Wholesale operating deposits are considered to be stable sources of liquidity because they are generated from customers that maintain operating service relationships with the Firm.
The table below shows the loan and deposit balances, the loans-to-deposits ratio, and deposits as a percentage of total liabilities, as of June 30, 2022 and December 31, 2021.
(in billions except ratios) | June 30, 2022 | December 31, 2021 | |||||||||
Deposits | $ | 2,471.5 | $ | 2,462.3 | |||||||
Deposits as a % of total liabilities | 70 | % | 71 | % | |||||||
Loans | $ | 1,104.2 | $ | 1,077.7 | |||||||
Loans-to-deposits ratio | 45 | % | 44 | % |
The Firm believes that average deposit balances are generally more representative of deposit trends than period-end deposit balances. However, during periods of market disruption those trends could be affected.
Average deposits increased for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, reflecting the residual impact associated with government actions in the prior year. In CCB, the increase was also driven by growth from new and existing accounts across both consumer and small business customers. However, during the second quarter of 2022, there was a decline in deposits, including in CB due to migration of non-operating deposits into higher-yielding alternatives, and in CCB as consumer spending continued to grow.
Average deposits increased for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, reflecting inflows across the LOBs resulting from the residual effect of certain government actions in the prior year. In CCB, the increase was also driven by growth from new and existing accounts across both consumer and small business customers.
Increases in Corporate predominantly relate to the Firm's international consumer growth initiatives.
Refer to the discussion of the Firm’s Consolidated Balance Sheets Analysis and the Business Segment Results on pages 15-16 and pages 20-42, respectively, for further information on deposit and liability balance trends.
51
The following table summarizes short-term and long-term funding, excluding deposits, as of June 30, 2022, and December 31, 2021, and average balances for the three and six months ended June 30, 2022 and 2021, respectively. Refer to the Consolidated Balance Sheets Analysis on pages 15-16 and Note 10 for additional information.
June 30, 2022 | December 31, 2021 | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||
Sources of funds (excluding deposits) | Average | Average | ||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
Commercial paper | $ | 21,670 | $ | 15,108 | $ | 19,589 | $ | 13,696 | $ | 17,097 | $ | 13,277 | ||||||||
Other borrowed funds | 10,708 | 9,999 | 12,533 | 13,888 | 13,061 | 12,574 | ||||||||||||||
Federal Funds purchased | 1,339 | 1,769 | 1,241 | 2,378 | 1,467 | 2,398 | ||||||||||||||
Total short-term unsecured funding | $ | 33,717 | $ | 26,876 | $ | 33,363 | $ | 29,962 | $ | 31,625 | $ | 28,249 | ||||||||
Securities sold under agreements to repurchase(a) | $ | 218,237 | $ | 189,806 | $ | 227,075 | $ | 251,455 | $ | 235,300 | $ | 271,320 | ||||||||
Securities loaned(a) | 3,143 | 2,765 | 5,060 | 7,510 | 4,982 | 7,536 | ||||||||||||||
Other borrowed funds | 26,044 | 28,487 | 26,376 | 28,291 | 27,152 | 27,131 | ||||||||||||||
Obligations of Firm-administered multi-seller conduits(b) | 6,993 | 6,198 | 6,779 | 9,863 | 6,625 | $ | 10,036 | |||||||||||||
Total short-term secured funding | $ | 254,417 | $ | 227,256 | $ | 265,290 | $ | 297,119 | $ | 274,059 | $ | 316,023 | ||||||||
Senior notes | $ | 189,248 | $ | 191,488 | $ | 187,143 | $ | 179,838 | $ | 188,779 | $ | 173,680 | ||||||||
Subordinated debt | 18,848 | 20,531 | 19,139 | 20,659 | 19,688 | 20,953 | ||||||||||||||
Structured notes(c) | 65,288 | 73,956 | 66,025 | 75,351 | 68,584 | 75,196 | ||||||||||||||
Total long-term unsecured funding | $ | 273,384 | $ | 285,975 | $ | 272,307 | $ | 275,848 | $ | 277,051 | $ | 269,829 | ||||||||
Credit card securitization(b) | $ | 1,749 | $ | 2,397 | $ | 1,748 | $ | 3,043 | $ | 2,010 | $ | 3,929 | ||||||||
FHLB advances | 11,103 | 11,110 | 11,106 | 12,174 | 11,107 | 12,949 | ||||||||||||||
Other long-term secured funding(d) | 3,725 | 3,920 | 3,807 | 4,459 | 3,858 | 4,542 | ||||||||||||||
Total long-term secured funding | $ | 16,577 | $ | 17,427 | $ | 16,661 | $ | 19,676 | $ | 16,975 | $ | 21,420 | ||||||||
Preferred stock(e) | $ | 32,838 | $ | 34,838 | $ | 32,838 | $ | 32,666 | $ | 33,180 | $ | 31,496 | ||||||||
Common stockholders’ equity(e) | $ | 253,305 | $ | 259,289 | $ | 247,986 | $ | 250,849 | $ | 250,234 | $ | 248,209 |
(a)Primarily consists of short-term securities loaned or sold under agreements to repurchase.
(b)Included in beneficial interests issued by consolidated variable interest entities on the Firm’s Consolidated balance sheets.
(c)Includes certain TLAC-eligible long-term unsecured debt issued by the Parent Company.
(d)Includes long-term structured notes which are secured.
(e)Refer to Capital Risk Management on pages 44-49 and Consolidated statements of changes in stockholders’ equity on page 91 of this Form 10-Q, and Note 21 and Note 22 of JPMorgan Chase’s 2021 Form 10-K for additional information on preferred stock and common stockholders’ equity.
Short-term funding
The Firm’s sources of short-term secured funding primarily consist of securities loaned or sold under agreements to repurchase. These instruments are secured predominantly by high-quality securities collateral, including government-issued debt and U.S. GSE and government agency MBS. Securities sold under agreements to repurchase increased at June 30, 2022, compared with December 31, 2021, due to higher secured financing of trading assets and the impact of netting on client-driven market-making activities in Markets, partially offset by lower secured financing of AFS investment securities in Treasury and CIO.
The balances associated with securities loaned or sold under agreements to repurchase fluctuate over time due to investment and financing activities of clients, the Firm’s demand for financing, the ongoing management of the mix of the Firm’s liabilities, including its secured and unsecured financing (for both the investment securities and market-making portfolios), and other market and portfolio factors.
The Firm’s sources of short-term unsecured funding primarily consist of issuances of wholesale commercial paper and other borrowed funds. The increase in commercial paper at June 30, 2022, from December 31, 2021, and for the average three and six months ended June 30, 2022 compared to the prior year period, was due to higher net issuance primarily for short-term liquidity management.
52
Long-term funding and issuance
Long-term funding provides an additional source of stable funding and liquidity for the Firm. The Firm’s long-term funding plan is driven primarily by expected client activity, liquidity considerations, and regulatory requirements, including TLAC. Long-term funding objectives include maintaining diversification, maximizing market access and optimizing funding costs. The Firm evaluates various funding markets, tenors and currencies in creating its optimal long-term funding plan.
The significant majority of the Firm’s long-term unsecured funding is issued by the Parent Company to provide flexibility in support of both bank and non-bank subsidiary funding needs. The Parent Company advances substantially all net funding proceeds to its subsidiary, the IHC. The IHC does not issue debt to external counterparties. The following table summarizes long-term unsecured issuance and maturities or redemptions for the three and six months ended June 30, 2022 and 2021. Refer to Liquidity Risk Management on pages 97-104 and Note 20 of JPMorgan Chase’s 2021 Form 10-K for additional information on the IHC and long-term debt.
Long-term unsecured funding | ||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
(Notional in millions) | Parent Company | Subsidiaries | ||||||||||||||||||||||||||||||
Issuance | ||||||||||||||||||||||||||||||||
Senior notes issued in the U.S. market | $ | 13,000 | $ | 20,000 | $ | 21,100 | $ | 29,250 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Senior notes issued in non-U.S. markets | — | 2,789 | 2,752 | 5,581 | — | — | — | — | ||||||||||||||||||||||||
Total senior notes | 13,000 | 22,789 | 23,852 | 34,831 | — | — | — | — | ||||||||||||||||||||||||
Structured notes(a) | 918 | 1,439 | 2,074 | 2,935 | 11,230 | 7,285 | 19,679 | 17,780 | ||||||||||||||||||||||||
Total long-term unsecured funding – issuance | $ | 13,918 | $ | 24,228 | $ | 25,926 | $ | 37,766 | $ | 11,230 | $ | 7,285 | $ | 19,679 | $ | 17,780 | ||||||||||||||||
Maturities/redemptions | ||||||||||||||||||||||||||||||||
Senior notes | $ | 5,000 | $ | 4,617 | $ | 8,693 | $ | 7,317 | $ | — | $ | — | $ | 64 | $ | 66 | ||||||||||||||||
Structured notes | 415 | 1,191 | 1,392 | 3,161 | 7,428 | 9,659 | 15,075 | 18,173 | ||||||||||||||||||||||||
Total long-term unsecured funding – maturities/redemptions | $ | 5,415 | $ | 5,808 | $ | 10,085 | $ | 10,478 | $ | 7,428 | $ | 9,659 | $ | 15,139 | $ | 18,239 |
(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 FHLB advances. The following table summarizes the securitization issuance and FHLB advances and their respective maturities or redemptions for the three and six months ended June 30, 2022 and 2021, respectively.
Long-term secured funding | ||||||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
Issuance | Maturities/Redemptions | Issuance | Maturities/Redemptions | |||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
Credit card securitization | $ | — | $ | — | $ | — | $ | 1,925 | $ | — | $ | — | $ | 650 | $ | 2,550 | ||||||||||||||||
FHLB advances | — | — | 4 | 1,005 | — | — | 6 | 2,006 | ||||||||||||||||||||||||
Other long-term secured funding(a) | 82 | 103 | 31 | 84 | 284 | 241 | 92 | 192 | ||||||||||||||||||||||||
Total long-term secured funding | $ | 82 | $ | 103 | $ | 35 | $ | 3,014 | $ | 284 | $ | 241 | $ | 748 | $ | 4,748 |
(a)Includes long-term structured notes that are secured.
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 of JPMorgan Chase’s 2021 Form 10-K for a further description of client-driven loan securitizations.
53
Credit ratings
The cost and availability of financing are influenced by credit ratings. Reductions in these ratings could have an adverse effect on the Firm’s access to liquidity sources, increase the cost of funds, trigger additional collateral or funding requirements and decrease the number of investors and counterparties willing to lend to the Firm. The nature and magnitude of the impact of ratings downgrades depends on numerous contractual and behavioral factors, which the Firm believes are incorporated in its liquidity risk and stress testing metrics. The Firm believes that it maintains sufficient liquidity to withstand a potential decrease in funding capacity due to ratings downgrades.
Additionally, the Firm’s funding requirements for VIEs and other third-party commitments may be adversely affected by a decline in credit ratings. Refer to liquidity risk and credit-related contingent features in Note 4 for additional information on the impact of a credit ratings downgrade on the funding requirements for VIEs, and on derivatives and collateral agreements.
The credit ratings of the Parent Company and the Firm’s principal bank and non-bank subsidiaries as of June 30, 2022, were as follows:
JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | J.P. Morgan Securities LLC J.P. Morgan Securities plc J.P. Morgan SE (b) | |||||||||||||||||||||||||||||||||
June 30, 2022 | Long-term issuer | Short-term issuer | Outlook | Long-term issuer | Short-term issuer | Outlook | Long-term issuer | Short-term issuer | Outlook | ||||||||||||||||||||||||||
Moody’s Investors Service (a) | A2 | P-1 | Positive/Stable | Aa2 | P-1 | Stable | Aa3 | P-1 | Stable | ||||||||||||||||||||||||||
Standard & Poor’s | A- | A-2 | Positive | A+ | A-1 | Positive | A+ | A-1 | Positive | ||||||||||||||||||||||||||
Fitch Ratings | AA- | F1+ | Stable | AA | F1+ | Stable | AA | F1+ | Stable |
(a) Moody’s outlook for the Parent Company’s long-term and short-term issuer rating is positive and stable, respectively.
(b) In January 2022, the three rating agencies affirmed the credit ratings of J.P. Morgan SE, which are equivalent to the ratings previously assigned to J.P. Morgan SE's predecessors, J.P. Morgan Bank Luxembourg S.A. and J.P. Morgan AG.
Refer to page 104 of JPMorgan Chase’s 2021 Form 10-K for a discussion of the factors that could affect the credit ratings of the Parent Company and the Firm’s principal bank and non-bank subsidiaries.
54
CREDIT AND INVESTMENT RISK MANAGEMENT |
Credit and investment risk is the risk associated with the default or change in credit profile of a client, counterparty or customer; or loss of principal or a reduction in expected returns on investments, including consumer credit risk,
wholesale credit risk, and investment portfolio risk. Refer to Consumer Credit Portfolio, Wholesale Credit Portfolio and
Allowance for Credit Losses on pages 57-73 for a further discussion of Credit Risk.
Refer to page 74 for a further discussion of Investment Portfolio Risk. Refer to Credit and Investment Risk Management on pages 106-132 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of the Firm’s Credit and Investment Risk Management framework.
55
CREDIT PORTFOLIO |
Credit risk is the risk associated with the default or change in credit profile of a client, counterparty or customer.
In the following tables, reported total loans include loans retained (i.e., held-for-investment); loans held-for-sale; and certain loans accounted for at fair value. The following tables do not include loans which the Firm accounts for at fair value and classifies as trading assets; refer to Notes 2 and 3 for further information regarding these loans. Refer to Notes 11, 22 and 4 for additional information on the Firm’s loans, lending-related commitments and derivative receivables.
Refer to Note 9 for information regarding the credit risk inherent in the Firm’s investment securities portfolio; and refer to Note 10 for information regarding the credit risk inherent in the securities financing portfolio. Refer to Consumer Credit Portfolio on pages 57-61 and Note 11 for further discussions of the consumer credit environment and consumer loans. Refer to Wholesale Credit Portfolio on pages 62-70 and Note 11 for further discussions of the wholesale credit environment and wholesale loans.
Total credit portfolio | |||||||||||||||||
Credit exposure | Nonperforming(c)(d) | ||||||||||||||||
(in millions) | Jun 30, 2022 | Dec 31, 2021 | Jun 30, 2022 | Dec 31, 2021 | |||||||||||||
Loans retained | $ | 1,052,390 | $ | 1,010,206 | $ | 6,269 | $ | 6,932 | |||||||||
Loans held-for-sale | 4,709 | 8,688 | 80 | 48 | |||||||||||||
Loans at fair value | 47,056 | 58,820 | 813 | 815 | |||||||||||||
Total loans | 1,104,155 | 1,077,714 | 7,162 | 7,795 | |||||||||||||
Derivative receivables | 81,317 | 57,081 | 447 | 316 | |||||||||||||
Receivables from customers(a) | 58,349 | 59,645 | — | — | |||||||||||||
Total credit-related assets | 1,243,821 | 1,194,440 | 7,609 | 8,111 | |||||||||||||
Assets acquired in loan satisfactions | |||||||||||||||||
Real estate owned | NA | NA | 211 | 213 | |||||||||||||
Other | NA | NA | 25 | 22 | |||||||||||||
Total assets acquired in loan satisfactions | NA | NA | 236 | 235 | |||||||||||||
Lending-related commitments | 1,302,005 | 1,262,313 | 397 | 764 | |||||||||||||
Total credit portfolio | $ | 2,545,826 | $ | 2,456,753 | $ | 8,242 | $ | 9,110 | |||||||||
Credit derivatives and credit-related notes used in credit portfolio management activities(b) | $ | (16,939) | $ | (20,739) | (e) | $ | — | $ | — | ||||||||
Liquid securities and other cash collateral held against derivatives | (19,801) | (10,102) | NA | NA |
(a)Receivables from customers reflect held-for-investment margin loans to brokerage clients in CIB, CCB and AWM; these are reported within accrued interest and accounts receivable on the Consolidated balance sheets.
(b)Represents the net notional amount of protection purchased and sold through credit derivatives and credit-related notes used to manage credit exposures.
(c)At June 30, 2022, and December 31, 2021, nonperforming assets excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $453 million and $623 million, respectively, and real estate owned (“REO”) insured by U.S. government agencies of $8 million and $5 million, respectively. These amounts have been excluded based upon the government guarantee. In addition, the Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance.
(d)At June 30, 2022 and December 31, 2021, nonaccrual loans excluded $119 million and $633 million, respectively, of PPP loans 90 or more days past due and guaranteed by the SBA.
(e)Prior-period amount has been revised to conform with the current presentation.
The following table provides information about the Firm’s net charge-offs and recoveries.
(in millions, except ratios) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||
Net charge-offs | $ | 657 | $ | 734 | $ | 1,239 | $ | 1,791 | |||||||||
Average retained loans | 1,035,933 | 954,155 | 1,020,180 | 953,118 | |||||||||||||
Net charge-off rates | 0.25 | % | 0.31 | % | 0.24 | % | 0.38 | % |
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CONSUMER CREDIT PORTFOLIO |
The Firm’s retained consumer portfolio consists primarily of residential real estate loans, credit card loans, scored auto and business banking loans, as well as associated lending-related commitments. The Firm’s focus is on serving primarily the prime segment of the consumer credit market. Refer to Note 11 of this Form 10-Q; and Consumer Credit Portfolio on pages 110-116 and Note 12 of JPMorgan Chase's 2021 Form 10-K for further information on consumer loans, as well as the Firm’s nonaccrual and charge-off accounting policies. Refer to Note 22 of this Form 10-Q and Note 28 of JPMorgan Chase's 2021 Form 10-K for further information on lending-related commitments.
The following tables present consumer credit-related information with respect to the scored credit portfolios held in CCB, AWM, CIB and Corporate.
Consumer credit portfolio | |||||||||||||||||
(in millions) | Credit exposure | Nonaccrual loans(j)(k)(l) | |||||||||||||||
Jun 30, 2022 | Dec 31, 2021 | Jun 30, 2022 | Dec 31, 2021 | ||||||||||||||
Consumer, excluding credit card | |||||||||||||||||
Residential real estate(a) | $ | 237,142 | $ | 224,795 | $ | 4,076 | $ | 4,759 | |||||||||
Auto and other(b)(c)(d) | 65,489 | 70,761 | 110 | 119 | |||||||||||||
Total loans – retained | 302,631 | 295,556 | 4,186 | 4,878 | |||||||||||||
Loans held-for-sale | 740 | 1,287 | 44 | — | |||||||||||||
Loans at fair value(e) | 13,841 | 26,463 | 442 | 472 | |||||||||||||
Total consumer, excluding credit card loans | 317,212 | 323,306 | 4,672 | 5,350 | |||||||||||||
Lending-related commitments(f) | 40,484 | 45,334 | |||||||||||||||
Total consumer exposure, excluding credit card | 357,696 | 368,640 | |||||||||||||||
Credit card | |||||||||||||||||
Loans retained(g) | 165,494 | 154,296 | NA | NA | |||||||||||||
Total credit card loans | 165,494 | 154,296 | NA | NA | |||||||||||||
Lending-related commitments(f)(h) | 774,021 | 730,534 | |||||||||||||||
Total credit card exposure(h) | 939,515 | 884,830 | |||||||||||||||
Total consumer credit portfolio(h) | $ | 1,297,211 | $ | 1,253,470 | $ | 4,672 | $ | 5,350 | |||||||||
Credit-related notes used in credit portfolio management activities(i) | $ | (1,560) | $ | (2,028) |
Three months ended June 30, | ||||||||||||||||||||||||||
(in millions, except ratios) | Net charge-offs/(recoveries) | Average loans - retained | Net charge-off/(recovery) rate(m) | |||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
Consumer, excluding credit card | ||||||||||||||||||||||||||
Residential real estate | $ | (67) | $ | (80) | $ | 232,770 | $ | 217,553 | (0.12) | % | (0.15) | % | ||||||||||||||
Auto and other | 94 | 49 | 66,879 | 81,270 | 0.56 | 0.24 | ||||||||||||||||||||
Total consumer, excluding credit card - retained | 27 | (31) | 299,649 | 298,823 | 0.04 | (0.04) | ||||||||||||||||||||
Credit card - retained | 580 | 755 | 158,434 | 135,430 | 1.47 | 2.24 | ||||||||||||||||||||
Total consumer - retained | $ | 607 | $ | 724 | $ | 458,083 | $ | 434,253 | 0.53 | % | 0.67 | % |
Six months ended June 30, | ||||||||||||||||||||||||||
(in millions, except ratios) | Net charge-offs/(recoveries) | Average loans - retained | Net charge-off/(recovery) rate(m) | |||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
Consumer, excluding credit card | ||||||||||||||||||||||||||
Residential real estate | $ | (134) | $ | (131) | $ | 229,369 | $ | 220,247 | (0.12) | % | (0.12) | % | ||||||||||||||
Auto and other | 207 | 121 | 68,197 | 80,183 | 0.61 | 0.30 | ||||||||||||||||||||
Total consumer, excluding credit card - retained | 73 | (10) | 297,566 | 300,430 | 0.05 | (0.01) | ||||||||||||||||||||
Credit card - retained | 1,086 | 1,738 | 153,941 | 134,796 | 1.42 | 2.60 | ||||||||||||||||||||
Total consumer - retained | $ | 1,159 | $ | 1,728 | $ | 451,507 | $ | 435,226 | 0.52 | % | 0.80 | % |
(a)Includes scored mortgage and home equity loans held in CCB and AWM, and scored mortgage loans held in Corporate.
(b)At June 30, 2022 and December 31, 2021, excluded operating lease assets of $14.2 billion and $17.1 billion, respectively. These operating lease assets are included in other assets on the Firm’s Consolidated balance sheets. Refer to Note 16 for further information.
(c)Includes scored auto and business banking loans and overdrafts.
(d)At June 30, 2022 and December 31, 2021, included $1.5 billion and $5.4 billion of loans, respectively, in Business Banking under the PPP. The Firm does not expect to realize material credit losses on PPP loans because the loans are guaranteed by the SBA. Refer to Credit Portfolio on page 109 of JPMorgan Chase's 2021 Form 10-K for a further discussion of the PPP.
(e)Includes scored mortgage loans held in CCB and CIB.
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(f)Credit card, home equity and certain business banking lending-related commitments represent the total available lines of credit for these products. The Firm has not experienced, and does not anticipate, that all available lines of credit would be used at the same time. For credit card commitments, and if certain conditions are met, home equity commitments and certain business banking commitments, the Firm can reduce or cancel these lines of credit by providing the borrower notice or, in some cases as permitted by law, without notice. Refer to Note 22 for further information.
(g)Includes billed interest and fees.
(h)Also includes commercial card lending-related commitments primarily in CB and CIB.
(i)Represents the notional amount of protection obtained through the issuance of credit-related notes that reference certain pools of residential real estate and auto loans in the retained consumer portfolio.
(j)At June 30, 2022 and December 31, 2021, nonaccrual loans excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $453 million and $623 million, respectively. These amounts have been excluded from nonaccrual loans based upon the government guarantee. In addition, the Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status, as permitted by regulatory guidance.
(k)Generally excludes loans under payment deferral programs offered in response to the COVID-19 pandemic.
(l)At June 30, 2022 and December 31, 2021, nonaccrual loans excluded $86 million and $506 million, respectively, of PPP loans 90 or more days past due and guaranteed by the SBA.
(m)Average consumer loans held-for-sale and loans at fair value were $18.2 billion and $27.0 billion for the three months ended June 30, 2022 and 2021, respectively, and were $21.0 billion and $24.2 billion for the six months ended June 30, 2022 and 2021, respectively. These amounts were excluded when calculating net charge-off/(recovery) rates.
58
Consumer, excluding credit card
Portfolio analysis
Loans decreased from December 31, 2021 driven by residential real estate loans at fair value and auto and other loans, largely offset by higher retained residential real estate loans.
Residential real estate: The residential real estate portfolio, including loans held-for-sale and loans at fair value, predominantly consists of prime mortgage loans and home equity lines of credit.
Retained loans increased compared to December 31, 2021, reflecting originations, net of paydowns. Retained nonaccrual loans decreased from December 31, 2021 reflecting improved credit performance. Net recoveries for the three months ended June 30, 2022 were lower when compared with the same period in the prior year as the current year recoveries were impacted by lower prepayments due to higher interest rates. Net recoveries for the six months ended June 30, 2022 were relatively flat compared with the same period in the prior year.
Loans at fair value decreased from December 31, 2021, as Home Lending warehouse loan sales outpaced originations due to higher interest rates and lower loan purchase activity in CIB. Nonaccrual loans at fair value decreased from December 31, 2021 driven by CIB.
The carrying value of home equity lines of credit outstanding was $16.9 billion at June 30, 2022. This amount included $5.5 billion of HELOCs that have recast from interest-only to fully amortizing payments or have been modified and $5.5 billion of interest-only balloon HELOCs, which primarily mature after 2030. 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 exhibiting a material deterioration in their credit risk profile.
At June 30, 2022 and December 31, 2021, the carrying value of interest-only residential mortgage loans were $34.4 billion and $30.0 billion, respectively. These loans have an interest-only payment period generally followed by an adjustable-rate or fixed-rate fully amortizing payment period to maturity and are typically originated as higher-balance loans to higher-income borrowers, predominantly in AWM. The interest-only residential mortgage loan portfolio reflected net charge-offs for the three months ended June 30, 2022 on a loan sale and net recoveries for the six months ended June 30, 2022. The credit performance of this portfolio is comparable with the performance of the broader prime mortgage portfolio.
The following table provides a summary of the Firm’s residential mortgage portfolio insured and/or guaranteed by U.S. government agencies, predominantly loans held-for-sale and loans at fair value. The Firm monitors its exposure to certain potential unrecoverable claim payments related to government-insured loans and considers this exposure in estimating the allowance for loan losses.
(in millions) | June 30, 2022 | December 31, 2021 | ||||||
Current | $ | 584 | $ | 689 | ||||
30-89 days past due | 121 | 135 | ||||||
90 or more days past due | 453 | 623 | ||||||
Total government guaranteed loans | $ | 1,158 | $ | 1,447 |
Geographic composition and current estimated loan-to-value ratio of residential real estate loans
Refer to Note 11 for information on the geographic composition and current estimated LTVs of the Firm’s residential real estate loans.
Modified residential real estate loans
The following table presents information relating to modified retained residential real estate loans for which concessions have been granted to borrowers experiencing financial difficulty, which include both TDRs and modified purchased credit deteriorated (“PCD”) loans not accounted for as TDRs. The following table does not include loans with short-term or other insignificant modifications that are not considered concessions and, therefore, are not TDRs. Refer to Note 11 for further information on modifications for the three and six months ended June 30, 2022 and 2021.
(in millions) | June 30, 2022 | December 31, 2021 | |||||||||
Retained loans | $ | 12,185 | $ | 13,251 | |||||||
Nonaccrual retained loans(a) | $ | 3,543 | $ | 3,938 |
(a)At June 30, 2022 and December 31, 2021, nonaccrual loans included $2.8 billion and $2.7 billion, respectively, of TDRs for which the borrowers were less than 90 days past due. Refer to Note 12 of JPMorgan Chase’s 2021 Form 10-K for additional information about loans modified in a TDR that are on nonaccrual status.
59
Auto and other: The auto and other loan portfolio, including loans at fair value, predominantly consists of prime-quality scored auto and business banking loans, as well as overdrafts. The portfolio decreased when compared with December 31, 2021 predominantly due to a decrease in business banking loans driven by PPP loan forgiveness. Scored auto portfolio loans decreased driven by paydowns predominantly offset by loan originations. Net charge-offs for the three and six months ended June 30, 2022 increased when compared to the same period in the prior year due to higher overdraft and scored auto charge-offs partially offset by lower scored business banking charge-offs. The scored auto portfolio net charge-off and net recovery rates were 0.12% and (0.11)% for the three months ended June 30, 2022 and 2021, respectively, and net charge-off rates of 0.15% and 0.00% for the six months ended June 30, 2022 and 2021, respectively, as the net recovery for the three months ended June 30, 2021 and net charge-offs for the six months ended June 30, 2021 benefited from government stimulus and payment assistance programs.
Nonperforming assets
The following table presents information as of June 30, 2022 and December 31, 2021, about consumer, excluding credit card, nonperforming assets.
Nonperforming assets(a) | |||||||||||
(in millions) | June 30, 2022 | December 31, 2021 | |||||||||
Nonaccrual loans | |||||||||||
Residential real estate(b) | $ | 4,562 | $ | 5,231 | |||||||
Auto and other(c) | 110 | 119 | |||||||||
Total nonaccrual loans | 4,672 | 5,350 | |||||||||
Assets acquired in loan satisfactions | |||||||||||
Real estate owned | 129 | 112 | |||||||||
Other | 25 | 22 | |||||||||
Total assets acquired in loan satisfactions | 154 | 134 | |||||||||
Total nonperforming assets | $ | 4,826 | $ | 5,484 |
(a)At June 30, 2022 and December 31, 2021, nonperforming assets excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $453 million and $623 million, respectively, and REO insured by U.S. government agencies of $8 million and $5 million, respectively. These amounts have been excluded based upon the government guarantee.
(b)Generally excludes loans under payment deferral programs offered in response to the COVID-19 pandemic.
(c)At June 30, 2022 and December 31, 2021, nonaccrual loans excluded $86 million and $506 million, respectively, of PPP loans 90 or more days past due and guaranteed by the SBA.
Nonaccrual loans
The following table presents changes in consumer, excluding credit card, nonaccrual loans for the six months ended June 30, 2022 and 2021.
Nonaccrual loan activity | ||||||||
Six months ended June 30, (in millions) | 2022 | 2021 | ||||||
Beginning balance | $ | 5,350 | $ | 6,467 | ||||
Additions | 1,149 | 1,422 | ||||||
Reductions: | ||||||||
Principal payments and other(a) | 789 | 1,215 | ||||||
Charge-offs | 117 | 122 | ||||||
Returned to performing status | 824 | 853 | ||||||
Foreclosures and other liquidations | 97 | 41 | ||||||
Total reductions | 1,827 | 2,231 | ||||||
Net changes | (678) | (809) | ||||||
Ending balance | $ | 4,672 | $ | 5,658 |
(a)Other reductions include loan sales.
Refer to Note 11 for further information about the consumer credit portfolio, including information about delinquencies, other credit quality indicators, loan modifications and loans that were in the process of active or suspended foreclosure.
Purchased credit deteriorated (“PCD”) loans
The following tables provide credit-related information for PCD loans which are reported in residential real estate.
(in millions, except ratios) | June 30, 2022 | December 31, 2021 | ||||||
Loan delinquency(a) | ||||||||
Current | $ | 11,664 | $ | 12,746 | ||||
30-149 days past due | 319 | 331 | ||||||
150 or more days past due | 365 | 664 | ||||||
Total PCD loans | $ | 12,348 | $ | 13,741 | ||||
% of 30+ days past due to total retained PCD loans | 5.54 | % | 7.24 | % | ||||
Nonaccrual loans | $ | 1,327 | $ | 1,616 |
(in millions, except ratios) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||
Net charge-offs/(recoveries) | $ | (5) | $ | 3 | $ | (6) | $ | 16 | |||||||||
Net charge-off/(recovery) rate | (0.16) | % | 0.08 | % | (0.09) | % | 0.20 | % |
(a)At June 30, 2022 and December 31, 2021, loans under payment deferral programs offered in response to the COVID-19 pandemic which are still within their deferral period and performing according to their modified terms are generally not considered delinquent.
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Credit card
Total credit card loans increased from December 31, 2021 reflecting higher consumer spending. The June 30, 2022 30+ and 90+ day delinquency rates of 1.05% and 0.51%, respectively, were relatively flat compared to the December 31, 2021 30+ and 90+ day delinquency rates of 1.04% and 0.50%. Net charge-offs decreased for the three and six months ended June 30, 2022 compared with the same period in the prior year. Delinquency and net charge-off rates continue to benefit from the financial strength of U.S. consumers.
Consistent with the Firm’s policy, all credit card loans typically remain on accrual status until charged off. However, the Firm’s allowance for loan losses includes the estimated uncollectible portion of accrued and billed interest and fee income. Refer to Note 11 for further information about this portfolio, including information about delinquencies.
Geographic and FICO composition of credit card loans
Refer to Note 11 for information on the geographic and FICO composition of the Firm’s credit card loans.
Modifications of credit card loans
At June 30, 2022, the Firm had $827 million of credit card loans outstanding that have been modified in TDRs, which does not include loans with short-term or other insignificant modifications that are not considered TDRs, compared to $1.0 billion at December 31, 2021. Refer to Note 11 for additional information about loan modification programs to borrowers.
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WHOLESALE CREDIT PORTFOLIO |
In its wholesale businesses, the Firm is exposed to credit risk primarily through its underwriting, lending, market-making, and hedging activities with and for clients and counterparties, as well as through various operating services (such as cash management and clearing activities), securities financing activities and cash placed with banks. A portion of the loans originated or acquired by the Firm’s wholesale businesses is generally retained on the balance sheet. The Firm distributes a significant percentage of the loans that it originates into the market as part of its syndicated loan business and to manage portfolio concentrations and credit risk. The wholesale portfolio is actively managed, in part by conducting ongoing, in-depth reviews of client credit quality and transaction structure inclusive of collateral where applicable, and of industry, product and client concentrations. Refer to the industry discussion on pages 64-67 for further information.
The Firm’s wholesale credit portfolio includes exposure held in CIB, CB, AWM and Corporate, as well as risk-rated exposures held in CCB, including business banking and auto dealer exposure for which the wholesale methodology is applied when determining the allowance for credit losses.
In the six months ended June 30, 2022, credit continued to perform well with charge-offs at historically low levels. As of June 30, 2022, the decrease in nonperforming exposure was driven by a decline in lending related commitments as a result of net portfolio activity, predominantly in CIB, partially offset by an increase in nonperforming derivatives. Nonperforming loans were relatively flat and included paydowns on exposures to certain Russia and Russia-associated clients that were downgraded in the first quarter of 2022. Refer to Business Developments on page 9 and Country Risk on pages 80-81 for additional information.
As of June 30, 2022, retained loans increased $23.9 billion driven by CB and CIB, partially offset by decreases in AWM.
Wholesale credit portfolio | |||||||||||||||||
Credit exposure | Nonperforming | ||||||||||||||||
(in millions) | Jun 30, 2022 | Dec 31, 2021 | Jun 30, 2022 | Dec 31, 2021 | |||||||||||||
Loans retained | $ | 584,265 | $ | 560,354 | $ | 2,083 | $ | 2,054 | |||||||||
Loans held-for-sale | 3,969 | 7,401 | 36 | 48 | |||||||||||||
Loans at fair value | 33,215 | 32,357 | 371 | 343 | |||||||||||||
Loans | 621,449 | 600,112 | 2,490 | 2,445 | |||||||||||||
Derivative receivables | 81,317 | 57,081 | 447 | 316 | |||||||||||||
Receivables from customers(a) | 58,349 | 59,645 | — | — | |||||||||||||
Total wholesale credit-related assets | 761,115 | 716,838 | 2,937 | 2,761 | |||||||||||||
Assets acquired in loan satisfactions | |||||||||||||||||
Real estate owned | NA | NA | 82 | 101 | |||||||||||||
Other | NA | NA | — | — | |||||||||||||
Total assets acquired in loan satisfactions | NA | NA | 82 | 101 | |||||||||||||
Lending-related commitments | 487,500 | 486,445 | 397 | 764 | |||||||||||||
Total wholesale credit portfolio | $ | 1,248,615 | $ | 1,203,283 | $ | 3,416 | $ | 3,626 | |||||||||
Credit derivatives and credit-related notes used in credit portfolio management activities(b) | $ | (15,379) | $ | (18,711) | (c) | $ | — | $ | — | ||||||||
Liquid securities and other cash collateral held against derivatives | (19,801) | (10,102) | NA | NA |
(a)Receivables from customers reflect held-for-investment margin loans to brokerage clients in CIB, CCB and AWM; these are reported within accrued interest and accounts receivable on the Consolidated balance sheets.
(b)Represents the net notional amount of protection purchased and sold through credit derivatives and credit-related notes 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 70 and Note 4 for additional information.
(c)Prior-period amount has been revised to conform with the current presentation.
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Wholesale credit exposure – maturity and ratings profile
The following tables present the maturity and internal risk ratings profiles of the wholesale credit portfolio as of June 30, 2022, and December 31, 2021. The Firm generally considers internal ratings with qualitative characteristics equivalent to BBB-/Baa3 or higher as investment grade, and takes into consideration collateral and structural support when determining the internal risk rating for each credit facility. Refer to Note 12 of JPMorgan Chase's 2021 Form 10-K for further information on internal risk ratings.
Maturity profile(e) | Ratings profile | |||||||||||||||||||||||||||||||
1 year or less | 1 year through 5 years | After 5 years | Total | Investment-grade | Noninvestment-grade | Total | Total % of IG | |||||||||||||||||||||||||
June 30, 2022 (in millions, except ratios) | ||||||||||||||||||||||||||||||||
Loans retained | $ | 215,425 | $ | 231,814 | $ | 137,026 | $ | 584,265 | $ | 419,945 | $ | 164,320 | $ | 584,265 | 72 | % | ||||||||||||||||
Derivative receivables | 81,317 | 81,317 | ||||||||||||||||||||||||||||||
Less: Liquid securities and other cash collateral held against derivatives | (19,801) | (19,801) | ||||||||||||||||||||||||||||||
Total derivative receivables, net of collateral | 24,639 | 16,088 | 20,789 | 61,516 | 44,538 | 16,978 | 61,516 | 72 | ||||||||||||||||||||||||
Lending-related commitments | 130,180 | 332,947 | 24,373 | 487,500 | 332,471 | 155,029 | 487,500 | 68 | ||||||||||||||||||||||||
Subtotal | 370,244 | 580,849 | 182,188 | 1,133,281 | 796,954 | 336,327 | 1,133,281 | 70 | ||||||||||||||||||||||||
Loans held-for-sale and loans at fair value(a) | 37,184 | 37,184 | ||||||||||||||||||||||||||||||
Receivables from customers | 58,349 | 58,349 | ||||||||||||||||||||||||||||||
Total exposure – net of liquid securities and other cash collateral held against derivatives | $ | 1,228,814 | $ | 1,228,814 | ||||||||||||||||||||||||||||
Credit derivatives and credit-related notes used in credit portfolio management activities(b)(c) | $ | (3,586) | $ | (10,032) | $ | (1,761) | $ | (15,379) | $ | (12,698) | $ | (2,681) | $ | (15,379) | 83 | % |
Maturity profile(e) | Ratings profile | ||||||||||||||||||||||||||||||||||
1 year or less | 1 year through 5 years | After 5 years | Total | Investment-grade | Noninvestment-grade | Total | Total % of IG | ||||||||||||||||||||||||||||
December 31, 2021 (in millions, except ratios) | |||||||||||||||||||||||||||||||||||
Loans retained | $ | 214,064 | $ | 218,176 | $ | 128,114 | $ | 560,354 | $ | 410,011 | $ | 150,343 | $ | 560,354 | 73 | % | |||||||||||||||||||
Derivative receivables | 57,081 | 57,081 | |||||||||||||||||||||||||||||||||
Less: Liquid securities and other cash collateral held against derivatives | (10,102) | (10,102) | |||||||||||||||||||||||||||||||||
Total derivative receivables, net of collateral | 13,648 | 12,814 | 20,517 | 46,979 | 31,934 | 15,045 | 46,979 | 68 | |||||||||||||||||||||||||||
Lending-related commitments | 120,929 | 340,308 | 25,208 | 486,445 | 331,116 | 155,329 | 486,445 | 68 | |||||||||||||||||||||||||||
Subtotal | 348,641 | 571,298 | 173,839 | 1,093,778 | 773,061 | 320,717 | 1,093,778 | 71 | |||||||||||||||||||||||||||
Loans held-for-sale and loans at fair value(a) | 39,758 | 39,758 | |||||||||||||||||||||||||||||||||
Receivables from customers | 59,645 | 59,645 | |||||||||||||||||||||||||||||||||
Total exposure – net of liquid securities and other cash collateral held against derivatives | $ | 1,193,181 | $ | 1,193,181 | |||||||||||||||||||||||||||||||
Credit derivatives and credit-related notes used in credit portfolio management activities(b)(c)(d) | $ | (7,472) | $ | (9,750) | $ | (1,489) | $ | (18,711) | $ | (15,012) | $ | (3,699) | $ | (18,711) | 80 | % |
(a)Loans held-for-sale are primarily related to syndicated loans and loans transferred from the retained portfolio.
(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. In addition, the Firm obtains credit protection against certain loans in the retained loan portfolio through the issuance of credit-related notes.
(d)Prior-period amounts have been revised to conform with the current presentation.
(e)The maturity profile of retained loans, lending-related commitments and derivative receivables is generally based on remaining contractual maturity. Derivative contracts that are in a receivable position at June 30, 2022, may become payable prior to maturity based on their cash flow profile or changes in market conditions.
63
Wholesale credit exposure – industry exposures
The Firm focuses on the management and diversification of its industry exposures, and pays particular attention to industries with actual or potential credit concerns.
Exposures deemed criticized align with the U.S. banking regulators’ definition of criticized exposures, which consist of the special mention, substandard and doubtful categories. Total criticized exposure, excluding loans held-for-sale and loans at fair value, was $31.3 billion and $38.2 billion at June 30, 2022 and December 31, 2021, representing approximately 2.7% and 3.5% of total wholesale credit exposure, respectively. The decrease in criticized exposure was driven by net portfolio activity and client-specific upgrades, partially offset by client-specific downgrades, with the largest decreases in Consumer & Retail and Technology, Media & Telecommunications. Of the $31.3 billion of criticized exposure at June 30, 2022, approximately half was undrawn and $28.3 billion was performing.
The table below summarizes by industry the Firm’s exposures as of June 30, 2022, and December 31, 2021. The industry of risk category is generally based on the client or counterparty’s primary business activity. Refer to Note 4 of JPMorgan Chase's 2021 Form 10-K for additional information on industry concentrations.
Wholesale credit exposure – industries(a) | |||||||||||||||||||||||||||||
Selected metrics | |||||||||||||||||||||||||||||
30 days or more past due and accruing loans | Net charge-offs/ (recoveries) | Credit derivative hedges and credit-related notes(h) | Liquid securities and other cash collateral held against derivative receivables | ||||||||||||||||||||||||||
Noninvestment-grade | |||||||||||||||||||||||||||||
As of or for the six months ended | Credit exposure(f)(g) | Investment- grade | Noncriticized | Criticized performing | Criticized nonperforming | ||||||||||||||||||||||||
June 30, 2022 | |||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Real Estate | $ | 165,475 | $ | 126,523 | $ | 34,612 | $ | 3,948 | $ | 392 | $ | 745 | $ | 6 | $ | (550) | $ | — | |||||||||||
Individuals and Individual Entities(b) | 138,215 | 119,730 | 17,631 | 418 | 436 | 1,636 | 10 | — | — | ||||||||||||||||||||
Consumer & Retail | 119,319 | 60,466 | 51,947 | 6,566 | 340 | 243 | 2 | (566) | — | ||||||||||||||||||||
Asset Managers | 97,670 | 80,566 | 17,099 | — | 5 | 308 | (1) | — | (8,679) | ||||||||||||||||||||
Technology, Media & Telecommunications | 77,831 | 44,080 | 27,277 | 6,136 | 338 | 125 | 36 | (1,068) | — | ||||||||||||||||||||
Industrials | 71,675 | 38,366 | 30,336 | 2,782 | 191 | 227 | — | (611) | — | ||||||||||||||||||||
Healthcare | 57,690 | 41,127 | 14,896 | 1,591 | 76 | 189 | 14 | (609) | (92) | ||||||||||||||||||||
Banks & Finance Cos | 55,920 | 29,960 | 25,179 | 743 | 38 | 65 | — | (323) | (807) | ||||||||||||||||||||
Oil & Gas | 46,548 | 22,906 | 22,664 | 825 | 153 | 65 | 5 | (656) | (31) | ||||||||||||||||||||
Utilities | 35,781 | 26,128 | 8,607 | 876 | 170 | 6 | 28 | (514) | — | ||||||||||||||||||||
State & Municipal Govt(c) | 34,729 | 33,901 | 702 | 124 | 2 | 14 | — | — | (54) | ||||||||||||||||||||
Automotive | 34,246 | 24,881 | 8,932 | 311 | 122 | 45 | — | (402) | — | ||||||||||||||||||||
Chemicals & Plastics | 22,732 | 15,104 | 7,210 | 369 | 49 | 8 | 3 | (141) | — | ||||||||||||||||||||
Insurance | 19,348 | 14,568 | 4,641 | 139 | — | 6 | — | (198) | (5,685) | ||||||||||||||||||||
Metals & Mining | 16,655 | 8,763 | 7,216 | 603 | 73 | 14 | (1) | (67) | (29) | ||||||||||||||||||||
Transportation | 15,650 | 5,541 | 7,229 | 2,709 | 171 | 20 | — | (261) | — | ||||||||||||||||||||
Central Govt | 14,167 | 13,913 | 243 | — | 11 | — | — | (5,401) | (179) | ||||||||||||||||||||
Securities Firms | 6,806 | 3,632 | 3,173 | 1 | — | — | (13) | (15) | (1,573) | ||||||||||||||||||||
Financial Markets Infrastructure | 5,455 | 5,399 | 56 | — | — | — | — | — | (8) | ||||||||||||||||||||
All other(d) | 117,170 | 99,814 | 16,799 | 197 | 360 | 61 | (9) | (3,997) | (2,664) | ||||||||||||||||||||
Subtotal | $ | 1,153,082 | $ | 815,368 | $ | 306,449 | $ | 28,338 | $ | 2,927 | $ | 3,777 | $ | 80 | $ | (15,379) | $ | (19,801) | |||||||||||
Loans held-for-sale and loans at fair value | 37,184 | ||||||||||||||||||||||||||||
Receivables from customers | 58,349 | ||||||||||||||||||||||||||||
Total(e) | $ | 1,248,615 |
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Selected metrics | ||||||||||||||||||||||||||||||||||||||
30 days or more past due and accruing loans | Net charge-offs/ (recoveries) | Credit derivative hedges and credit-related notes(h) | Liquid securities and other cash collateral held against derivative receivables | |||||||||||||||||||||||||||||||||||
Noninvestment-grade | ||||||||||||||||||||||||||||||||||||||
As of or for the year ended | Credit exposure(f)(g) | Investment- grade | Noncriticized | Criticized performing | Criticized nonperforming | |||||||||||||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||||||||
Real Estate | $ | 155,069 | $ | 120,174 | $ | 29,642 | $ | 4,636 | $ | 617 | $ | 394 | $ | 6 | $ | (185) | (i) | $ | — | |||||||||||||||||||
Individuals and Individual Entities(b) | 141,973 | 122,606 | 18,797 | 99 | 471 | 1,450 | 32 | — | (1) | |||||||||||||||||||||||||||||
Consumer & Retail | 122,789 | 59,622 | 53,317 | 9,445 | 405 | 288 | 2 | (352) | (i) | — | ||||||||||||||||||||||||||||
Asset Managers | 81,228 | 68,593 | 12,630 | — | 5 | 8 | — | — | (3,900) | |||||||||||||||||||||||||||||
Technology, Media & Telecommunications | 84,070 | 49,610 | 25,540 | 8,595 | 325 | 58 | (1) | (900) | (i) | (12) | ||||||||||||||||||||||||||||
Industrials | 66,974 | 36,953 | 26,957 | 2,895 | 169 | 428 | 13 | (586) | (i) | (1) | ||||||||||||||||||||||||||||
Healthcare | 59,014 | 42,133 | 15,136 | 1,686 | 59 | 204 | (4) | (490) | (174) | |||||||||||||||||||||||||||||
Banks & Finance Cos | 54,684 | 29,732 | 23,809 | 1,138 | 5 | 9 | 9 | (503) | (i) | (810) | ||||||||||||||||||||||||||||
Oil & Gas | 42,606 | 20,698 | 20,222 | 1,558 | 128 | 4 | 60 | (564) | (i) | — | ||||||||||||||||||||||||||||
Utilities | 33,203 | 25,069 | 7,011 | 914 | 209 | 11 | 6 | (367) | (i) | (4) | ||||||||||||||||||||||||||||
State & Municipal Govt(c) | 33,216 | 32,522 | 586 | 101 | 7 | 74 | — | — | (14) | |||||||||||||||||||||||||||||
Automotive | 34,573 | 24,606 | 9,446 | 399 | 122 | 95 | (3) | (463) | — | |||||||||||||||||||||||||||||
Chemicals & Plastics | 17,660 | 11,319 | 5,817 | 518 | 6 | 7 | — | (89) | (i) | — | ||||||||||||||||||||||||||||
Insurance | 13,926 | 9,943 | 3,887 | 96 | — | — | — | (25) | (2,366) | |||||||||||||||||||||||||||||
Metals & Mining | 16,696 | 7,848 | 8,491 | 294 | 63 | 27 | 7 | (15) | (4) | |||||||||||||||||||||||||||||
Transportation | 14,635 | 6,010 | 5,983 | 2,470 | 172 | 21 | 20 | (100) | (i) | (24) | ||||||||||||||||||||||||||||
Central Govt | 11,317 | 11,067 | 250 | — | — | — | — | (6,961) | (i) | (72) | ||||||||||||||||||||||||||||
Securities Firms | 4,180 | 2,599 | 1,578 | — | 3 | — | — | (47) | (217) | |||||||||||||||||||||||||||||
Financial Markets Infrastructure | 4,377 | 3,987 | 390 | — | — | — | — | — | — | |||||||||||||||||||||||||||||
All other(d) | 111,690 | 97,537 | 13,580 | 205 | 368 | 242 | (5) | (7,064) | (i) | (2,503) | ||||||||||||||||||||||||||||
Subtotal | $ | 1,103,880 | $ | 782,628 | $ | 283,069 | $ | 35,049 | $ | 3,134 | $ | 3,320 | $ | 142 | $ | (18,711) | $ | (10,102) | ||||||||||||||||||||
Loans held-for-sale and loans at fair value | 39,758 | |||||||||||||||||||||||||||||||||||||
Receivables from customers | 59,645 | |||||||||||||||||||||||||||||||||||||
Total(e) | $ | 1,203,283 |
(a)The industry rankings presented in the table as of December 31, 2021, are based on the industry rankings of the corresponding exposures at June 30, 2022, not actual rankings of such exposures at December 31, 2021.
(b)Individuals and Individual Entities predominantly consists of Global Private Bank 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.) noted above, the Firm held $6.9 billion and $7.1 billion of trading assets at June 30, 2022, and December 31, 2021, respectively; $10.1 billion and $15.9 billion, respectively, of AFS securities; and $19.2 billion and $14.0 billion, respectively, of HTM securities, issued by U.S. state and municipal governments. Refer to Note 2 and Note 9 for further information.
(d)All other includes: SPEs, and Private education and civic organizations, representing approximately 94% and 6% at both June 30, 2022 and December 31, 2021.
(e)Excludes cash placed with banks of $658.6 billion and $729.6 billion, at June 30, 2022, and December 31, 2021, 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 and credit-related notes used in credit portfolio management activities held against derivative receivables or loans and liquid securities and other cash collateral held against derivative receivables.
(g)Credit exposure includes held-for-sale and fair value option elected lending-related commitments.
(h)Represents the net notional amounts of protection purchased and sold through credit derivatives and credit-related notes 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.
(i)Prior-period amounts have been revised to conform with the current presentation.
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Presented below is additional detail on certain of the Firm’s industry exposures.
Real Estate
Real Estate exposure was $165.5 billion as of June 30, 2022, of which $95.2 billion was multifamily lending as shown in the table below. Criticized exposure decreased by $913 million from $5.3 billion at December 31, 2021 to $4.3 billion at June 30, 2022, driven by client-specific upgrades and net portfolio activity largely offset by client-specific downgrades.
June 30, 2022 | ||||||||||||||||||||||||||||||||
(in millions, except ratios) | Loans and Lending-related Commitments | Derivative Receivables | Credit exposure | % Investment-grade | % Drawn(d) | |||||||||||||||||||||||||||
Multifamily(a) | $ | 95,167 | $ | 27 | $ | 95,194 | 83 | % | 88 | % | ||||||||||||||||||||||
Office | 15,794 | 20 | 15,815 | 76 | 73 | |||||||||||||||||||||||||||
Industrial | 14,191 | 15 | 14,206 | 77 | 67 | |||||||||||||||||||||||||||
Services and Non Income Producing | 13,356 | 15 | 13,371 | 64 | 50 | |||||||||||||||||||||||||||
Other Income Producing Properties(b) | 12,743 | 166 | 12,909 | 72 | 58 | |||||||||||||||||||||||||||
Retail | 9,768 | 25 | 9,792 | 66 | 67 | |||||||||||||||||||||||||||
Lodging | 4,175 | 13 | 4,188 | 3 | 23 | |||||||||||||||||||||||||||
Total Real Estate Exposure(c) | $ | 165,194 | $ | 281 | $ | 165,475 | 76 | % | 77 | % | ||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||
(in millions, except ratios) | Loans and Lending-related Commitments | Derivative Receivables | Credit exposure | % Investment- grade | % Drawn(d) | |||||||||||||||||||||||||||
Multifamily(a) | $ | 89,032 | $ | 122 | $ | 89,154 | 84 | % | 89 | % | ||||||||||||||||||||||
Office | 16,409 | 234 | 16,643 | 75 | 71 | |||||||||||||||||||||||||||
Industrial | 11,546 | 66 | 11,612 | 75 | 64 | |||||||||||||||||||||||||||
Services and Non Income Producing | 11,512 | 24 | 11,536 | 63 | 50 | |||||||||||||||||||||||||||
Other Income Producing Properties(b) | 13,018 | 498 | 13,516 | 77 | 55 | |||||||||||||||||||||||||||
Retail | 9,580 | 106 | 9,686 | 61 | 69 | |||||||||||||||||||||||||||
Lodging | 2,859 | 63 | 2,922 | 5 | 33 | |||||||||||||||||||||||||||
Total Real Estate Exposure | $ | 153,956 | $ | 1,113 | $ | 155,069 | 77 | % | 77 | % |
(a)Multifamily exposure is largely in California.
(b)Other Income Producing Properties consists of clients with diversified property types or other property types outside of categories listed in the table above.
(c)Real Estate exposure is approximately 78% secured; unsecured exposure is approximately 76% investment-grade.
(d)Represents drawn exposure as a percentage of credit exposure.
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Consumer & Retail
Consumer & Retail exposure was $119.3 billion as of June 30, 2022, and predominantly included Food and Beverage, Retail, and Business and Consumer Services as shown in the table below. Criticized exposure decreased by $2.9 billion from $9.9 billion at December 31, 2021 to $6.9 billion at June 30, 2022, driven by net portfolio activity and client-specific upgrades partially offset by client-specific downgrades.
June 30, 2022 | ||||||||||||||||||||||||||||||||
(in millions, except ratios) | Loans and Lending-related Commitments | Derivative Receivables | Credit exposure | % Investment-grade | % Drawn(d) | |||||||||||||||||||||||||||
Food and Beverage | $ | 32,755 | $ | 678 | $ | 33,433 | 59 | % | 36 | % | ||||||||||||||||||||||
Retail(a) | 32,530 | 637 | 33,167 | 50 | 34 | |||||||||||||||||||||||||||
Business and Consumer Services | 30,855 | 476 | 31,331 | 49 | 38 | |||||||||||||||||||||||||||
Consumer Hard Goods | 13,331 | 146 | 13,477 | 55 | 40 | |||||||||||||||||||||||||||
Leisure(b) | 7,849 | 62 | 7,911 | 20 | 39 | |||||||||||||||||||||||||||
Total Consumer & Retail(c) | $ | 117,320 | $ | 1,999 | $ | 119,319 | 51 | % | 37 | % | ||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||
(in millions, except ratios) | Loans and Lending-related Commitments | Derivative Receivables | Credit exposure | % Investment- grade | % Drawn(d) | |||||||||||||||||||||||||||
Food and Beverage | $ | 30,434 | $ | 957 | $ | 31,391 | 59 | % | 33 | % | ||||||||||||||||||||||
Retail(a) | 32,872 | 1,152 | 34,024 | 50 | 31 | |||||||||||||||||||||||||||
Business and Consumer Services | 32,159 | 347 | 32,506 | 46 | 33 | |||||||||||||||||||||||||||
Consumer Hard Goods | 17,035 | 111 | 17,146 | 46 | 30 | |||||||||||||||||||||||||||
Leisure(b) | 7,620 | 102 | 7,722 | 17 | 34 | |||||||||||||||||||||||||||
Total Consumer & Retail | $ | 120,120 | $ | 2,669 | $ | 122,789 | 49 | % | 32 | % |
(a)Retail consists of Home Improvement & Specialty Retailers, Restaurants, Supermarkets, Discount & Drug Stores, Specialty Apparel and Department Stores.
(b)Leisure consists of Gaming, Arts & Culture, Travel Services and Sports & Recreation. As of June 30, 2022 approximately 86% of the noninvestment-grade Leisure portfolio is secured.
(c)Consumer & Retail exposure is approximately 56% secured; unsecured exposure is approximately 77% investment-grade.
(d)Represents drawn exposure as a percent of credit exposure.
Oil & Gas
Oil & Gas exposure was $46.5 billion as of June 30, 2022, including $27.4 billion of Exploration & Production and Oil field Services as shown in the table below. The increase in derivative receivables reflects market movements related to Oil & Gas prices. Criticized exposure decreased by $708 million from $1.7 billion at December 31, 2021 to $978 million at June 30, 2022, driven by net portfolio activity and client-specific upgrades partially offset by client-specific downgrades.
June 30, 2022 | ||||||||||||||||||||||||||||||||
(in millions, except ratios) | Loans and Lending-related Commitments | Derivative Receivables | Credit exposure | % Investment-grade | % Drawn(c) | |||||||||||||||||||||||||||
Exploration & Production (“E&P”) and Oil field Services | $ | 16,612 | $ | 10,837 | $ | 27,449 | 47 | % | 19 | % | ||||||||||||||||||||||
Other Oil & Gas(a) | 17,510 | 1,589 | 19,099 | 52 | 23 | |||||||||||||||||||||||||||
Total Oil & Gas(b) | $ | 34,122 | $ | 12,426 | $ | 46,548 | 49 | % | 21 | % | ||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||||||||
(in millions, except ratios) | Loans and Lending-related Commitments | Derivative Receivables | Credit exposure | % Investment- grade | % Drawn(c) | |||||||||||||||||||||||||||
Exploration & Production (“E&P”) and Oil field Services | $ | 17,631 | $ | 5,452 | $ | 23,083 | 39 | % | 26 | % | ||||||||||||||||||||||
Other Oil & Gas(a) | 18,941 | 582 | 19,523 | 60 | 26 | |||||||||||||||||||||||||||
Total Oil & Gas | $ | 36,572 | $ | 6,034 | $ | 42,606 | 49 | % | 26 | % |
(a)Other Oil & Gas includes Integrated Oil & Gas companies, Midstream/Oil Pipeline companies and refineries.
(b)Oil & Gas exposure is approximately 48% secured, over half of which is reserve-based lending to the Exploration & Production sub-sector; unsecured exposure is approximately 57% investment-grade.
(c)Represents drawn exposure as a percent of credit exposure.
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Loans
In its wholesale businesses, the Firm provides loans to a variety of clients, ranging from large corporate and institutional clients to high-net-worth individuals. Refer to Note 11 for a further discussion on loans, including information about delinquencies, loan modifications and other credit quality indicators.
The following table presents the change in the nonaccrual loan portfolio for the six months ended June 30, 2022 and 2021. Since June 30, 2021, nonaccrual loan exposure decreased $924 million driven by net portfolio activity, largely in Real Estate and Oil & Gas, partially offset by client-specific downgrades, including downgrades to certain Russia and Russia-associated clients in the first quarter of 2022, some of which paid down their loans in the second quarter of 2022.
Wholesale nonaccrual loan activity | |||||||||||
Six month ended June 30, 2022, (in millions) | 2022 | 2021 | |||||||||
Beginning balance | $ | 2,445 | $ | 4,106 | |||||||
Additions | 1,239 | 1,654 | |||||||||
Reductions: | |||||||||||
Paydowns and other | 776 | 1,367 | |||||||||
Gross charge-offs | 83 | 129 | |||||||||
Returned to performing status | 326 | 605 | |||||||||
Sales | 9 | 245 | |||||||||
Total reductions | 1,194 | 2,346 | |||||||||
Net changes | 45 | (692) | |||||||||
Ending balance | $ | 2,490 | $ | 3,414 |
The following table presents net charge-offs/recoveries, which are defined as gross charge-offs less recoveries, for the three and six months ended June 30, 2022 and 2021. The amounts in the table below do not include gains or losses from sales of nonaccrual loans recognized in noninterest revenue.
Wholesale net charge-offs/(recoveries) | ||||||||||||||
(in millions, except ratios) | Three months ended June 30, | Six months ended June 30, | ||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||
Loans | ||||||||||||||
Average loans retained | $ | 577,850 | $ | 519,902 | $ | 568,673 | $ | 517,892 | ||||||
Gross charge-offs | 71 | 47 | 123 | 135 | ||||||||||
Gross recoveries collected | (21) | (37) | (43) | (72) | ||||||||||
Net charge-offs/(recoveries) | 50 | 10 | 80 | 63 | ||||||||||
Net charge-off/(recovery) rate | 0.03 | % | 0.01 | % | 0.03 | % | 0.02 | % |
68
Lending-related commitments
The Firm uses lending-related financial instruments, such as commitments (including revolving credit facilities) and guarantees, to address the financing needs of its clients. The contractual amounts of these financial instruments represent the maximum possible credit risk should the clients draw down on these commitments or when the Firm fulfills its obligations under these guarantees, and the clients subsequently fail to perform according to the terms of these contracts. Most of these commitments and guarantees have historically been refinanced, extended, cancelled, or expired without being drawn upon or a default occurring. As a result, the Firm does not believe that the total contractual amount of these wholesale lending-related commitments is representative of the Firm’s expected future credit exposure or funding requirements. Refer to Note 22 for further information on wholesale lending-related commitments.
Receivables from customers
Receivables from customers reflect held-for-investment margin loans to brokerage clients in CIB, CCB and AWM that are collateralized by assets maintained in the clients’ brokerage accounts (e.g., cash on deposit, and liquid and readily marketable debt or equity securities). Because of this collateralization, no allowance for credit losses is generally 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.
Derivative contracts
Derivatives enable clients and counterparties to manage risk including credit risk and risks arising from fluctuations in interest rates, foreign exchange and equities and commodities prices. The Firm makes markets in derivatives in order to meet these needs and uses derivatives to manage certain risks associated with net open risk positions from its market-making activities, including the counterparty credit risk arising from derivative receivables. The Firm also uses derivative instruments to manage its own credit risk and other market risk exposure. The nature of the counterparty and the settlement mechanism of the derivative affect the credit risk to which the Firm is exposed. For OTC derivatives the Firm is exposed to the credit risk of the derivative counterparty. For exchange-traded derivatives (“ETD”), such as futures and options, and cleared over-the-counter (“OTC-cleared”) derivatives, the Firm can also be exposed to the credit risk of the relevant central counterparty clearing house (“CCP”). Where possible, the Firm seeks to mitigate its credit risk exposures arising from derivative contracts through the use of legally enforceable master netting arrangements and collateral agreements.
The percentage of the Firm’s over-the-counter derivative transactions subject to collateral agreements — excluding foreign exchange spot trades, which are not typically covered by collateral agreements due to their short maturity, and centrally cleared trades that are settled daily — was approximately 87% and 88% at June 30, 2022, and December 31, 2021, respectively. Refer to Note 4 for additional information on the Firm’s use of collateral agreements and for a further discussion of derivative contracts, counterparties and settlement types.
The fair value of derivative receivables reported on the Consolidated balance sheets were $81.3 billion and $57.1 billion at June 30, 2022, and December 31, 2021, respectively. The increase was driven by higher foreign exchange and commodity derivative receivables as a result of market movements. Derivative receivables represent the fair value of the derivative contracts after giving effect to legally enforceable master netting agreements and the related cash collateral held by the Firm.
In addition, the Firm held liquid securities and other cash collateral that may be used as security when the fair value of the client’s exposure is in the Firm’s favor. For these purposes, the definition of liquid securities is consistent with the definition of high quality liquid assets as defined in the LCR rule.
In management’s view, the appropriate measure of current credit risk should also take into consideration other collateral, which generally represents securities that do not qualify as high quality liquid assets under the LCR rule.
The benefits of these additional collateral amounts for each counterparty are subject to a legally enforceable master netting agreement and limited to the net amount of the derivative receivables for each counterparty.
The Firm also holds additional collateral (primarily cash, G7 government securities, other liquid government agency and guaranteed securities, and corporate debt and equity securities) delivered by clients at the initiation of transactions, as well as collateral related to contracts that have a non-daily call frequency and collateral that the Firm has agreed to return but has not yet settled as of the reporting date. Although this collateral does not reduce the balances and is not included in the tables below, it is available as security against potential exposure that could arise should the fair value of the client’s derivative contracts move in the Firm’s favor. Refer to Note 4 for additional information on the Firm’s use of collateral agreements.
69
The following tables summarize the net derivative receivables and the internal ratings profile for the periods presented.
Derivative receivables | ||||||||
(in millions) | June 30, 2022 | December 31, 2021 | ||||||
Total, net of cash collateral | $ | 81,317 | $ | 57,081 | ||||
Liquid securities and other cash collateral held against derivative receivables | (19,801) | (10,102) | ||||||
Total, net of liquid securities and other cash collateral | $ | 61,516 | $ | 46,979 | ||||
Other collateral held against derivative receivables | (1,692) | (1,544) | ||||||
Total, net of collateral | $ | 59,824 | $ | 45,435 |
Ratings profile of derivative receivables | ||||||||||||||||||||
June 30, 2022 | December 31, 2021 | |||||||||||||||||||
(in millions, except ratios) | Exposure net of collateral | % of exposure net of collateral | Exposure net of collateral | % of exposure net of collateral | ||||||||||||||||
Investment-grade | $ | 43,139 | 72 | % | $ | 30,278 | 67 | % | ||||||||||||
Noninvestment-grade | 16,685 | 28 | 15,157 | (a) | 33 | |||||||||||||||
Total | $ | 59,824 | 100 | % | $ | 45,435 | 100 | % |
Credit portfolio management activities
The Firm uses credit derivatives for two primary purposes: first, in its capacity as a market-maker, and second, as an end-user, to manage the Firm’s own credit risk associated with traditional lending activities (loans and lending-related commitments) and derivatives counterparty exposure in the Firm’s wholesale businesses. In addition, the Firm obtains credit protection against certain loans in the retained wholesale portfolio through the issuance of credit-related notes. Information on credit portfolio management activities is provided in the table below.
Credit derivatives and credit-related notes used in credit portfolio management activities | ||||||||||||||
Notional amount of protection purchased and sold(a) | ||||||||||||||
(in millions) | June 30, 2022 | December 31, 2021 | ||||||||||||
Credit derivatives and credit-related notes used to manage: | ||||||||||||||
Loans and lending-related commitments | $ | 4,590 | $ | 4,138 | ||||||||||
Derivative receivables | 10,789 | 14,573 | (b) | |||||||||||
Credit derivatives and credit-related notes used in credit portfolio management activities | $ | 15,379 | $ | 18,711 |
(a)Amounts are presented net, considering the Firm’s net protection purchased or sold with respect to each underlying reference entity or index.
(b)Prior-period amount has been revised to conform with the current presentation.
Refer to Credit derivatives in Note 4 of this Form 10-Q and Note 5 of JPMorgan Chase’s 2021 Form 10-K for further information on credit derivatives and derivatives used in credit portfolio management activities.
70
ALLOWANCE FOR CREDIT LOSSES |
The Firm’s allowance for credit losses represents management's estimate of expected credit losses over the remaining expected life of the Firm's financial assets measured at amortized cost and certain off-balance sheet lending-related commitments. The allowance for credit losses comprises:
•the allowance for loan losses, which covers the Firm’s retained loan portfolios (scored and risk-rated) and is presented separately on the Consolidated balance sheets,
•the allowance for lending-related commitments, which is presented on the Consolidated balance sheets in accounts payable and other liabilities, and
•the allowance for credit losses on investment securities, which is reflected in investment securities on the Consolidated balance sheets.
Discussion of changes in the allowance
The allowance for credit losses as of June 30, 2022 was $20.0 billion, an increase of $1.3 billion from December 31, 2021, consisting of: $1.0 billion in wholesale and $311 million in consumer.
The change in allowance reflects the increased weight placed on the adverse scenarios in the current year, due to the ongoing effects associated with higher inflation, changes in monetary policy, and geopolitical risks, including the war in Ukraine, and a modest deterioration in the Firm's macroeconomic forecast. The increase in the allowance was also driven by loan growth in Card and CB in the second quarter of 2022, and client-specific Russia and Russia-associated downgrades in CIB and AWM in the first quarter of 2022.
The Firm's allowance for credit losses is estimated using a weighted average of five internally developed macroeconomic scenarios. The adverse scenarios incorporate more punitive macroeconomic factors than the central case assumptions provided in the table below, resulting in weighted average U.S. unemployment rates above 4% through the fourth quarter of 2023, and a 1.1% lower U.S. real GDP level exiting the fourth quarter of 2023.
The Firm’s central case assumptions reflected U.S. unemployment rates and U.S. real GDP as follows:
Assumptions at June 30, 2022 | |||||||||||
4Q22 | 2Q23 | 4Q23 | |||||||||
U.S. unemployment rate(a) | 3.6 | % | 3.6 | % | 3.7 | % | |||||
YoY growth in U.S. real GDP(b) | 1.3 | % | 1.7 | % | 1.2 | % | |||||
Assumptions at December 31, 2021 | |||||||||||
2Q22 | 4Q22 | 2Q23 | |||||||||
U.S. unemployment rate(a) | 4.2 | % | 4.0 | % | 3.9 | % | |||||
YoY growth in U.S. real GDP(b) | 3.1 | % | 2.8 | % | 2.1 | % |
(a)Reflects quarterly average of forecasted U.S. unemployment rate.
(b)As of June 30, 2022, the year over year growth in U.S. real GDP in the forecast horizon of the central scenario is calculated as the percent change in U.S. real GDP levels from the prior year.
Subsequent changes to this forecast and related estimates will be reflected in the provision for credit losses in future periods.
Refer to Note 13 and Note 10 of JPMorgan Chase's 2021 Form 10-K for a description of the policies, methodologies and judgments used to determine the Firm’s allowances for credit losses on loans, lending-related commitments, and investment securities.
Refer to Consumer Credit Portfolio on pages 57-61, Wholesale Credit Portfolio on pages 62-70 and Note 11 for additional information on the consumer and wholesale credit portfolios.
Refer to Critical Accounting Estimates Used by the Firm on pages 83-85 for further information on the allowance for credit losses and related management judgments.
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Allowance for credit losses and related information | |||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Six months ended June 30, | Consumer, excluding credit card | Credit card | Wholesale | Total | Consumer, excluding credit card | Credit card | Wholesale | Total | |||||||||||||||||||||
(in millions, except ratios) | |||||||||||||||||||||||||||||
Allowance for loan losses | |||||||||||||||||||||||||||||
Beginning balance at January 1, | $ | 1,765 | $ | 10,250 | $ | 4,371 | $ | 16,386 | $ | 3,636 | $ | 17,800 | $ | 6,892 | $ | 28,328 | |||||||||||||
Gross charge-offs | 384 | 1,505 | 123 | 2,012 | 308 | 2,213 | 135 | 2,656 | |||||||||||||||||||||
Gross recoveries collected | (311) | (419) | (43) | (773) | (318) | (475) | (72) | (865) | |||||||||||||||||||||
Net charge-offs/(recoveries) | 73 | 1,086 | 80 | 1,239 | (10) | 1,738 | 63 | 1,791 | |||||||||||||||||||||
Provision for loan losses | 237 | 1,236 | 1,125 | 2,598 | (1,746) | (3,562) | (1,730) | (7,038) | |||||||||||||||||||||
Other | — | 5 | 5 | (2) | — | 3 | 1 | ||||||||||||||||||||||
Ending balance at June 30, | $ | 1,929 | $ | 10,400 | $ | 5,421 | $ | 17,750 | $ | 1,898 | $ | 12,500 | $ | 5,102 | $ | 19,500 | |||||||||||||
Allowance for lending-related commitments | |||||||||||||||||||||||||||||
Beginning balance at January 1, | $ | 113 | $ | — | $ | 2,148 | $ | 2,261 | $ | 187 | $ | — | $ | 2,222 | $ | 2,409 | |||||||||||||
Provision for lending-related commitments | (2) | — | (37) | (39) | (46) | — | 634 | 588 | |||||||||||||||||||||
Other | (1) | — | 1 | — | 1 | — | — | 1 | |||||||||||||||||||||
Ending balance at June 30, | $ | 110 | $ | — | $ | 2,112 | $ | 2,222 | $ | 142 | $ | — | $ | 2,856 | $ | 2,998 | |||||||||||||
Impairment methodology | |||||||||||||||||||||||||||||
Asset-specific(a) | $ | (676) | $ | 227 | $ | 332 | $ | (117) | $ | (557) | $ | 443 | $ | 488 | $ | 374 | |||||||||||||
Portfolio-based | 2,605 | 10,173 | 5,089 | 17,867 | 2,455 | 12,057 | 4,614 | 19,126 | |||||||||||||||||||||
Total allowance for loan losses | $ | 1,929 | $ | 10,400 | $ | 5,421 | $ | 17,750 | $ | 1,898 | $ | 12,500 | $ | 5,102 | $ | 19,500 | |||||||||||||
Impairment methodology | |||||||||||||||||||||||||||||
Asset-specific | $ | — | $ | — | $ | 78 | $ | 78 | $ | — | $ | — | $ | 150 | $ | 150 | |||||||||||||
Portfolio-based | 110 | — | 2,034 | 2,144 | 142 | — | 2,706 | 2,848 | |||||||||||||||||||||
Total allowance for lending-related commitments | $ | 110 | $ | — | $ | 2,112 | $ | 2,222 | $ | 142 | $ | — | $ | 2,856 | $ | 2,998 | |||||||||||||
Total allowance for investment securities | NA | NA | NA | $ | 47 | NA | NA | NA | $ | 87 | |||||||||||||||||||
Total allowance for credit losses | $ | 2,039 | $ | 10,400 | $ | 7,533 | $ | 20,019 | $ | 2,040 | $ | 12,500 | $ | 7,958 | $ | 22,585 | |||||||||||||
Memo: | |||||||||||||||||||||||||||||
Retained loans, end of period | $ | 302,631 | $ | 165,494 | $ | 584,265 | $ | 1,052,390 | $ | 297,731 | $ | 141,079 | $ | 524,855 | $ | 963,665 | |||||||||||||
Retained loans, average | 297,566 | 153,941 | 568,673 | 1,020,180 | 300,430 | 134,796 | 517,892 | 953,118 | |||||||||||||||||||||
Credit ratios | |||||||||||||||||||||||||||||
Allowance for loan losses to retained loans | 0.64 | % | 6.28 | % | 0.93 | % | 1.69 | % | 0.64 | % | 8.86 | % | 0.97 | % | 2.02 | % | |||||||||||||
Allowance for loan losses to retained nonaccrual loans(b) | 46 | NM | 260 | 283 | 37 | NM | 189 | 247 | |||||||||||||||||||||
Allowance for loan losses to retained nonaccrual loans excluding credit card | 46 | NM | 260 | 117 | 37 | NM | 189 | 89 | |||||||||||||||||||||
Net charge-off/(recovery) rates | 0.05 | 1.42 | 0.03 | 0.24 | (0.01) | 2.60 | 0.02 | 0.38 |
(a)Includes collateral dependent loans, including those considered TDRs and those for which foreclosure is deemed probable, modified PCD loans, and non-collateral dependent loans that have been modified or are reasonably expected to be modified in a TDR. Also includes risk-rated loans that have been placed on nonaccrual status for the wholesale portfolio segment. The asset-specific allowance for credit card loans modified, or reasonably expected to be modified, in a TDR is calculated based on the loans’ original contractual interest rates and does not consider any incremental penalty rates.
(b)The Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance.
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Allocation of allowance for loan losses
The table below presents a breakdown of the allowance for loan losses by loan class. Refer to Note 11 for further information on loan classes.
June 30, 2022 | December 31, 2021 | ||||||||||||||||
(in millions, except ratios) | Allowance for loan losses | Percent of retained loans to total retained loans | Allowance for loan losses | Percent of retained loans to total retained loans | |||||||||||||
Residential real estate | $ | 974 | 23 | % | $ | 817 | 22 | % | |||||||||
Auto and other | 955 | 6 | 948 | 7 | |||||||||||||
Consumer, excluding credit card | 1,929 | 29 | 1,765 | 29 | |||||||||||||
Credit card | 10,400 | 16 | 10,250 | 15 | |||||||||||||
Total consumer | 12,329 | 44 | 12,015 | 45 | |||||||||||||
Secured by real estate | 1,531 | 12 | 1,495 | 12 | |||||||||||||
Commercial and industrial | 2,691 | 15 | 1,881 | 14 | |||||||||||||
Other | 1,199 | 29 | 995 | 29 | |||||||||||||
Total wholesale | 5,421 | 56 | 4,371 | 55 | |||||||||||||
Total | $ | 17,750 | 100 | % | $ | 16,386 | 100 | % |
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INVESTMENT PORTFOLIO RISK MANAGEMENT |
Investment portfolio risk is the risk associated with the loss of principal or a reduction in expected returns on investments arising from the investment securities portfolio or from principal investments. The investment securities portfolio is predominantly held by Treasury and CIO in connection with the Firm’s balance sheet and asset-liability management objectives. Principal investments are predominantly privately-held financial instruments and are managed in the LOBs and Corporate. Investments are typically intended to be held over extended periods and, accordingly, the Firm has no expectation for short-term realized gains with respect to these investments.
Investment securities risk
Investment securities risk includes the exposure associated with a default in the payment of principal and interest. This risk is mitigated given that the investment securities portfolio held by Treasury and CIO predominantly consists of high-quality securities. At June 30, 2022, the Treasury and CIO investment securities portfolio, net of allowance for credit losses, was $661.9 billion, and the average credit rating of the securities comprising the portfolio was AA+ (based upon external ratings where available, and where not available, based primarily upon internal risk ratings). Refer to Corporate segment results on pages 41-42 and Note 9 for further information on the investment securities portfolio and internal risk ratings. Refer to Liquidity Risk Management on pages 50-54 for further information on related liquidity risk. Refer to Market Risk Management on pages 75-79 for further information on the market risk inherent in the portfolio.
Principal investment risk
Principal investments are typically privately-held financial instruments representing ownership interests or other forms of junior capital. In general, principal investments include tax-oriented investments and investments made to enhance or accelerate the Firm’s business strategies and exclude those that are consolidated on the Firm's balance sheets. These investments are made by dedicated investing businesses or as part of a broader business strategy. The Firm’s principal investments are managed by the LOBs and Corporate and are reflected within their respective financial results. The Firm’s investments will continue to evolve in line with its strategies, including the Firm’s commitment to support underserved communities and minority-owned businesses.
The table below presents the aggregate carrying values of the principal investment portfolios as June 30, 2022 and December 31, 2021.
(in billions) | June 30, 2022 | December 31, 2021 | |||||||||
Tax-oriented investments, primarily in alternative energy and affordable housing | $ | 23.7 | $ | 23.2 | |||||||
Private equity, various debt and equity instruments, and real assets | 9.6 | (a) | 7.3 | ||||||||
Total carrying value | $ | 33.3 | $ | 30.5 |
(a)Includes the Firm's 40% ownership stake in C6 Bank.
Refer to page 132 of JPMorgan Chase’s 2021 Form 10-K for a discussion of the Firm’s Investment Portfolio Risk Management governance and oversight.
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MARKET RISK MANAGEMENT |
Market risk is the risk associated with the effect of changes in market factors such as interest and foreign exchange rates, equity and commodity prices, credit spreads or implied volatilities, on the value of assets and liabilities held for both the short and long term. Refer to Market Risk Management on pages 133-140 of JPMorgan Chase’s 2021 Form 10-K for a discussion of the Firm’s Market Risk Management organization, market risk measurement, risk monitoring and control, and predominant business activities that give rise to market risk.
Models used to measure market risk are inherently imprecise and are limited in their ability to measure certain risks or to predict losses. This imprecision may be heightened when sudden or severe shifts in market conditions occur. For additional discussion on model uncertainty refer to Estimations and Model Risk Management on page 149 of JPMorgan Chase’s 2021 Form 10-K.
Market Risk Management periodically reviews the Firm’s existing market risk measures to identify opportunities for enhancement, and to the extent appropriate, will calibrate those measures accordingly over time.
Value-at-risk
JPMorgan Chase utilizes value-at-risk (“VaR”), a statistical risk measure, to estimate the potential loss from adverse market moves in the current market environment. The Firm has a single VaR framework used as a basis for calculating Risk Management VaR and Regulatory VaR.
The Firm’s Risk Management VaR is calculated assuming a one-day holding period and an expected tail-loss methodology which approximates a 95% confidence level. For risk management purposes, the Firm believes this methodology provides a daily measure of risk that is closely aligned to risk management decisions made by the LOBs and Corporate and, along with other market risk measures, provides the appropriate information needed to respond to risk events. The Firm calculates separately a daily aggregated VaR in accordance with regulatory rules (“Regulatory VaR”), which is used to derive the Firm’s regulatory VaR-based capital requirements under Basel III.
The Firm’s VaR model calculations are periodically evaluated and enhanced in response to changes in the composition of the Firm’s portfolios, changes in market conditions, improvements in the Firm’s modeling techniques and measurements, and other factors. Such changes may affect historical comparisons of VaR results. Refer to Estimations and Model Risk Management on page 149 of JPMorgan Chase’s 2021 Form 10-K for information regarding model reviews and approvals.
Refer to page 135 of JPMorgan Chase’s 2021 Form 10-K for further information regarding VaR, including the inherent limitations, and the key differences between Risk Management VaR and Regulatory VaR. Refer to JPMorgan Chase’s Basel III Pillar 3 Regulatory Capital Disclosures reports, which are available on the Firm’s website, for additional information on Regulatory VaR and the other components of market risk regulatory capital for the Firm (e.g., VaR-based measure, stressed VaR-based measure and the respective backtesting). Refer to Other risk measures on pages 138-140 of JPMorgan Chase’s 2021 Form 10-K for further information regarding nonstatistical market risk measures used by the Firm.
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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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three months ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Avg. | Min | Max | Avg. | Min | Max | Avg. | Min | Max | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CIB trading VaR by risk type | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed income | $ | 60 | $ | 48 | $ | 79 | $ | 47 | $ | 33 | $ | 64 | $ | 39 | $ | 33 | $ | 44 | |||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange | 8 | 4 | 13 | 4 | 3 | 7 | 6 | 4 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equities | 11 | 7 | 15 | 12 | 9 | 18 | 18 | 11 | 23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodities and other | 14 | 12 | 17 | 15 | 10 | 23 | 22 | 12 | 35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diversification benefit to CIB trading VaR | (43) | (a) | NM | (e) | NM | (e) | (33) | (a) | NM | (e) | NM | (e) | (44) | (a) | NM | (e) | NM | (e) | |||||||||||||||||||||||||||||||||||||||||||||||
CIB trading VaR | 50 | 38 | 66 | 45 | 34 | 59 | 41 | 34 | 51 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Portfolio VaR | 17 | (b)(c) | 6 | (b) | 31 | (b)(c) | 29 | (b)(c) | 4 | (b) | 235 | (b)(c) | 6 | 4 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Diversification benefit to CIB VaR | (15) | (a) | NM | (e) | NM | (e) | (10) | (a) | NM | (e) | NM | (e) | (6) | (a) | NM | (e) | NM | (e) | |||||||||||||||||||||||||||||||||||||||||||||||
CIB VaR | 52 | 38 | 70 | 64 | 35 | 240 | 41 | 34 | 52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CCB VaR | 5 | 4 | 6 | 4 | 2 | 5 | 5 | 4 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate and other LOB VaR | 10 | (d) | 9 | 11 | 13 | 10 | 16 | 20 | (d) | 18 | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diversification benefit to other VaR | (3) | (a) | NM | (e) | NM | (e) | (4) | (a) | NM | (e) | NM | (e) | (5) | (a) | NM | (e) | NM | (e) | |||||||||||||||||||||||||||||||||||||||||||||||
Other VaR | 12 | 10 | 14 | 13 | 10 | 17 | 20 | 19 | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diversification benefit to CIB and other VaR | (10) | (a) | NM | (e) | NM | (e) | (14) | (a) | NM | (e) | NM | (e) | (18) | (a) | NM | (e) | NM | (e) | |||||||||||||||||||||||||||||||||||||||||||||||
Total VaR | $ | 54 | $ | 41 | $ | 71 | $ | 63 | $ | 34 | $ | 242 | $ | 43 | $ | 35 | $ | 52 |
(a)Diversification benefit represents the difference between the portfolio VaR and the sum of its individual components. This reflects the non-additive nature of VaR due to imperfect correlation across LOBs, Corporate, and risk types.
(b)In the first quarter of 2022, in line with the Firm's internal model governance, the credit risk component of CVA related to certain counterparties was removed from Credit Portfolio VaR due to the widening of the credit spreads for those counterparties to elevated levels. The related hedges were also removed to maintain consistency. This exposure is now reflected in other sensitivity-based measures.
(c)During the period ended March 31, 2022, the effects of nickel price increases and the associated volatility in the nickel market resulted in elevated average and maximum Credit Portfolio VaR. During the period ended June 30, 2022, average and maximum Credit Portfolio VaR decreased driven by a reduction in nickel-related exposure, although average and maximum Credit Portfolio VaR remained elevated when compared to the prior year period.
(d)The decrease in Corporate and other LOB VaR was driven by lower market values for a legacy private equity position which is publicly traded.
(e)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.
Quarter over quarter results
Average total VaR decreased by $9 million for the three months ended June 30, 2022 when compared with March 31, 2022 due to decreases in Credit Portfolio VaR predominantly driven by changes in nickel-related counterparty exposure, largely offset by increased market volatility impacting Fixed income.
Year over year results
Average total VaR increased by $11 million for the three months ended June 30, 2022, compared with the same period in the prior year. This increase was largely driven by market volatility impacting Fixed income as well as increases in Credit Portfolio VaR due to the effects of nickel price increases and the associated volatility in the nickel market observed in March 2022.
The following graph presents daily Risk Management VaR for the five trailing quarters. The movement in VaR in March 2022 was driven by changes in nickel-related counterparty exposure in the Firm's Credit portfolio.
Daily Risk Management VaR

Second Quarter 2021 | Third Quarter 2021 | Fourth Quarter 2021 | First Quarter 2022 | Second Quarter 2022 |
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VaR backtesting
The Firm performs daily VaR model backtesting, which compares the daily Risk Management VaR results with the daily gains and losses that are utilized for VaR backtesting purposes. The gains and losses depicted in the chart below do not reflect the Firm’s reported revenue as they exclude select components of total net revenue, such as those associated with the execution of new transactions (i.e., intraday client-driven trading and intraday risk management activities), fees, commissions, certain valuation adjustments and net interest income. These excluded components of total net revenue may more than offset the backtesting gain or loss on a particular day. The definition of backtesting gains and losses above is consistent with the requirements for backtesting under Basel III capital rules.
A backtesting exception occurs when the daily backtesting loss exceeds the daily Risk Management VaR for the prior day. Under the Firm’s Risk Management VaR methodology, assuming current changes in market values are consistent with the historical changes used in the simulation, the Firm would expect to incur VaR backtesting exceptions on average five times every 100 trading days. The number of VaR backtesting exceptions observed can differ from the statistically expected number of backtesting exceptions if the current level of market volatility is materially different from the level of market volatility during the 12 months of historical data used in the VaR calculation.
For the 12 months ended June 30, 2022, the Firm posted backtesting gains on 148 of the 261 days, and observed 22 VaR backtesting exceptions. For the three months ended June 30, 2022, the Firm posted backtesting gains on 37 of the 65 days, and observed three VaR backtesting exceptions.
The following chart presents the distribution of Firmwide daily backtesting gains and losses for the trailing 12 months and three months ended June 30, 2022. The daily backtesting losses are displayed as a percentage of the corresponding daily Risk Management VaR. The count of days with backtesting losses are shown in aggregate, in fifty percentage point intervals. Backtesting exceptions are displayed within the intervals that are greater than one hundred percent. The results in the chart below differ from the results of backtesting disclosed in the Market Risk section of the Firm’s Basel III Pillar 3 Regulatory Capital Disclosures reports, which are based on Regulatory VaR applied to the Firm’s covered positions.
Distribution of Daily Backtesting Gains and Losses

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Earnings-at-risk
The effect of interest rate exposure on the Firm’s reported net income is important as interest rate risk represents one of the Firm’s significant market risks. Interest rate risk arises not only from trading activities but also from the Firm’s traditional banking activities, which include extension of loans and credit facilities, taking deposits, issuing debt and the investment securities portfolio. Refer to the table on page 134 of JPMorgan Chase’s 2021 Form 10-K for a summary by LOB and Corporate, identifying positions included in earnings-at-risk.
One way the Firm evaluates its structural interest rate risk is through earnings-at-risk. Earnings-at-risk estimates the Firm’s interest rate exposure for a given interest rate scenario. It is presented as a sensitivity to a baseline, which includes net interest income and certain interest rate sensitive fees. The baseline uses market interest rates and in the case of deposits, pricing assumptions. The Firm conducts simulations of changes to this baseline for interest rate-sensitive assets and liabilities denominated in U.S. dollars and other currencies (“non-U.S. dollar” currencies). These simulations primarily include retained loans, deposits, deposits with banks, investment securities, long-term debt and any related interest rate hedges, and funds transfer pricing of other positions in risk management VaR and other sensitivity-based measures as described on page 134 of JPMorgan Chase’s 2021 Form 10-K.
Earnings-at-risk scenarios estimate the potential change to a net interest income baseline, over the following 12 months utilizing multiple assumptions. These scenarios include a parallel shift involving changes to both short-term and long-term rates by an equal amount; a steeper yield curve involving holding short-term rates constant and increasing long-term rates; and a flatter yield curve involving increasing short-term rates and holding long-term rates constant or holding short-term rates constant and decreasing long-term rates. These scenarios consider many different factors, including:
•The impact on exposures as a result of instantaneous changes in interest rates from baseline rates.
•Forecasted balance sheet, as well as modeled prepayment and reinvestment behavior, but excluding assumptions about actions that could be taken by the Firm or its clients and customers in response to any such instantaneous rate changes. Mortgage prepayment assumptions are based on the interest rates used in the scenarios compared with underlying contractual rates, the time since origination, and other factors which are updated periodically based on historical experience. Deposit forecasts used in the baseline and scenarios include certain assumptions relating to the reversal of Quantitative Easing.
•The pricing sensitivity of deposits, known as deposit betas, represent the amount by which deposit rates paid could change upon a given change in market interest rates. The deposit rates paid in these scenarios differ from actual deposit rates paid, due to repricing lags and other factors.
The Firm’s earnings-at-risk scenarios are periodically evaluated and enhanced in response to changes in the composition of the Firm’s balance sheet, changes in market conditions, improvements in the Firm’s simulation and other factors. While a relevant measure of the Firm’s interest rate exposure, the earnings-at-risk analysis does not represent a forecast of the Firm’s net interest income (Refer to Outlook on page 8 for additional information).
The Firm’s U.S. dollar sensitivities are presented in the table below.
(in billions) | June 30, 2022 | December 31, 2021 | ||||||||||||
Parallel shift: | ||||||||||||||
+100 bps shift in rates | $ | (1.4) | $ | 5.0 | ||||||||||
-100 bps shift in rates | (1.0) | NM | (a) | |||||||||||
Steeper yield curve: | ||||||||||||||
+100 bps shift in long-term rates | 0.5 | 1.8 | ||||||||||||
-100 bps shift in short-term rates | (0.4) | NM | (a) | |||||||||||
Flatter yield curve: | ||||||||||||||
+100 bps shift in short-term rates | (1.8) | 3.2 | ||||||||||||
-100 bps shift in long-term rates | (0.6) | NM | (a) |
(a)Given the level of market interest rates, these scenarios were not considered to be meaningful as of December 31, 2021.
The change in the Firm’s U.S. dollar sensitivities as of June 30, 2022 compared to December 31, 2021 reflected updates to the Firm’s baseline for higher rates as well as the impact of changes in the Firm’s balance sheet.
As of June 30, 2022, the Firm’s sensitivity to the +100 basis points parallel and short-term shift in rates is primarily the result of a greater impact from liabilities repricing compared to the impact of assets repricing, while a +100 basis points shift in long-term rates and the -100 basis points shift in rates are primarily the result of a greater impact from assets repricing compared to the impact of liabilities repricing.
The Firm’s non-U.S. dollar sensitivities are presented in the table below.
(in billions) | June 30, 2022 | December 31, 2021 | ||||||||||||
Parallel shift: | ||||||||||||||
+100 bps shift in rates | $ | 0.9 | $ | 0.8 | ||||||||||
-100 bps shift in rates | (0.8) | NM | (a) | |||||||||||
Steeper yield curve: | ||||||||||||||
-100 bps shift in short-term rates | (0.8) | NM | (a) | |||||||||||
Flatter yield curve: | ||||||||||||||
+100 bps shift in short-term rates | 0.8 | 0.8 |
(a)Given the level of market interest rates, these scenarios were not considered to be meaningful as of December 31, 2021.
The results of the non-U.S. dollar interest rate scenario involving a steeper/flatter yield curve with long-term rates increasing/decreasing by 100 basis points and short-term rates staying at current levels were not material to the Firm’s earnings-at-risk at June 30, 2022 and December 31, 2021.
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Other sensitivity-based measures
The Firm quantifies the market risk of certain debt and equity and credit and funding-related exposures by assessing the potential impact on net revenue, other comprehensive income (“OCI”) and noninterest expense due to changes in relevant market variables. Refer to the predominant business activities that give rise to market risk on page 140 of JPMorgan Chase’s 2021 Form 10-K for additional information on the positions captured in other sensitivity-based measures.
The table below represents the potential impact to net revenue, OCI or noninterest expense for market risk-sensitive instruments that are not included in VaR or earnings-at-risk. Where appropriate, instruments used for hedging purposes are reported net of the positions being hedged. The sensitivities disclosed in the table below may not be representative of the actual gain or loss that would have been realized at June 30, 2022 and December 31, 2021, as the movement in market parameters across maturities may vary and are not intended to imply management’s expectation of future changes in these sensitivities.
Gain/(loss) (in millions) | June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||
Activity | Description | Sensitivity measure | ||||||||||||||||||||||||
Debt and equity(a) | ||||||||||||||||||||||||||
Asset Management activities | Consists of seed capital and related hedges; fund co-investments(c); and certain deferred compensation and related hedges(d) | 10% decline in market value | $ | (50) | $ | (69) | ||||||||||||||||||||
Other debt and equity | Consists of certain real estate-related fair value option elected loans, privately held equity and other investments held at fair value(c) | 10% decline in market value | (1,098) | (971) | ||||||||||||||||||||||
Credit- and funding-related exposures | ||||||||||||||||||||||||||
Non-USD LTD cross-currency basis | Represents the basis risk on derivatives used to hedge the foreign exchange risk on the non-USD LTD(e) | 1 basis point parallel tightening of cross currency basis | (14) | (16) | ||||||||||||||||||||||
Non-USD LTD hedges foreign currency (“FX”) exposure | Primarily represents the foreign exchange revaluation on the fair value of the derivative hedges(e) | 10% depreciation of currency | (5) | 15 | ||||||||||||||||||||||
Derivatives – funding spread risk | Impact of changes in the spread related to derivatives FVA(c) | 1 basis point parallel increase in spread | (5) | (7) | ||||||||||||||||||||||
CVA - counterparty credit risk(b) | Credit risk component of CVA and associated hedges | 10% credit spread widening | (1) | N/A | ||||||||||||||||||||||
Fair value option elected liabilities – funding spread risk | Impact of changes in the spread related to fair value option elected liabilities DVA(e) | 1 basis point parallel increase in spread | 44 | 41 | ||||||||||||||||||||||
Fair value option elected liabilities – interest rate sensitivity | Interest rate sensitivity on fair value option elected liabilities resulting from a change in the Firm’s own credit spread(e) | 1 basis point parallel increase in spread | — | (3) | ||||||||||||||||||||||
Interest rate sensitivity related to risk management of changes in the Firm’s own credit spread on the fair value option elected liabilities noted above(c) | 1 basis point parallel increase in spread | — | 3 |
(a)Excludes equity securities without readily determinable fair values that are measured under the measurement alternative. Refer to Note 2 for additional information.
(b)In the first quarter of 2022, in line with the Firm's internal model governance, the credit risk component of CVA related to certain counterparties was removed from Credit Portfolio VaR due to the widening of the credit spreads for those counterparties to elevated levels. The related hedges were also removed to maintain consistency. This exposure is now reflected in other sensitivity-based measures.
(c)Impact recognized through net revenue.
(d)Impact recognized through noninterest expense.
(e)Impact recognized through OCI.
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COUNTRY RISK MANAGEMENT |
The Firm, through its LOBs and Corporate, may be exposed to country risk resulting from financial, economic, political or other significant developments which adversely affect the value of the Firm’s exposures related to a particular country or set of countries. The Country Risk Management group actively monitors the various portfolios which may be impacted by these developments and measures the extent to which the Firm’s exposures are diversified given the Firm’s strategy and risk tolerance relative to a country.
Refer to pages 141-142 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of the Firm’s country risk management.
Sources and measurement
The Firm is exposed to country risk through its lending and deposits, investing, and market-making activities, whether cross-border or locally funded. Country exposure includes activity with both government and private-sector entities in a country.
Under the Firm’s internal country risk management approach, attribution of exposure to an individual country is based on the country where the largest proportion of the assets of the counterparty, issuer, obligor or guarantor are located or where the largest proportion of its revenue is derived, which may be different than the domicile (i.e. legal residence) or country of incorporation.
Individual country exposures reflect an aggregation of the Firm’s risk to an immediate default, with zero recovery, of the counterparties, issuers, obligors or guarantors attributed to that country. Activities which result in contingent or indirect exposure to a country are not included in the country exposure measure (for example, providing clearing services or secondary exposure to collateral on securities financing receivables).
Assumptions are sometimes required in determining the measurement and allocation of country exposure, particularly in the case of certain non-linear or index products, or where the nature of the counterparty, issuer, obligor or guarantor is not suitable for attribution to an individual country. The use of different measurement approaches or assumptions could affect the amount of reported country exposure.
Under the Firm’s internal country risk measurement framework:
•Lending exposures are measured at the total committed amount (funded and unfunded), net of the allowance for credit losses and eligible cash and marketable securities collateral received
•Deposits are measured as the cash balances placed with central and commercial banks
•Securities financing exposures are measured at their receivable balance, net of eligible collateral received
•Debt and equity securities are measured at the fair value of all positions, including both long and short positions
•Counterparty exposure on derivative receivables is measured at the derivative’s fair value, net of the fair value of the eligible collateral received
•Credit derivatives exposure is measured at the net notional amount of protection purchased or sold for the same underlying reference entity, inclusive of the fair value of the derivative receivable or payable; reflecting the manner in which the Firm manages these exposures
The Firm’s internal country risk reporting differs from the reporting provided under the FFIEC bank regulatory requirements.
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Risk Reporting
The following table presents the Firm’s top 20 exposures by country (excluding the U.S.) as of June 30, 2022 and their comparative exposures as of December 31, 2021. The selection of countries represents the Firm’s largest total exposures by individual country, based on the Firm’s internal country risk management approach, and does not represent the Firm’s view of any existing or potentially adverse credit conditions. Country exposures may fluctuate from period to period due to client activity and market flows.
The increase in exposure to Germany and the decrease in exposure to the U.K. were primarily due to changes in cash placements with the central banks of those countries driven by balance sheet and liquidity management activities.
The decrease in exposure to Australia was driven by a reduction in cash placed with the central bank of Australia, largely due to client-driven market-making activities and lower client cash deposits following recent interest rate increases.
As of June 30, 2022, exposure to Russia, based on the Firm's internal country risk measurement framework, was approximately $600 million.
Top 20 country exposures (excluding the U.S.)(a) | ||||||||||||||||||||
(in billions) | June 30, 2022 | December 31, 2021(e) | ||||||||||||||||||
Lending and deposits(b) | Trading and investing(c) | Other(d) | Total exposure | Total exposure | ||||||||||||||||
Germany | $ | 95.0 | $ | (0.2) | $ | 0.4 | $ | 95.2 | $ | 61.7 | ||||||||||
United Kingdom | 63.1 | 9.8 | 2.3 | 75.2 | 96.4 | |||||||||||||||
Japan | 39.1 | 9.7 | 0.3 | 49.1 | 45.5 | |||||||||||||||
Australia | 12.0 | 7.2 | 0.1 | 19.3 | 39.1 | |||||||||||||||
France | 12.3 | 0.8 | 5.8 | 18.9 | 14.0 | |||||||||||||||
Switzerland | 10.7 | 1.3 | 5.1 | 17.1 | 20.9 | |||||||||||||||
China | 9.8 | 6.4 | 0.8 | 17.0 | 18.6 | |||||||||||||||
Canada | 13.9 | 2.3 | 0.2 | 16.4 | 16.9 | |||||||||||||||
Brazil | 8.1 | 8.2 | — | 16.3 | 12.0 | |||||||||||||||
Singapore | 7.3 | 3.6 | 0.7 | 11.6 | 12.3 | |||||||||||||||
Luxembourg | 10.1 | 1.3 | — | 11.4 | 11.5 | |||||||||||||||
Spain | 9.8 | 0.4 | — | 10.2 | 10.1 | |||||||||||||||
Netherlands | 9.4 | — | 0.6 | 10.0 | 6.8 | |||||||||||||||
Belgium | 8.8 | 1.2 | — | 10.0 | 6.8 | |||||||||||||||
India | 5.3 | 3.8 | 0.2 | 9.3 | 14.7 | |||||||||||||||
South Korea | 4.8 | 4.1 | 0.3 | 9.2 | 8.7 | |||||||||||||||
Saudi Arabia | 6.4 | 2.6 | — | 9.0 | 9.1 | |||||||||||||||
Hong Kong SAR | 3.5 | 1.5 | 0.5 | 5.5 | 5.9 | |||||||||||||||
Ireland | 4.2 | 0.9 | — | 5.1 | 2.7 | |||||||||||||||
Mexico | 4.6 | 0.5 | — | 5.1 | 4.9 |
(a)Country exposures presented in the table reflect 88% and 87% of total Firmwide non-U.S. exposure, where exposure is attributed to an individual country, at June 30, 2022 and December 31, 2021, respectively.
(b)Lending and deposits includes loans and accrued interest receivable, lending-related commitments (net of eligible collateral and the allowance for credit losses), deposits with banks (including central banks), acceptances, other monetary assets, and issued letters of credit net of risk participations. Excludes intra-day and operating exposures, such as those from settlement and clearing activities.
(c)Includes market-making inventory, investment securities, and counterparty exposure on derivative and securities financings net of eligible collateral and hedging. Includes exposure from single reference entity (“single-name”), index and other multiple reference entity transactions for which one or more of the underlying reference entities is in a country listed in the above table.
(d)Predominantly includes physical commodity inventory.
(e)The country rankings presented in the table as of December 31, 2021, are based on the country rankings of the corresponding exposures at June 30, 2022, not actual rankings of such exposures at December 31, 2021.
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OPERATIONAL RISK MANAGEMENT |
Operational risk is the risk of an adverse outcome resulting from inadequate or failed internal processes or systems, human factors, or external events impacting the Firm’s processes or systems. Operational Risk includes compliance, conduct, legal, and estimations and model risk. Operational risk is inherent in the Firm’s activities and can manifest itself in various ways, including fraudulent acts, business disruptions (including those caused by extraordinary events beyond the Firm's control), cyberattacks, inappropriate employee behavior, failure to comply with applicable laws, rules and regulations or failure of vendors or other third party providers to perform in accordance with their agreements. Operational Risk Management attempts to manage operational risk at appropriate levels in light of the Firm’s financial position, the characteristics of its businesses, and the markets and regulatory environments in which it operates. Refer to Operational Risk Management on pages 143-149 of JPMorgan Chase’s 2021 Form 10-K for a discussion of the Firm’s Operational Risk Management. Details on other select examples of operational risks are provided below.
In response to the war in Ukraine, numerous sanctions have been imposed on Russia and Russia-associated entities and individuals by various governments around the world, including the authorities in the U.S., the U.K. and the EU. These sanctions are complex and continue to evolve. The Firm continues to face increased operational risk associated with interpreting and maintaining these complex compliance programs. To manage this increased risk, the Firm implemented additional controls reasonably designed to mitigate the risk of non-compliance and to prevent dealing with sanctioned persons or in property subject to sanctions, as well as to block or restrict payments as required by the applicable regulations.
Business and technology resiliency risk
Disruptions can occur due to forces beyond the Firm’s control such as the spread of infectious diseases or pandemics, severe weather, power or telecommunications loss, failure of a third party to provide expected services, cyberattacks and terrorism. The Firmwide Business Resiliency Program is designed to enable the Firm to prepare for, adapt to, withstand and recover from business disruptions including occurrence of an extraordinary event beyond its control that may impact critical business functions and supporting assets (i.e., staff, technology, facilities and third parties). The program includes governance, awareness training, planning and testing of recovery strategies, as well as strategic and tactical initiatives to identify, assess, and manage business interruption and public safety risks.
Cybersecurity Risk
The Firm continues to face increased risk of cyber attacks due to potential retaliation for the sanctions imposed as a result of the war in Ukraine. The Firm implemented additional precautionary measures and controls reasonably designed to address this increased risk, such as enhanced threat monitoring. There can be no assurance that the measures taken by the Firm to protect against cybersecurity breaches will provide absolute security against cyber attacks.
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CRITICAL ACCOUNTING ESTIMATES USED BY THE FIRM |
JPMorgan Chase’s accounting policies and use of estimates are integral to understanding its reported results. The Firm’s most complex accounting estimates require management’s judgment to ascertain the appropriate carrying value of assets and liabilities. The Firm has established policies and control procedures intended to ensure that estimation methods, including any judgments made as part of such methods, are well-controlled, independently reviewed and applied consistently from period to period. The methods used and judgments made reflect, among other factors, the nature of the assets or liabilities and the related business and risk management strategies, which may vary across the Firm’s businesses and portfolios. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The Firm believes its estimates for determining the carrying value of its assets and liabilities are appropriate. The following is a brief description of the Firm’s critical accounting estimates involving significant judgments.
Allowance for credit losses
The Firm’s allowance for credit losses represents management’s estimate of expected credit losses over the remaining expected life of the Firm’s financial assets measured at amortized cost and certain off-balance sheet lending-related commitments. The allowance for credit losses comprises:
•The allowance for loan losses, which covers the Firm’s retained loan portfolios (scored and risk-rated),
•The allowance for lending-related commitments, and
•The allowance for credit losses on investment securities.
The allowance for credit losses involves significant judgment on a number of matters including development and weighting of macroeconomic forecasts, incorporation of historical loss experience, assessment of risk characteristics, assignment of risk ratings, valuation of collateral, and the determination of remaining expected life. Refer to Note 10 and Note 13 of JPMorgan Chase's 2021 Form 10-K for further information on these judgments as well as the Firm’s policies and methodologies used to determine the Firm’s allowance for credit losses; and refer to Allowance for credit losses on pages 71-73 and Note 12 of this Form 10-Q for further information.
One of the most significant judgments involved in estimating the Firm’s allowance for credit losses relates to the macroeconomic forecasts used to estimate credit losses over the eight-quarter forecast period within the Firm’s methodology. The eight-quarter forecast incorporates hundreds of MEVs that are relevant for exposures across the Firm, with modeled credit losses being driven primarily by a subset of less than twenty variables. The specific variables that have the greatest effect on the modeled losses of each portfolio vary by portfolio and geography.
•Key MEVs for the consumer portfolio include U.S. unemployment, HPI and U.S. real GDP.
•Key MEVs for the wholesale portfolio include U.S. real GDP, U.S. unemployment, U.S. equity prices, corporate credit spreads, oil prices, commercial real estate prices and HPI.
Changes in the Firm’s assumptions and forecasts of economic conditions could significantly affect its estimate of expected credit losses in the portfolio at the balance sheet date or lead to significant changes in the estimate from one reporting period to the next.
It is difficult to estimate how potential changes in any one factor or input might affect the overall allowance for credit losses because management considers a wide variety of factors and inputs in estimating the allowance for credit losses. Changes in the factors and inputs considered may not occur at the same rate and may not be consistent across all geographies or product types, and changes in factors and inputs may be directionally inconsistent, such that improvement in one factor or input may offset deterioration in others.
To consider the impact of a hypothetical alternate macroeconomic forecast, the Firm compared the modeled credit losses determined using its central and relative adverse macroeconomic scenarios, which are two of the five scenarios considered in estimating the allowances for loan losses and lending-related commitments. The central and relative adverse scenarios each included a full suite of MEVs, but differed in the levels, paths and peaks/troughs of those variables over the eight-quarter forecast period.
For example, compared to the Firm’s central scenario shown on page 71 and in Note 12, the Firm’s relative adverse scenario assumes an elevated U.S. unemployment rate, averaging approximately 2.2% higher
over the eight-quarter forecast, with a peak difference of
approximately 3.7% in the second quarter of 2023; lower
U.S. real GDP with a slower recovery, remaining nearly
2.9% lower at the end of the eight-quarter forecast, with a
peak difference of approximately 5.8% in the second
quarter of 2023; and lower national HPI with a peak
difference of 17.6% in the first quarter of 2024.
This analysis is not intended to estimate expected future changes in the allowance for credit losses, for a number of reasons, including:
•The allowance as of June 30, 2022, reflects credit losses beyond those estimated under the central scenario due to the weight placed on the adverse scenarios.
•The impacts of changes in many MEVs are both interrelated and nonlinear, so the results of this analysis cannot be simply extrapolated for more severe changes in macroeconomic variables.
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•Expectations of future changes in portfolio composition and borrower behavior can significantly affect the allowance for credit losses.
To demonstrate the sensitivity of credit loss estimates to macroeconomic forecasts as of June 30, 2022, the Firm compared the modeled estimates under its relative adverse scenario to its central scenario. Without considering offsetting or correlated effects in other qualitative components of the Firm’s allowance for credit losses, the comparison between these two scenarios for the exposures below reflect the following differences:
•An increase of approximately $600 million for residential real estate loans and lending-related commitments
•An increase of approximately $2.0 billion for credit card loans
•An increase of approximately $3.0 billion for wholesale loans and lending-related commitments
This analysis relates only to the modeled credit loss estimates and is not intended to estimate changes in the overall allowance for credit losses as it does not reflect any potential changes in other adjustments to the quantitative calculation, which would also be influenced by the judgment management applies to the modeled lifetime loss estimates to reflect the uncertainty and imprecision of these modeled lifetime loss estimates based on then-current circumstances and conditions.
Recognizing that forecasts of macroeconomic conditions are inherently uncertain, particularly in light of the recent economic conditions, the Firm believes that its process to consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected credit losses were reasonable and appropriate for the period ended June 30, 2022.
Fair value
JPMorgan Chase carries a portion of its assets and liabilities at fair value. The majority of such assets and liabilities are measured at fair value on a recurring basis, including derivatives, structured note products and certain securities financing agreements. Certain assets and liabilities are measured at fair value on a nonrecurring basis, including certain mortgage, home equity and other loans, where the carrying value is based on the fair value of the underlying collateral.
Assets measured at fair value
The following table includes the Firm’s assets measured at fair value and the portion of such assets that are classified within level 3 of the fair value hierarchy. Refer to Note 2 for further information.
June 30, 2022 (in billions, except ratios) | Total assets at fair value | Total level 3 assets | ||||||||||||
Federal funds sold and securities purchased under resale agreements | $ | 319.2 | $ | — | ||||||||||
Securities borrowed | 74.0 | — | ||||||||||||
Trading assets: | ||||||||||||||
Trading–debt and equity instruments | 384.2 | 3.3 | ||||||||||||
Derivative receivables(a) | 81.3 | 8.9 | ||||||||||||
Total trading assets | 465.5 | 12.2 | ||||||||||||
AFS securities | 222.1 | 0.2 | ||||||||||||
Loans | 47.1 | 2.0 | ||||||||||||
MSRs | 7.4 | 7.4 | ||||||||||||
Other | 18.1 | 0.5 | ||||||||||||
Total assets measured at fair value on a recurring basis | 1,153.4 | 22.3 | ||||||||||||
Total assets measured at fair value on a nonrecurring basis | 3.3 | 1.7 | ||||||||||||
Total assets measured at fair value | $ | 1,156.7 | $ | 24.0 | ||||||||||
Total Firm assets | $ | 3,841.3 | ||||||||||||
Level 3 assets at fair value as a percentage of total Firm assets(a) | 0.6 | % | ||||||||||||
Level 3 assets at fair value as a percentage of total Firm assets at fair value(a) | 2.1 | % |
(a)For purposes of the table above, the derivative receivables total reflects the impact of netting adjustments; however, the $8.9 billion of derivative receivables classified as level 3 does not reflect the netting adjustment as such netting is not relevant to a presentation based on the transparency of inputs to the valuation of an asset. The level 3 balances would be reduced if netting were applied, including the netting benefit associated with cash collateral.
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Valuation
Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available to the Firm. For instruments valued using internally developed valuation models and other valuation techniques that use significant unobservable inputs and are therefore classified within level 3 of the fair value hierarchy, judgments used to estimate fair value are more significant than those required when estimating the fair value of instruments classified within levels 1 and 2.
In arriving at an estimate of fair value for an instrument within level 3, management must first determine the appropriate valuation model or other valuation technique to use. Second, the lack of observability of certain significant inputs requires management to assess relevant empirical data in deriving valuation inputs including, for example, transaction details, yield curves, interest rates, prepayment speed, default rates, volatilities, correlations, prices (such as commodity, equity or debt prices), valuations of comparable instruments, foreign exchange rates and credit curves. Refer to Note 2 for a further discussion of the valuation of level 3 instruments, including unobservable inputs used.
For instruments classified in levels 2 and 3, management judgment must be applied to assess the appropriate level of valuation adjustments to reflect counterparty credit quality, the Firm’s creditworthiness, market funding rates, liquidity considerations, unobservable parameters, and for portfolios that meet specified criteria, the size of the net open risk position. The judgments made are typically affected by the type of product and its specific contractual terms, and the level of liquidity for the product or within the market as a whole. In periods of heightened market volatility and uncertainty judgments are further affected by the wider variation of reasonable valuation estimates, particularly for positions that are less liquid. Refer to Note 2 for a further discussion of valuation adjustments applied by the Firm.
Imprecision in estimating unobservable market inputs or other factors can affect the amount of gain or loss recorded for a particular position. Furthermore, while the Firm believes its valuation methods are appropriate and consistent with those of other market participants, the methods and assumptions used reflect management judgment and may vary across the Firm’s businesses and portfolios.
The Firm uses various methodologies and assumptions in the determination of fair value. The use of methodologies or assumptions different than those used by the Firm could result in a different estimate of fair value at the reporting date. Refer to Note 2 for a detailed discussion of the Firm’s valuation process and hierarchy, and its determination of fair value for individual financial instruments.
Credit card rewards liability
The credit card rewards liability was $10.6 billion and $9.8 billion at June 30, 2022 and December 31, 2021, respectively, and is recorded in accounts payable and other liabilities on the Consolidated balance sheets. Refer to page 152 of JPMorgan Chase’s 2021 Form 10-K for a description of the significant assumptions and sensitivities, associated with the Firm’s credit card rewards liability.
Income taxes
Refer to Income taxes on pages 152-153 of JPMorgan Chase’s 2021 Form 10-K for a description of the significant assumptions, judgments and interpretations associated with the accounting for income taxes.
Goodwill impairment
Management applies significant judgment when testing goodwill for impairment. Refer to Goodwill impairment on page 152 of JPMorgan Chase’s 2021 Form 10-K for a description of the significant valuation judgments associated with goodwill impairment.
Refer to Note 14 for additional information on goodwill, including the goodwill impairment assessment as of June 30, 2022.
Litigation reserves
Refer to Note 24 of this Form 10-Q, and Note 30 of JPMorgan Chase’s 2021 Form 10-K for a description of the significant estimates and judgments associated with establishing litigation reserves.
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ACCOUNTING AND REPORTING DEVELOPMENTS |
Financial Accounting Standards Board (“FASB”) Standards Adopted since January 1, 2021 | |||||||||||
Standard | Summary of guidance | Effects on financial statements | |||||||||
Reference Rate Reform Issued March 2020 and updated January 2021 | •Provides optional expedients and exceptions to current accounting guidance when financial instruments, hedge accounting relationships, and other transactions are amended due to reference rate reform. •Provides an election to account for certain contract amendments related to reference rate reform as modifications rather than extinguishments without the requirement to assess the significance of the amendments. •Allows for changes in critical terms of a hedge accounting relationship without automatic termination of that relationship. Provides various practical expedients and elections designed to allow hedge accounting to continue uninterrupted during the transition period. •Provides a one-time election to transfer securities out of the held-to-maturity classification if certain criteria are met. •The January 2021 update provides an election to account for derivatives modified to change the rate used for discounting, margining, or contract price alignment (collectively “discounting transition”) as modifications. | •Issued and effective March 12, 2020. The January 7, 2021 update was effective when issued. •The Firm elected to apply certain of the practical expedients related to contract modifications and hedge accounting relationships, and discounting transition beginning in the third quarter of 2020. The discounting transition election was applied retrospectively. The main purpose of the practical expedients is to ease the administrative burden of accounting for contracts impacted by reference rate reform. These elections did not have a material impact on the Consolidated Financial Statements. | |||||||||
FASB Standards Issued but not yet Adopted | |||||||||||
Standard | Summary of guidance | Effects on financial statements | |||||||||
Derivatives and Hedging: Fair Value Hedging – Portfolio Layer Method Issued March 2022 | •Expands the current ability to hedge a portfolio of prepayable assets to allow more of the portfolio to be hedged. Non-prepayable assets can also be included in the same portfolio, thus increasing the size of the portfolio and the amount available to be hedged. •Clarifies the types of derivatives that can be used as hedges, and the balance sheet presentation and updates the disclosure guidance for the hedge accounting adjustments. | •Required effective date: January 1, 2023. (a) •The Firm is currently evaluating the potential impact on the Consolidated Financial Statements, as well as the Firm's planned date of adoption. | |||||||||
Financial Instruments – Credit Losses: Troubled Debt Restructurings and Vintage Disclosures Issued March 2022 | •Eliminates existing accounting and disclosure requirements for Troubled Debt Restructurings, including the requirement to measure the allowance using a discounted cash flow methodology. •Requires disclosure of loan modifications for borrowers experiencing financial difficulty involving principal forgiveness, interest rate reduction, other-than-insignificant payment delay, term extension or a combination of these modifications. •Requires disclosure of current period loan charge-off information by origination year. •May be adopted prospectively, or by using a modified retrospective method wherein the effect of adoption is reflected as an adjustment to retained earnings at the effective date. | •Required effective date: January 1, 2023. (a) •The Firm is currently evaluating the potential impact on the Consolidated Financial Statements. •The Firm plans to adopt the new guidance on January 1, 2023. |
(a)Early adoption is permitted.
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FORWARD-LOOKING STATEMENTS |
From time to time, the Firm has made and will make forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipate,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “believe,” or other words of similar meaning. Forward-looking statements provide JPMorgan Chase’s current expectations or forecasts of future events, circumstances, results or aspirations. JPMorgan Chase’s disclosures in this Form 10-Q contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Firm also may make forward-looking statements in its other documents filed or furnished with the SEC. In addition, the Firm’s senior management may make forward-looking statements orally to investors, analysts, representatives of the media and others.
All forward-looking statements are, by their nature, subject to risks and uncertainties, many of which are beyond the Firm’s control. JPMorgan Chase’s actual future results may differ materially from those set forth in its forward-looking statements. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ from those in the forward-looking statements:
•Local, regional and global business, economic and political conditions and geopolitical events, including the war in Ukraine;
•Changes in laws, rules and regulatory requirements, including capital and liquidity requirements affecting the Firm’s businesses, and the ability of the Firm to address those requirements;
•Heightened regulatory and governmental oversight and scrutiny of JPMorgan Chase’s business practices, including dealings with retail customers;
•Changes in trade, monetary and fiscal policies and laws;
•Changes in the level of inflation;
•Changes in income tax laws, rules and regulations;
•Securities and capital markets behavior, including changes in market liquidity and volatility;
•Changes in investor sentiment or consumer spending or savings behavior;
•Ability of the Firm to manage effectively its capital and liquidity;
•Changes in credit ratings assigned to the Firm or its subsidiaries;
•Damage to the Firm’s reputation;
•Ability of the Firm to appropriately address social, environmental and sustainability concerns that may arise, including from its business activities;
•Ability of the Firm to deal effectively with an economic slowdown or other economic or market disruption, including, but not limited to, in the interest rate environment;
•Technology changes instituted by the Firm, its counterparties or competitors;
•The effectiveness of the Firm’s control agenda;
•Ability of the Firm to develop or discontinue products and services, and the extent to which products or services previously sold by the Firm require the Firm to incur liabilities or absorb losses not contemplated at their initiation or origination;
•Acceptance of the Firm’s new and existing products and services by the marketplace and the ability of the Firm to innovate and to increase market share;
•Ability of the Firm to attract and retain qualified and diverse employees;
•Ability of the Firm to control expenses;
•Competitive pressures;
•Changes in the credit quality of the Firm’s clients, customers and counterparties;
•Adequacy of the Firm’s risk management framework, disclosure controls and procedures and internal control over financial reporting;
•Adverse judicial or regulatory proceedings;
•Ability of the Firm to determine accurate values of certain assets and liabilities;
•Occurrence of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, epidemics or pandemics, an outbreak or escalation of hostilities or other geopolitical instabilities, the effects of climate change or extraordinary events beyond the Firm's control, and the Firm’s ability to deal effectively with disruptions caused by the foregoing;
•Ability of the Firm to maintain the security of its financial, accounting, technology, data processing and other operational systems and facilities;
•Ability of the Firm to withstand disruptions that may be caused by any failure of its operational systems or those of third parties;
•Ability of the Firm to effectively defend itself against cyberattacks and other attempts by unauthorized parties to access information of the Firm or its customers or to disrupt the Firm’s systems;
•Economic, financial, reputational and other impacts of the COVID-19 pandemic; and
•The other risks and uncertainties detailed in Part I, Item 1A: Risk Factors in JPMorgan Chase’s 2021 Form 10-K.
Any forward-looking statements made by or on behalf of the Firm speak only as of the date they are made, and JPMorgan Chase does not undertake to update any forward-looking statements. The reader should, however, consult any further disclosures of a forward-looking nature the Firm may make in any subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.
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JPMorgan Chase & Co.
Consolidated statements of income (unaudited)
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions, except per share data) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Revenue | |||||||||||||||||||||||
Investment banking fees | $ | 1,586 | $ | 3,470 | $ | 3,594 | $ | 6,440 | |||||||||||||||
Principal transactions | 4,990 | 4,076 | 10,095 | 10,576 | |||||||||||||||||||
Lending- and deposit-related fees | 1,873 | 1,760 | 3,712 | 3,447 | |||||||||||||||||||
Asset management, administration and commissions | 5,240 | 5,194 | 10,602 | 10,223 | |||||||||||||||||||
Investment securities losses | (153) | (155) | (547) | (141) | |||||||||||||||||||
Mortgage fees and related income | 378 | 551 | 838 | 1,255 | |||||||||||||||||||
Card income | 1,133 | 1,647 | 2,108 | 2,997 | |||||||||||||||||||
Other income | 540 | 1,195 | 2,030 | 2,318 | |||||||||||||||||||
Noninterest revenue | 15,587 | 17,738 | 32,432 | 37,115 | |||||||||||||||||||
Interest income | 18,646 | 14,094 | 34,142 | 28,365 | |||||||||||||||||||
Interest expense | 3,518 | 1,353 | 5,142 | 2,735 | |||||||||||||||||||
Net interest income | 15,128 | 12,741 | 29,000 | 25,630 | |||||||||||||||||||
Total net revenue | 30,715 | 30,479 | 61,432 | 62,745 | |||||||||||||||||||
Provision for credit losses | 1,101 | (2,285) | 2,564 | (6,441) | |||||||||||||||||||
Noninterest expense | |||||||||||||||||||||||
Compensation expense | 10,301 | 9,814 | 21,088 | 20,415 | |||||||||||||||||||
Occupancy expense | 1,129 | 1,090 | 2,263 | 2,205 | |||||||||||||||||||
Technology, communications and equipment expense | 2,376 | 2,488 | 4,736 | 5,007 | |||||||||||||||||||
Professional and outside services | 2,469 | 2,385 | 5,041 | 4,588 | |||||||||||||||||||
Marketing | 881 | 626 | 1,801 | 1,377 | |||||||||||||||||||
Other expense | 1,593 | 1,264 | 3,011 | 2,800 | |||||||||||||||||||
Total noninterest expense | 18,749 | 17,667 | 37,940 | 36,392 | |||||||||||||||||||
Income before income tax expense | 10,865 | 15,097 | 20,928 | 32,794 | |||||||||||||||||||
Income tax expense | 2,216 | 3,149 | 3,997 | 6,546 | |||||||||||||||||||
Net income | $ | 8,649 | $ | 11,948 | $ | 16,931 | $ | 26,248 | |||||||||||||||
Net income applicable to common stockholders | $ | 8,195 | $ | 11,496 | $ | 16,039 | $ | 25,346 | |||||||||||||||
Net income per common share data | |||||||||||||||||||||||
Basic earnings per share | $ | 2.77 | $ | 3.79 | $ | 5.40 | $ | 8.30 | |||||||||||||||
Diluted earnings per share | 2.76 | 3.78 | 5.39 | 8.28 | |||||||||||||||||||
Weighted-average basic shares | 2,962.2 | 3,036.6 | 2,969.6 | 3,054.9 | |||||||||||||||||||
Weighted-average diluted shares | 2,966.3 | 3,041.9 | 2,973.7 | 3,060.3 | |||||||||||||||||||
The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.
88
JPMorgan Chase & Co.
Consolidated statements of comprehensive income (unaudited)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
Net income | $ | 8,649 | $ | 11,948 | $ | 16,931 | $ | 26,248 | ||||||||||||||||||
Other comprehensive income/(loss), after–tax | ||||||||||||||||||||||||||
Unrealized gains/(losses) on investment securities | (4,031) | 674 | (11,484) | (3,665) | ||||||||||||||||||||||
Translation adjustments, net of hedges | (679) | 64 | (741) | (186) | ||||||||||||||||||||||
Fair value hedges | 51 | (23) | 161 | (51) | ||||||||||||||||||||||
Cash flow hedges | (1,348) | 591 | (4,139) | (1,658) | ||||||||||||||||||||||
Defined benefit pension and OPEB plans | 20 | 9 | 87 | 77 | ||||||||||||||||||||||
DVA on fair value option elected liabilities | 1,185 | 214 | 1,831 | 67 | ||||||||||||||||||||||
Total other comprehensive income/(loss), after–tax | (4,802) | 1,529 | (14,285) | (5,416) | ||||||||||||||||||||||
Comprehensive income | $ | 3,847 | $ | 13,477 | $ | 2,646 | $ | 20,832 |
The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.
89
JPMorgan Chase & Co.
Consolidated balance sheets (unaudited)
(in millions, except share data) | June 30, 2022 | December 31, 2021 | |||||||||
Assets | |||||||||||
Cash and due from banks | $ | 27,215 | $ | 26,438 | |||||||
Deposits with banks | 642,045 | 714,396 | |||||||||
Federal funds sold and securities purchased under resale agreements (included $319,188 and $252,720 at fair value) | 322,156 | 261,698 | |||||||||
Securities borrowed (included $73,995 and $81,463 at fair value) | 202,393 | 206,071 | |||||||||
Trading assets (included assets pledged of $98,070 and $102,710) | 465,577 | 433,575 | |||||||||
Available-for-sale securities (amortized cost of $231,904 and $308,254, net of allowance for credit losses; included assets pledged of $15,162 and $18,268) | 222,069 | 308,525 | |||||||||
Held-to-maturity securities (net of allowance for credit losses) | 441,649 | 363,707 | |||||||||
Investment securities, net of allowance for credit losses | 663,718 | 672,232 | |||||||||
Loans (included $47,056 and $58,820 at fair value) | 1,104,155 | 1,077,714 | |||||||||
Allowance for loan losses | (17,750) | (16,386) | |||||||||
Loans, net of allowance for loan losses | 1,086,405 | 1,061,328 | |||||||||
Accrued interest and accounts receivable | 145,442 | 102,570 | |||||||||
Premises and equipment | 26,770 | 27,070 | |||||||||
Goodwill, MSRs and other intangible assets | 59,360 | 56,691 | |||||||||
Other assets (included $18,940 and $14,753 at fair value and assets pledged of $10,267 and $5,298) | 200,233 | 181,498 | |||||||||
Total assets(a) | $ | 3,841,314 | $ | 3,743,567 | |||||||
Liabilities | |||||||||||
Deposits (included $13,270 and $11,333 at fair value) | $ | 2,471,544 | $ | 2,462,303 | |||||||
Federal funds purchased and securities loaned or sold under repurchase agreements (included $156,340 and $126,435 at fair value) | 222,719 | 194,340 | |||||||||
Short-term borrowings (included $16,879 and $20,015 at fair value) | 58,422 | 53,594 | |||||||||
Trading liabilities | 190,308 | 164,693 | |||||||||
Accounts payable and other liabilities (included $9,753 and $5,651 at fair value) | 313,326 | 262,755 | |||||||||
Beneficial interests issued by consolidated VIEs (included $5 and $12 at fair value) | 10,640 | 10,750 | |||||||||
Long-term debt (included $66,062 and $74,934 at fair value) | 288,212 | 301,005 | |||||||||
Total liabilities(a) | 3,555,171 | 3,449,440 | |||||||||
Commitments and contingencies (refer to Notes 22, 23 and 24) | |||||||||||
Stockholders’ equity | |||||||||||
Preferred stock ($1 par value; authorized 200,000,000 shares; issued 3,283,750 and 3,483,750 shares) | 32,838 | 34,838 | |||||||||
Common stock ($1 par value; authorized 9,000,000,000 shares; issued 4,104,933,895 shares) | 4,105 | 4,105 | |||||||||
Additional paid-in capital | 88,614 | 88,415 | |||||||||
Retained earnings | 282,445 | 272,268 | |||||||||
Accumulated other comprehensive income/(loss) | (14,369) | (84) | |||||||||
Treasury stock, at cost (1,172,361,505 and 1,160,784,750 shares) | (107,490) | (105,415) | |||||||||
Total stockholders’ equity | 286,143 | 294,127 | |||||||||
Total liabilities and stockholders’ equity | $ | 3,841,314 | $ | 3,743,567 |
(a) The following table presents information on assets and liabilities related to VIEs that are consolidated by the Firm at June 30, 2022, and December 31, 2021. The assets of the consolidated VIEs are used to settle the liabilities of those entities. The holders of the beneficial interests generally do not have recourse to the general credit of JPMorgan Chase. The assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs and exclude intercompany balances that eliminate in consolidation. Refer to Note 13 for a further discussion.
(in millions) | June 30, 2022 | December 31, 2021 | |||||||||
Assets | |||||||||||
Trading assets | $ | 2,012 | $ | 2,010 | |||||||
Loans | 31,677 | 33,024 | |||||||||
All other assets | 567 | 490 | |||||||||
Total assets | $ | 34,256 | $ | 35,524 | |||||||
Liabilities | |||||||||||
Beneficial interests issued by consolidated VIEs | $ | 10,640 | $ | 10,750 | |||||||
All other liabilities | 267 | 245 | |||||||||
Total liabilities | $ | 10,907 | $ | 10,995 |
The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.
90
JPMorgan Chase & Co.
Consolidated statements of changes in stockholders’ equity (unaudited)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
(in millions, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
Preferred stock | ||||||||||||||||||||||||||
Balance at the beginning of the period | $ | 32,838 | $ | 31,563 | $ | 34,838 | $ | 30,063 | ||||||||||||||||||
Issuance | — | 3,850 | — | 5,350 | ||||||||||||||||||||||
Redemption | — | (2,575) | (2,000) | (2,575) | ||||||||||||||||||||||
Balance at June 30 | 32,838 | 32,838 | 32,838 | 32,838 | ||||||||||||||||||||||
Common stock | ||||||||||||||||||||||||||
Balance at the beginning and end of the period | 4,105 | 4,105 | 4,105 | 4,105 | ||||||||||||||||||||||
Additional paid-in capital | ||||||||||||||||||||||||||
Balance at the beginning of the period | 88,260 | 88,005 | 88,415 | 88,394 | ||||||||||||||||||||||
Shares issued and commitments to issue common stock for employee share-based compensation awards, and related tax effects | 354 | 229 | 199 | (134) | ||||||||||||||||||||||
Other | — | (40) | — | (66) | ||||||||||||||||||||||
Balance at June 30 | 88,614 | 88,194 | 88,614 | 88,194 | ||||||||||||||||||||||
Retained earnings | ||||||||||||||||||||||||||
Balance at the beginning of the period | 277,177 | 248,151 | 272,268 | 236,990 | ||||||||||||||||||||||
Net income | 8,649 | 11,948 | 16,931 | 26,248 | ||||||||||||||||||||||
Dividends declared: | ||||||||||||||||||||||||||
Preferred stock | (410) | (393) | (807) | (772) | ||||||||||||||||||||||
Common stock ($1.00 and $0.90 per share and $2.00 and $1.80 per share, respectively) | (2,971) | (2,723) | (5,947) | (5,483) | ||||||||||||||||||||||
Balance at June 30 | 282,445 | 256,983 | 282,445 | 256,983 | ||||||||||||||||||||||
Accumulated other comprehensive income/(loss) | ||||||||||||||||||||||||||
Balance at the beginning of the period | (9,567) | 1,041 | (84) | 7,986 | ||||||||||||||||||||||
Other comprehensive income/(loss), after-tax | (4,802) | 1,529 | (14,285) | (5,416) | ||||||||||||||||||||||
Balance at June 30 | (14,369) | 2,570 | (14,369) | 2,570 | ||||||||||||||||||||||
Treasury stock, at cost | ||||||||||||||||||||||||||
Balance at the beginning of the period | (106,914) | (92,151) | (105,415) | (88,184) | ||||||||||||||||||||||
Repurchase | (622) | (6,201) | (3,122) | (11,200) | ||||||||||||||||||||||
Reissuance | 46 | 48 | 1,047 | 1,080 | ||||||||||||||||||||||
Balance at June 30 | (107,490) | (98,304) | (107,490) | (98,304) | ||||||||||||||||||||||
Total stockholders’ equity | $ | 286,143 | $ | 286,386 | $ | 286,143 | $ | 286,386 |
The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.
91
JPMorgan Chase & Co.
Consolidated statements of cash flows (unaudited)
Six months ended June 30, | |||||||||||
(in millions) | 2022 | 2021 | |||||||||
Operating activities | |||||||||||
Net income | $ | 16,931 | $ | 26,248 | |||||||
Adjustments to reconcile net income to net cash used in operating activities: | |||||||||||
Provision for credit losses | 2,564 | (6,441) | |||||||||
Depreciation and amortization | 3,609 | 4,073 | |||||||||
Deferred tax (benefit)/expense | (2,086) | 1,027 | |||||||||
Other | 2,172 | 1,788 | |||||||||
Originations and purchases of loans held-for-sale | (102,857) | (184,866) | |||||||||
Proceeds from sales, securitizations and paydowns of loans held-for-sale | 116,764 | 161,030 | |||||||||
Net change in: | |||||||||||
Trading assets | (53,816) | (2,004) | |||||||||
Securities borrowed | 3,379 | (25,838) | |||||||||
Accrued interest and accounts receivable | (43,051) | (34,929) | |||||||||
Other assets | (14,930) | 2,709 | |||||||||
Trading liabilities | 23,646 | (3,521) | |||||||||
Accounts payable and other liabilities | 70,976 | 30,772 | |||||||||
Other operating adjustments | 800 | (390) | |||||||||
Net cash provided by/(used in) operating activities | 24,101 | (30,342) | |||||||||
Investing activities | |||||||||||
Net change in: | |||||||||||
Federal funds sold and securities purchased under resale agreements | (60,833) | 35,283 | |||||||||
Held-to-maturity securities: | |||||||||||
Proceeds from paydowns and maturities | 20,952 | 26,224 | |||||||||
Purchases | (27,490) | (63,072) | |||||||||
Available-for-sale securities: | |||||||||||
Proceeds from paydowns and maturities | 21,913 | 28,727 | |||||||||
Proceeds from sales | 36,217 | 125,192 | |||||||||
Purchases | (66,200) | (109,944) | |||||||||
Proceeds from sales and securitizations of loans held-for-investment | 22,185 | 16,165 | |||||||||
Other changes in loans, net | (67,802) | (21,980) | |||||||||
All other investing activities, net | (4,753) | (3,506) | |||||||||
Net cash provided by/(used in) investing activities | (125,811) | 33,089 | |||||||||
Financing activities | |||||||||||
Net change in: | |||||||||||
Deposits | 5,841 | 138,578 | |||||||||
Federal funds purchased and securities loaned or sold under repurchase agreements | 28,586 | 30,260 | |||||||||
Short-term borrowings | 5,622 | 5,862 | |||||||||
Beneficial interests issued by consolidated VIEs | 552 | (674) | |||||||||
Proceeds from long-term borrowings | 45,873 | 55,767 | |||||||||
Payments of long-term borrowings | (25,991) | (33,464) | |||||||||
Proceeds from issuance of preferred stock | — | 5,350 | |||||||||
Redemption of preferred stock | (2,000) | (2,575) | |||||||||
Treasury stock repurchased | (3,162) | (11,000) | |||||||||
Dividends paid | (6,774) | (6,314) | |||||||||
All other financing activities, net | 423 | (822) | |||||||||
Net cash provided by financing activities | 48,970 | 180,968 | |||||||||
Effect of exchange rate changes on cash and due from banks and deposits with banks | (18,834) | (5,903) | |||||||||
Net increase/(decrease) in cash and due from banks and deposits with banks | (71,574) | 177,812 | |||||||||
Cash and due from banks and deposits with banks at the beginning of the period | 740,834 | 527,609 | |||||||||
Cash and due from banks and deposits with banks at the end of the period | $ | 669,260 | $ | 705,421 | |||||||
Cash interest paid | $ | 4,457 | $ | 2,461 | |||||||
Cash income taxes paid, net | 3,100 | 13,716 |
The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.
92
Refer to the Glossary of Terms and Acronyms on pages 182-190 for definitions of terms and acronyms used throughout the Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 1 – Basis of presentation
JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”), a financial holding company incorporated under Delaware law in 1968, is a leading financial services firm based in the U.S., with 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. Refer to Note 25 for a further discussion of the Firm’s business segments.
The accounting and financial reporting policies of JPMorgan Chase and its subsidiaries conform to U.S. GAAP. Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by regulatory authorities.
The unaudited Consolidated Financial Statements prepared in conformity with U.S. GAAP require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expense, and the disclosures of contingent assets and liabilities. Actual results could be different from these estimates. In the opinion of management, all normal, recurring adjustments have been included such that this interim financial information is fairly stated.
These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements, and related notes thereto, included in JPMorgan Chase’s 2021 Form 10-K.
Certain amounts reported in prior periods have been reclassified to conform with the current presentation.
Consolidation
The Consolidated Financial Statements include the accounts of JPMorgan Chase and other entities in which the Firm has a controlling financial interest. All material intercompany balances and transactions have been eliminated.
Assets held for clients in an agency or fiduciary capacity by the Firm are not assets of JPMorgan Chase and are not included on the Consolidated balance sheets.
The Firm determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity.
Refer to Notes 1 and 14 of JPMorgan Chase’s 2021 Form 10-K for a further description of JPMorgan Chase’s accounting policies regarding consolidation.
Offsetting assets and liabilities
U.S. GAAP permits entities to present derivative receivables and derivative payables with the same counterparty and the related cash collateral receivables and payables on a net basis on the Consolidated balance sheets when a legally enforceable master netting agreement exists. U.S. GAAP also permits securities financing activities to be presented on a net basis when specified conditions are met, including the existence of a legally enforceable master netting agreement. The Firm has elected to net such balances where it has determined that the specified conditions are met. Refer to Note 1 of JPMorgan Chase’s 2021 Form 10-K for further information on offsetting assets and liabilities.
93
Note 2 – Fair value measurement
Refer to Note 2 of JPMorgan Chase’s 2021 Form 10-K for a discussion of the Firm’s valuation methodologies for assets, liabilities and lending-related commitments measured at fair value and the fair value hierarchy.
94
The following table presents the assets and liabilities reported at fair value as of June 30, 2022, and December 31, 2021, by major product category and fair value hierarchy.
Assets and liabilities measured at fair value on a recurring basis | |||||||||||||||||||||||
Fair value hierarchy | Derivative netting adjustments(f) | ||||||||||||||||||||||
June 30, 2022 (in millions) | Level 1 | Level 2 | Level 3 | Total fair value | |||||||||||||||||||
Federal funds sold and securities purchased under resale agreements | $ | — | $ | 319,187 | $ | 1 | $ | — | $ | 319,188 | |||||||||||||
Securities borrowed | — | 73,995 | — | — | 73,995 | ||||||||||||||||||
Trading assets: | |||||||||||||||||||||||
Debt instruments: | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
U.S. GSEs and government agencies(a) | — | 50,166 | 803 | — | 50,969 | ||||||||||||||||||
Residential – nonagency | — | 2,191 | 14 | — | 2,205 | ||||||||||||||||||
Commercial – nonagency | — | 1,646 | 10 | — | 1,656 | ||||||||||||||||||
Total mortgage-backed securities | — | 54,003 | 827 | — | 54,830 | ||||||||||||||||||
U.S. Treasury, GSEs and government agencies(a) | 64,403 | 10,013 | — | — | 74,416 | ||||||||||||||||||
Obligations of U.S. states and municipalities | — | 6,938 | 7 | — | 6,945 | ||||||||||||||||||
Certificates of deposit, bankers’ acceptances and commercial paper | — | 677 | — | — | 677 | ||||||||||||||||||
Non-U.S. government debt securities | 33,142 | 47,976 | 205 | — | 81,323 | ||||||||||||||||||
Corporate debt securities | — | 25,943 | 574 | — | 26,517 | ||||||||||||||||||
Loans | — | 6,900 | 898 | — | 7,798 | ||||||||||||||||||
Asset-backed securities | — | 2,711 | 20 | — | 2,731 | ||||||||||||||||||
Total debt instruments | 97,545 | 155,161 | 2,531 | — | 255,237 | ||||||||||||||||||
Equity securities | 84,045 | 2,429 | 661 | — | 87,135 | ||||||||||||||||||
Physical commodities(b) | 3,413 | 19,480 | 2 | — | 22,895 | ||||||||||||||||||
Other | — | 18,861 | 87 | — | 18,948 | ||||||||||||||||||
Total debt and equity instruments(c) | 185,003 | 195,931 | 3,281 | — | 384,215 | ||||||||||||||||||
Derivative receivables: | |||||||||||||||||||||||
Interest rate | 3,682 | 246,878 | 2,584 | (231,214) | 21,930 | ||||||||||||||||||
Credit | — | 12,847 | 731 | (11,971) | 1,607 | ||||||||||||||||||
Foreign exchange | 254 | 260,425 | 1,175 | (233,688) | 28,166 | ||||||||||||||||||
Equity | — | 72,297 | 3,884 | (66,004) | 10,177 | ||||||||||||||||||
Commodity | — | 48,168 | 581 | (29,312) | 19,437 | ||||||||||||||||||
Total derivative receivables | 3,936 | 640,615 | 8,955 | (572,189) | 81,317 | ||||||||||||||||||
Total trading assets(d) | 188,939 | 836,546 | 12,236 | (572,189) | 465,532 | ||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
U.S. GSEs and government agencies(a) | — | 63,689 | — | — | 63,689 | ||||||||||||||||||
Residential – nonagency | — | 5,475 | — | — | 5,475 | ||||||||||||||||||
Commercial – nonagency | — | 2,153 | — | — | 2,153 | ||||||||||||||||||
Total mortgage-backed securities | — | 71,317 | — | — | 71,317 | ||||||||||||||||||
U.S. Treasury and government agencies | 109,984 | — | — | — | 109,984 | ||||||||||||||||||
Obligations of U.S. states and municipalities | — | 10,133 | — | — | 10,133 | ||||||||||||||||||
Non-U.S. government debt securities | 6,597 | 9,211 | — | — | 15,808 | ||||||||||||||||||
Corporate debt securities | — | 133 | 186 | — | 319 | ||||||||||||||||||
Asset-backed securities: | |||||||||||||||||||||||
Collateralized loan obligations | — | 10,972 | — | — | 10,972 | ||||||||||||||||||
Other | — | 3,536 | — | — | 3,536 | ||||||||||||||||||
Total available-for-sale securities | 116,581 | 105,302 | 186 | — | 222,069 | ||||||||||||||||||
Loans (e) | — | 45,036 | 2,020 | — | 47,056 | ||||||||||||||||||
Mortgage servicing rights | — | — | 7,439 | — | 7,439 | ||||||||||||||||||
Other assets(d) | 9,969 | 7,752 | 408 | — | 18,129 | ||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 315,489 | $ | 1,387,818 | $ | 22,290 | $ | (572,189) | $ | 1,153,408 | |||||||||||||
Deposits | $ | — | $ | 11,238 | $ | 2,032 | $ | — | $ | 13,270 | |||||||||||||
Federal funds purchased and securities loaned or sold under repurchase agreements | — | 156,340 | — | — | 156,340 | ||||||||||||||||||
Short-term borrowings | — | 14,778 | 2,101 | — | 16,879 | ||||||||||||||||||
Trading liabilities: | |||||||||||||||||||||||
Debt and equity instruments(c) | 104,871 | 32,964 | 56 | — | 137,891 | ||||||||||||||||||
Derivative payables: | |||||||||||||||||||||||
Interest rate | 2,706 | 232,342 | 2,164 | (225,687) | 11,525 | ||||||||||||||||||
Credit | — | 10,841 | 482 | (10,433) | 890 | ||||||||||||||||||
Foreign exchange | 240 | 258,116 | 930 | (240,045) | 19,241 | ||||||||||||||||||
Equity | — | 71,601 | 5,118 | (66,555) | 10,164 | ||||||||||||||||||
Commodity | — | 42,434 | 555 | (32,392) | 10,597 | ||||||||||||||||||
Total derivative payables | 2,946 | 615,334 | 9,249 | (575,112) | 52,417 | ||||||||||||||||||
Total trading liabilities | 107,817 | 648,298 | 9,305 | (575,112) | 190,308 | ||||||||||||||||||
Accounts payable and other liabilities | 6,752 | 2,928 | 73 | — | 9,753 | ||||||||||||||||||
Beneficial interests issued by consolidated VIEs | — | 5 | — | — | 5 | ||||||||||||||||||
Long-term debt | — | 42,985 | 23,077 | — | 66,062 | ||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 114,569 | $ | 876,572 | $ | 36,588 | $ | (575,112) | $ | 452,617 |
95
Fair value hierarchy | Derivative netting adjustments(f) | |||||||||||||||||||||||||
December 31, 2021 (in millions) | Level 1 | Level 2 | Level 3 | Total fair value | ||||||||||||||||||||||
Federal funds sold and securities purchased under resale agreements | $ | — | $ | 252,720 | $ | — | $ | — | $ | 252,720 | ||||||||||||||||
Securities borrowed | — | 81,463 | — | — | 81,463 | |||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||
Debt instruments: | ||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||
U.S. GSEs and government agencies(a) | — | 38,944 | 265 | — | 39,209 | |||||||||||||||||||||
Residential – nonagency | — | 2,358 | 28 | — | 2,386 | |||||||||||||||||||||
Commercial – nonagency | — | 1,506 | 10 | — | 1,516 | |||||||||||||||||||||
Total mortgage-backed securities | — | 42,808 | 303 | — | 43,111 | |||||||||||||||||||||
U.S. Treasury, GSEs and government agencies(a) | 68,527 | 9,181 | — | — | 77,708 | |||||||||||||||||||||
Obligations of U.S. states and municipalities | — | 7,068 | 7 | — | 7,075 | |||||||||||||||||||||
Certificates of deposit, bankers’ acceptances and commercial paper | — | 852 | — | — | 852 | |||||||||||||||||||||
Non-U.S. government debt securities | 26,982 | 44,581 | 81 | — | 71,644 | |||||||||||||||||||||
Corporate debt securities | — | 24,491 | 332 | — | 24,823 | |||||||||||||||||||||
Loans | — | 7,366 | 708 | — | 8,074 | |||||||||||||||||||||
Asset-backed securities | — | 2,668 | 26 | — | 2,694 | |||||||||||||||||||||
Total debt instruments | 95,509 | 139,015 | 1,457 | — | 235,981 | |||||||||||||||||||||
Equity securities | 86,904 | 1,741 | 662 | — | 89,307 | |||||||||||||||||||||
Physical commodities(b) | 5,357 | 20,788 | — | — | 26,145 | |||||||||||||||||||||
Other | — | 24,850 | 160 | — | 25,010 | |||||||||||||||||||||
Total debt and equity instruments(c) | 187,770 | 186,394 | 2,279 | — | 376,443 | |||||||||||||||||||||
Derivative receivables: | ||||||||||||||||||||||||||
Interest rate | 1,072 | 267,493 | 2,020 | (248,611) | 21,974 | |||||||||||||||||||||
Credit | — | 9,321 | 518 | (8,808) | 1,031 | |||||||||||||||||||||
Foreign exchange | 134 | 168,590 | 855 | (156,954) | 12,625 | |||||||||||||||||||||
Equity | — | 65,139 | 3,492 | (58,650) | 9,981 | |||||||||||||||||||||
Commodity | — | 26,232 | 421 | (15,183) | 11,470 | |||||||||||||||||||||
Total derivative receivables | 1,206 | 536,775 | 7,306 | (488,206) | 57,081 | |||||||||||||||||||||
Total trading assets(d) | 188,976 | 723,169 | 9,585 | (488,206) | 433,524 | |||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||
U.S. GSEs and government agencies(a) | 4 | 72,539 | — | — | 72,543 | |||||||||||||||||||||
Residential – nonagency | — | 6,070 | — | — | 6,070 | |||||||||||||||||||||
Commercial – nonagency | — | 4,949 | — | — | 4,949 | |||||||||||||||||||||
Total mortgage-backed securities | 4 | 83,558 | — | — | 83,562 | |||||||||||||||||||||
U.S. Treasury and government agencies | 177,463 | — | — | — | 177,463 | |||||||||||||||||||||
Obligations of U.S. states and municipalities | — | 15,860 | — | — | 15,860 | |||||||||||||||||||||
Non-U.S. government debt securities | 5,430 | 10,779 | — | — | 16,209 | |||||||||||||||||||||
Corporate debt securities | — | 160 | 161 | — | 321 | |||||||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||
Collateralized loan obligations | — | 9,662 | — | — | 9,662 | |||||||||||||||||||||
Other | — | 5,448 | — | — | 5,448 | |||||||||||||||||||||
Total available-for-sale securities | 182,897 | 125,467 | 161 | — | 308,525 | |||||||||||||||||||||
Loans(e) | — | 56,887 | 1,933 | — | 58,820 | |||||||||||||||||||||
Mortgage servicing rights | — | — | 5,494 | — | 5,494 | |||||||||||||||||||||
Other assets(d) | 9,558 | 4,139 | 306 | — | 14,003 | |||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 381,431 | $ | 1,243,845 | $ | 17,479 | $ | (488,206) | $ | 1,154,549 | ||||||||||||||||
Deposits | $ | — | $ | 9,016 | $ | 2,317 | $ | — | $ | 11,333 | ||||||||||||||||
Federal funds purchased and securities loaned or sold under repurchase agreements | — | 126,435 | — | — | 126,435 | |||||||||||||||||||||
Short-term borrowings | — | 17,534 | 2,481 | — | 20,015 | |||||||||||||||||||||
Trading liabilities: | ||||||||||||||||||||||||||
Debt and equity instruments(c) | 87,831 | 26,716 | 30 | — | 114,577 | |||||||||||||||||||||
Derivative payables: | ||||||||||||||||||||||||||
Interest rate | 981 | 237,714 | 2,036 | (232,537) | 8,194 | |||||||||||||||||||||
Credit | — | 10,468 | 444 | (10,032) | 880 | |||||||||||||||||||||
Foreign exchange | 123 | 174,349 | 1,274 | (161,649) | 14,097 | |||||||||||||||||||||
Equity | — | 72,609 | 7,118 | (62,494) | 17,233 | |||||||||||||||||||||
Commodity | — | 26,600 | 1,328 | (18,216) | 9,712 | |||||||||||||||||||||
Total derivative payables | 1,104 | 521,740 | 12,200 | (484,928) | 50,116 | |||||||||||||||||||||
Total trading liabilities | 88,935 | 548,456 | 12,230 | (484,928) | 164,693 | |||||||||||||||||||||
Accounts payable and other liabilities | 5,115 | 467 | 69 | — | 5,651 | |||||||||||||||||||||
Beneficial interests issued by consolidated VIEs | — | 12 | — | — | 12 | |||||||||||||||||||||
Long-term debt | — | 50,560 | 24,374 | — | 74,934 | |||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 94,050 | $ | 752,480 | $ | 41,471 | $ | (484,928) | $ | 403,073 |
(a)At June 30, 2022, and December 31, 2021, included total U.S. GSE obligations of $70.0 billion and $73.9 billion, respectively, which were mortgage-related.
(b)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 approximates fair value, because under fair value hedge accounting, the cost basis is adjusted for changes in fair value. Refer to Note 4 for a further discussion of the Firm’s hedge accounting relationships. To provide consistent fair value disclosure information, all physical commodities inventories have been included in each period presented.
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(c)Balances reflect the reduction of securities owned (long positions) by the amount of identical securities sold but not yet purchased (short positions).
(d)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not required to be classified in the fair value hierarchy. At June 30, 2022, and December 31, 2021, the fair values of these investments, which include certain hedge funds, private equity funds, real estate and other funds, were $856 million and $801 million, respectively. Included in these balances at June 30, 2022, and December 31, 2021, were trading assets of $45 million and $51 million, respectively, and other assets of $811 million and $750 million, respectively.
(e)At June 30, 2022, and December 31, 2021, included $13.5 billion and $26.2 billion, respectively, of residential first-lien mortgages, and $7.7 billion and $8.2 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 $4.4 billion and $13.6 billion, respectively.
(f)As permitted under U.S. GAAP, the Firm has elected to net derivative receivables and derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists. The level 3 balances would be reduced if netting were applied, including the netting benefit associated with cash collateral.
Level 3 valuations
Refer to Note 2 of JPMorgan Chase’s 2021 Form 10-K for further information on the Firm’s valuation process and a detailed discussion of the determination of fair value for individual financial instruments.
The following table presents the Firm’s primary level 3 financial instruments, the valuation techniques used to measure the fair value of those financial instruments, the significant unobservable inputs, the range of values for those inputs and the weighted or arithmetic averages of such inputs. While the determination to classify an instrument within level 3 is based on the significance of the unobservable inputs to the overall fair value measurement, level 3 financial instruments typically include observable components (that is, components that are actively quoted and can be validated to external sources) in addition to the unobservable components. The level 1 and/or level 2 inputs 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.
In the Firm’s view, the input range, weighted and arithmetic average values do not reflect the degree of input uncertainty or an assessment of the reasonableness of the Firm’s estimates and assumptions. Rather, they reflect the characteristics of the various instruments held by the Firm and the relative distribution of instruments within the range of characteristics. For example, two option contracts may have similar levels of market risk exposure and valuation uncertainty, but may have significantly different implied volatility levels because the option contracts have different underlyings, tenors, or strike prices. The input range and weighted average values will therefore vary from period-to-period and parameter-to-parameter based on the characteristics of the instruments held by the Firm at each balance sheet date.
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Level 3 inputs(a) | |||||||||||||||||||||||||||||
June 30, 2022 | |||||||||||||||||||||||||||||
Product/Instrument | Fair value (in millions) | Principal valuation technique | Unobservable inputs(g) | Range of input values | Average(i) | ||||||||||||||||||||||||
Residential mortgage-backed securities and loans(b) | $ | 1,731 | Discounted cash flows | Yield | 3% | – | 18% | 6% | |||||||||||||||||||||
Prepayment speed | 2% | – | 12% | 9% | |||||||||||||||||||||||||
Conditional default rate | 0% | – | 5% | 0% | |||||||||||||||||||||||||
Loss severity | 0% | – | 110% | 3% | |||||||||||||||||||||||||
Commercial mortgage-backed securities and loans(c) | 418 | Market comparables | Price | $0 | – | $103 | $87 | ||||||||||||||||||||||
Corporate debt securities | 760 | Market comparables | Price | $0 | – | $243 | $94 | ||||||||||||||||||||||
Loans(d) | 1,596 | Market comparables | Price | $0 | – | $356 | $89 | ||||||||||||||||||||||
Non-U.S. government debt securities | 205 | Market comparables | Price | $6 | – | $109 | $94 | ||||||||||||||||||||||
Net interest rate derivatives | 415 | Option pricing | Interest rate volatility | 22 bps | – | 836 bps | 141 bps | ||||||||||||||||||||||
Interest rate spread volatility | 11 bps | – | 23 bps | 15 bps | |||||||||||||||||||||||||
Interest rate correlation | (82)% | – | 89% | 17% | |||||||||||||||||||||||||
IR-FX correlation | (35)% | – | 65% | 6% | |||||||||||||||||||||||||
5 | Discounted cash flows | Prepayment speed | 0% | – | 30% | 7% | |||||||||||||||||||||||
Net credit derivatives | 227 | Discounted cash flows | Credit correlation | 30% | – | 60% | 47% | ||||||||||||||||||||||
Credit spread | 1 bps | – | 5,308 bps | 656 bps | |||||||||||||||||||||||||
Recovery rate | 12% | – | 67% | 45% | |||||||||||||||||||||||||
22 | Market comparables | Price | $0 | – | $115 | $79 | |||||||||||||||||||||||
Net foreign exchange derivatives | 338 | Option pricing | IR-FX correlation | (40)% | – | 65% | 18% | ||||||||||||||||||||||
(93) | Discounted cash flows | Prepayment speed | 9% | 9% | |||||||||||||||||||||||||
Interest rate curve | 2% | – | 42% | 11% | |||||||||||||||||||||||||
Net equity derivatives | (1,234) | Option pricing | Forward equity price(h) | 80% | – | 138% | 100% | ||||||||||||||||||||||
Equity volatility | 4% | – | 127% | 36% | |||||||||||||||||||||||||
Equity correlation | 17% | – | 98% | 55% | |||||||||||||||||||||||||
Equity-FX correlation | (77)% | – | 59% | (26)% | |||||||||||||||||||||||||
Equity-IR correlation | 15% | – | 50% | 28% | |||||||||||||||||||||||||
Net commodity derivatives | 26 | Option pricing | Oil commodity forward | $128 / BBL | – | $347 / BBL | $237 / BBL | ||||||||||||||||||||||
Industrial metals commodity forward | $1,854 / MT | – | $3,313 / MT | $2,583 / MT | |||||||||||||||||||||||||
Commodity volatility | 4% | – | 150% | 77% | |||||||||||||||||||||||||
Commodity correlation | (30)% | – | 98% | 34% | |||||||||||||||||||||||||
MSRs | 7,439 | Discounted cash flows | Refer to Note 14 | ||||||||||||||||||||||||||
Long-term debt, short-term borrowings, and deposits(e) | 26,284 | Option pricing | Interest rate volatility | 22 bps | – | 836 bps | 141 bps | ||||||||||||||||||||||
Interest rate correlation | (82)% | – | 89% | 17% | |||||||||||||||||||||||||
IR-FX correlation | (35)% | – | 65% | 6% | |||||||||||||||||||||||||
Equity correlation | 17% | – | 98% | 55% | |||||||||||||||||||||||||
Equity-FX correlation | (77)% | – | 59% | (26)% | |||||||||||||||||||||||||
Equity-IR correlation | 15% | – | 50% | 28% | |||||||||||||||||||||||||
926 | Discounted cash flows | Credit correlation | 30% | – | 60% | 47% | |||||||||||||||||||||||
Other level 3 assets and liabilities, net(f) | 1,057 | ||||||||||||||||||||||||||||
(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. GSE and government agency securities of $803 million, nonagency securities of $14 million and non-trading loans of $914 million.
(c)Comprises nonagency securities of $10 million, trading loans of $40 million and non-trading loans of $368 million.
(d)Comprises trading loans of $858 million and non-trading loans of $738 million.
(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 equity securities of $918 million including $257 million in Other Assets, for which quoted prices are not readily available and the fair value is generally based on internal valuation techniques such as EBITDA multiples and comparable analysis. All other level 3 assets and liabilities 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.
(i)Amounts represent weighted averages except for derivative related inputs where arithmetic averages are used.
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Changes in and ranges of unobservable inputs
Refer to Note 2 of JPMorgan Chase’s 2021 Form 10-K for a discussion of the impact on fair value of changes in unobservable inputs and the relationships between unobservable inputs as well as a description of attributes of the underlying instruments and external market factors that affect the range of inputs used in the valuation of the Firm’s positions.
Changes in level 3 recurring fair value measurements
The following tables include a rollforward of the Consolidated balance sheets amounts (including changes in fair value) for financial instruments classified by the Firm within level 3 of the fair value hierarchy for the three and six months ended June 30, 2022 and 2021. When a determination is made to classify a financial instrument within level 3, the determination is based on the significance of the unobservable inputs to the overall fair value measurement. However, level 3 financial instruments typically include, in addition to the unobservable or level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources); accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology. Also, the Firm risk-manages the observable components of level 3 financial instruments using securities and derivative positions that are classified within level 1 or 2 of the fair value hierarchy; as these level 1 and level 2 risk management instruments are not included below, the gains or losses in the following tables do not reflect the effect of the Firm’s risk management activities related to such level 3 instruments.
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Fair value measurements using significant unobservable inputs | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2022 (in millions) | Fair value at April 1, 2022 | Total realized/unrealized gains/(losses) | Transfers into level 3 | Transfers (out of) level 3 | Fair value at June 30, 2022 | Change in unrealized gains/(losses) related to financial instruments held at June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||
Purchases(g) | Sales | Settlements(h) | |||||||||||||||||||||||||||||||||||||||||||||
Assets:(a) | |||||||||||||||||||||||||||||||||||||||||||||||
Federal funds sold and securities purchased under resale agreements | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1 | $ | — | $ | 1 | $ | — | |||||||||||||||||||||||||||||
Trading assets: | |||||||||||||||||||||||||||||||||||||||||||||||
Debt instruments: | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. GSEs and government agencies | $ | 286 | $ | (1) | $ | 643 | $ | (118) | $ | (7) | $ | — | $ | — | $ | 803 | $ | (2) | |||||||||||||||||||||||||||||
Residential – nonagency | 10 | — | 5 | — | (1) | — | — | 14 | — | ||||||||||||||||||||||||||||||||||||||
Commercial – nonagency | 10 | — | — | — | — | — | — | 10 | — | ||||||||||||||||||||||||||||||||||||||
Total mortgage-backed securities | 306 | (1) | 648 | (118) | (8) | — | — | 827 | (2) | ||||||||||||||||||||||||||||||||||||||
Obligations of U.S. states and municipalities | 7 | — | — | — | — | — | — | 7 | — | ||||||||||||||||||||||||||||||||||||||
Non-U.S. government debt securities | 133 | (9) | 177 | (86) | — | 6 | (16) | 205 | (8) | ||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 293 | (16) | 272 | (12) | — | 57 | (20) | 574 | (16) | ||||||||||||||||||||||||||||||||||||||
Loans | 1,049 | (33) | 122 | (164) | (152) | 254 | (178) | 898 | (32) | ||||||||||||||||||||||||||||||||||||||
Asset-backed securities | 28 | — | 1 | (10) | — | 1 | — | 20 | — | ||||||||||||||||||||||||||||||||||||||
Total debt instruments | 1,816 | (59) | 1,220 | (390) | (160) | 318 | (214) | 2,531 | (58) | ||||||||||||||||||||||||||||||||||||||
Equity securities | 663 | (99) | 98 | (61) | — | 106 | (46) | 661 | (90) | ||||||||||||||||||||||||||||||||||||||
Physical commodities | — | — | 2 | — | — | — | — | 2 | — | ||||||||||||||||||||||||||||||||||||||
Other | 175 | 66 | 6 | — | (158) | — | (2) | 87 | 60 | ||||||||||||||||||||||||||||||||||||||
Total trading assets – debt and equity instruments | 2,654 | (92) | (c) | 1,326 | (451) | (318) | 424 | (262) | 3,281 | (88) | (c) | ||||||||||||||||||||||||||||||||||||
Net derivative receivables:(b) | |||||||||||||||||||||||||||||||||||||||||||||||
Interest rate | 367 | 160 | 99 | (135) | 105 | 44 | (220) | 420 | 204 | ||||||||||||||||||||||||||||||||||||||
Credit | 44 | 264 | 4 | (3) | (65) | 1 | 4 | 249 | 255 | ||||||||||||||||||||||||||||||||||||||
Foreign exchange | 76 | 193 | 15 | (19) | (38) | 24 | (6) | 245 | 174 | ||||||||||||||||||||||||||||||||||||||
Equity | (2,583) | 1,838 | 162 | (466) | (140) | (227) | 182 | (1,234) | 1,788 | ||||||||||||||||||||||||||||||||||||||
Commodity | (414) | 382 | 18 | (69) | 112 | (1) | (2) | 26 | 423 | ||||||||||||||||||||||||||||||||||||||
Total net derivative receivables | (2,510) | 2,837 | (c) | 298 | (692) | (26) | (159) | (42) | (294) | 2,844 | (c) | ||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 205 | (19) | — | — | — | — | — | 186 | (19) | ||||||||||||||||||||||||||||||||||||||
Total available-for-sale securities | 205 | (19) | (d) | — | — | — | — | — | 186 | (19) | (d) | ||||||||||||||||||||||||||||||||||||
Loans | 2,072 | (82) | (c) | 273 | (95) | (250) | 226 | (124) | 2,020 | (80) | (c) | ||||||||||||||||||||||||||||||||||||
Mortgage servicing rights | 7,294 | 654 | (e) | 341 | (614) | (236) | — | — | 7,439 | 654 | (e) | ||||||||||||||||||||||||||||||||||||
Other assets | 341 | 116 | (c) | 5 | (28) | (20) | — | (6) | 408 | 116 | (c) | ||||||||||||||||||||||||||||||||||||
Fair value measurements using significant unobservable inputs | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2022 (in millions) | Fair value at April 1, 2022 | Total realized/unrealized (gains)/losses | Transfers into level 3 | Transfers (out of) level 3 | Fair value at June 30, 2022 | Change in unrealized (gains)/losses related to financial instruments held at June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||
Purchases | Sales | Issuances | Settlements(h) | ||||||||||||||||||||||||||||||||||||||||||||
Liabilities:(a) | |||||||||||||||||||||||||||||||||||||||||||||||
Deposits | $ | 2,121 | $ | (160) | (c)(f) | $ | — | $ | — | $ | 138 | $ | (21) | $ | — | $ | (46) | $ | 2,032 | $ | (160) | (c)(f) | |||||||||||||||||||||||||
Short-term borrowings | 2,146 | 14 | (c)(f) | — | — | 963 | (1,036) | 14 | — | 2,101 | 93 | (c)(f) | |||||||||||||||||||||||||||||||||||
Trading liabilities – debt and equity instruments | 41 | 1 | (c) | (20) | 4 | — | — | 30 | — | 56 | 1 | (c) | |||||||||||||||||||||||||||||||||||
Accounts payable and other liabilities | 108 | (2) | (c) | (28) | 1 | — | — | — | (6) | 73 | (2) | (c) | |||||||||||||||||||||||||||||||||||
Beneficial interests issued by consolidated VIEs | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Long-term debt | 24,394 | (2,640) | (c)(f) | — | — | 3,470 | (2,045) | 179 | (281) | 23,077 | (2,613) | (c)(f) |
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Fair value measurements using significant unobservable inputs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2021 (in millions) | Fair value at April 1, 2021 | Total realized/unrealized gains/(losses) | Transfers into level 3 | Transfers (out of) level 3 | Fair value at June 30, 2021 | Change in unrealized gains/(losses) related to financial instruments held at June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Purchases(g) | Sales | Settlements(h) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Assets:(a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Trading assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt instruments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. GSEs and government agencies | $ | 397 | $ | (33) | $ | 1 | $ | (8) | $ | (28) | $ | 1 | $ | (1) | $ | 329 | $ | (34) | |||||||||||||||||||||||||||||||||||
Residential – nonagency | 32 | — | 6 | (21) | (1) | — | — | 16 | — | ||||||||||||||||||||||||||||||||||||||||||||
Commercial – nonagency | 2 | — | 11 | — | (3) | — | — | 10 | 1 | ||||||||||||||||||||||||||||||||||||||||||||
Total mortgage-backed securities | 431 | (33) | 18 | (29) | (32) | 1 | (1) | 355 | (33) | ||||||||||||||||||||||||||||||||||||||||||||
Obligations of U.S. states and municipalities | 8 | — | — | — | — | — | — | 8 | — | ||||||||||||||||||||||||||||||||||||||||||||
Non-U.S. government debt securities | 177 | 1 | 84 | (79) | — | — | — | 183 | (1) | ||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 370 | 30 | 228 | (154) | — | 28 | (15) | 487 | 30 | ||||||||||||||||||||||||||||||||||||||||||||
Loans | 832 | (1) | 294 | (85) | (125) | 85 | (205) | 795 | 1 | ||||||||||||||||||||||||||||||||||||||||||||
Asset-backed securities | 54 | 8 | 10 | (36) | (1) | — | — | 35 | 1 | ||||||||||||||||||||||||||||||||||||||||||||
Total debt instruments | 1,872 | 5 | 634 | (383) | (158) | 114 | (221) | 1,863 | (2) | ||||||||||||||||||||||||||||||||||||||||||||
Equity securities | 688 | 8 | 23 | (27) | — | 24 | (26) | 690 | 15 | ||||||||||||||||||||||||||||||||||||||||||||
Other | 122 | 7 | 36 | — | (26) | 3 | (95) | 47 | 19 | ||||||||||||||||||||||||||||||||||||||||||||
Total trading assets – debt and equity instruments | 2,682 | 20 | (c) | 693 | (410) | (184) | 141 | (342) | 2,600 | 32 | (c) | ||||||||||||||||||||||||||||||||||||||||||
Net derivative receivables:(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate | 149 | 524 | 18 | (9) | (657) | (2) | (45) | (22) | 198 | ||||||||||||||||||||||||||||||||||||||||||||
Credit | (4) | (34) | 1 | (2) | 17 | (6) | 11 | (17) | (13) | ||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange | (539) | 2 | 37 | (48) | (12) | 1 | (24) | (583) | (104) | ||||||||||||||||||||||||||||||||||||||||||||
Equity | (3,834) | (941) | 281 | (407) | 600 | (91) | (544) | (4,936) | (942) | ||||||||||||||||||||||||||||||||||||||||||||
Commodity | (911) | (347) | 6 | (81) | 165 | — | 1 | (1,167) | (198) | ||||||||||||||||||||||||||||||||||||||||||||
Total net derivative receivables | (5,139) | (796) | (c) | 343 | (547) | 113 | (98) | (601) | (6,725) | (1,059) | (c) | ||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Total available-for-sale securities | — | — | (d) | — | — | — | — | — | — | — | (d) | ||||||||||||||||||||||||||||||||||||||||||
Loans | 1,823 | 7 | (c) | 240 | (135) | (318) | 445 | (328) | 1,734 | (11) | (c) | ||||||||||||||||||||||||||||||||||||||||||
Mortgage servicing rights | 4,470 | (528) | (e) | 814 | (25) | (182) | — | — | 4,549 | (528) | (e) | ||||||||||||||||||||||||||||||||||||||||||
Other assets | 511 | 31 | (c) | 4 | — | (27) | — | (1) | 518 | 35 | (c) | ||||||||||||||||||||||||||||||||||||||||||
Fair value measurements using significant unobservable inputs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2021 (in millions) | Fair value at April 1, 2021 | Total realized/unrealized (gains)/losses | Transfers into level 3 | Transfers (out of) level 3 | Fair value at June 30, 2021 | Change in unrealized (gains)/losses related to financial instruments held at June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Purchases | Sales | Issuances | Settlements(h) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities:(a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | $ | 2,652 | $ | 47 | (c)(f) | $ | — | $ | — | $ | 150 | $ | (93) | $ | 1 | $ | (73) | $ | 2,684 | $ | 47 | (c)(f) | |||||||||||||||||||||||||||||||
Short-term borrowings | 3,664 | (283) | (c)(f) | — | — | 1,395 | (1,706) | 9 | (4) | 3,075 | 35 | (c)(f) | |||||||||||||||||||||||||||||||||||||||||
Trading liabilities – debt and equity instruments | 60 | (1) | (c) | (27) | 13 | — | — | — | (9) | 36 | — | ||||||||||||||||||||||||||||||||||||||||||
Accounts payable and other liabilities | 61 | (9) | (c) | — | — | — | — | — | (1) | 51 | (8) | (c) | |||||||||||||||||||||||||||||||||||||||||
Beneficial interests issued by consolidated VIEs | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Long-term debt | 22,575 | 714 | (c)(f) | — | — | 3,469 | (3,089) | 7 | (149) | 23,527 | 708 | (c)(f) |
101
Fair value measurements using significant unobservable inputs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, 2022 (in millions) | Fair value at Jan 1, 2022 | Total realized/unrealized gains/(losses) | Transfers into level 3 | Transfers (out of) level 3 | Fair value at June 30, 2022 | Change in unrealized gains/(losses) related to financial instruments held at June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Purchases(g) | Sales | Settlements(h) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Assets:(a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Federal funds sold and securities purchased under resale agreements | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1 | $ | — | $ | 1 | $ | — | |||||||||||||||||||||||||||||||||||
Trading assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt instruments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. GSEs and government agencies | $ | 265 | $ | 26 | $ | 665 | $ | (125) | $ | (28) | $ | — | $ | — | $ | 803 | $ | 24 | |||||||||||||||||||||||||||||||||||
Residential – nonagency | 28 | — | 5 | — | (12) | — | (7) | 14 | (1) | ||||||||||||||||||||||||||||||||||||||||||||
Commercial – nonagency | 10 | — | — | — | — | — | — | 10 | — | ||||||||||||||||||||||||||||||||||||||||||||
Total mortgage-backed securities | 303 | 26 | 670 | (125) | (40) | — | (7) | 827 | 23 | ||||||||||||||||||||||||||||||||||||||||||||
Obligations of U.S. states and municipalities | 7 | — | — | — | — | — | — | 7 | — | ||||||||||||||||||||||||||||||||||||||||||||
Non-U.S. government debt securities | 81 | (42) | 405 | (266) | — | 43 | (16) | 205 | (106) | ||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 332 | (35) | 333 | (71) | (37) | 98 | (46) | 574 | (44) | ||||||||||||||||||||||||||||||||||||||||||||
Loans | 708 | (37) | 419 | (262) | (159) | 525 | (296) | 898 | (13) | ||||||||||||||||||||||||||||||||||||||||||||
Asset-backed securities | 26 | — | 2 | (10) | — | 5 | (3) | 20 | — | ||||||||||||||||||||||||||||||||||||||||||||
Total debt instruments | 1,457 | (88) | 1,829 | (734) | (236) | 671 | (368) | 2,531 | (140) | ||||||||||||||||||||||||||||||||||||||||||||
Equity securities | 662 | (912) | 321 | (301) | — | 959 | (68) | 661 | (474) | ||||||||||||||||||||||||||||||||||||||||||||
Physical Commodities | — | — | 2 | — | — | — | — | 2 | — | ||||||||||||||||||||||||||||||||||||||||||||
Other | 160 | 67 | 26 | — | (163) | — | (3) | 87 | 70 | ||||||||||||||||||||||||||||||||||||||||||||
Total trading assets – debt and equity instruments | 2,279 | (933) | (c) | 2,178 | (1,035) | (399) | 1,630 | (439) | 3,281 | (544) | (c) | ||||||||||||||||||||||||||||||||||||||||||
Net derivative receivables:(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate | (16) | 393 | 225 | (229) | 256 | 17 | (226) | 420 | 428 | ||||||||||||||||||||||||||||||||||||||||||||
Credit | 74 | 331 | 8 | (7) | (161) | (2) | 6 | 249 | 330 | ||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange | (419) | 538 | 147 | (43) | 32 | 18 | (28) | 245 | 486 | ||||||||||||||||||||||||||||||||||||||||||||
Equity | (3,626) | 2,568 | 660 | (1,025) | 303 | (558) | 444 | (1,234) | 2,975 | ||||||||||||||||||||||||||||||||||||||||||||
Commodity | (907) | 804 | 68 | (206) | 268 | (1) | — | 26 | 469 | ||||||||||||||||||||||||||||||||||||||||||||
Total net derivative receivables | (4,894) | 4,634 | (c) | 1,108 | (1,510) | 698 | (526) | 196 | (294) | 4,688 | (c) | ||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 161 | 8 | 17 | — | — | — | — | 186 | 8 | ||||||||||||||||||||||||||||||||||||||||||||
Total available-for-sale securities | 161 | 8 | (d) | 17 | — | — | — | — | 186 | 8 | (d) | ||||||||||||||||||||||||||||||||||||||||||
Loans | 1,933 | 16 | (c) | 394 | (100) | (531) | 616 | (308) | 2,020 | (24) | (c) | ||||||||||||||||||||||||||||||||||||||||||
Mortgage servicing rights | 5,494 | 1,613 | (e) | 1,471 | (671) | (468) | — | — | 7,439 | 1,613 | (e) | ||||||||||||||||||||||||||||||||||||||||||
Other assets | 306 | 125 | (c) | 46 | (28) | (37) | 2 | (6) | 408 | 119 | (c) | ||||||||||||||||||||||||||||||||||||||||||
Fair value measurements using significant unobservable inputs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, 2022 (in millions) | Fair value at Jan 1, 2022 | Total realized/unrealized (gains)/losses | Transfers into level 3 | Transfers (out of) level 3 | Fair value at June 30, 2022 | Change in unrealized (gains)/losses related to financial instruments held at June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Purchases | Sales | Issuances | Settlements(h) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities:(a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | $ | 2,317 | $ | (302) | (c)(f) | $ | — | $ | — | $ | 246 | $ | (69) | $ | — | $ | (160) | $ | 2,032 | $ | (298) | (c)(f) | |||||||||||||||||||||||||||||||
Short-term borrowings | 2,481 | (387) | (c)(f) | — | — | 2,386 | (2,383) | 15 | (11) | 2,101 | 7 | (c)(f) | |||||||||||||||||||||||||||||||||||||||||
Trading liabilities – debt and equity instruments | 30 | (16) | (c) | (34) | 34 | — | — | 44 | (2) | 56 | 15 | (c) | |||||||||||||||||||||||||||||||||||||||||
Accounts payable and other liabilities | 69 | (6) | (c) | (28) | 43 | — | — | 1 | (6) | 73 | (6) | (c) | |||||||||||||||||||||||||||||||||||||||||
Long-term debt | 24,374 | (4,308) | (c)(f) | — | — | 7,520 | (4,521) | 442 | (430) | 23,077 | (4,151) | (c)(f) |
102
Fair value measurements using significant unobservable inputs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, 2021 (in millions) | Fair value at Jan 1, 2021 | Total realized/unrealized gains/(losses) | Transfers into level 3 | Transfers (out of) level 3 | Fair value at June 30, 2021 | Change in unrealized gains/(losses) related to financial instruments held at June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Purchases(g) | Sales | Settlements(h) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Assets:(a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Trading assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt instruments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. GSEs and government agencies | $ | 449 | $ | (10) | $ | 7 | $ | (56) | $ | (61) | $ | 1 | $ | (1) | $ | 329 | $ | (12) | |||||||||||||||||||||||||||||||||||
Residential – nonagency | 28 | 1 | 15 | (24) | (3) | — | (1) | 16 | — | ||||||||||||||||||||||||||||||||||||||||||||
Commercial – nonagency | 3 | — | 11 | (1) | (3) | — | — | 10 | — | ||||||||||||||||||||||||||||||||||||||||||||
Total mortgage-backed securities | 480 | (9) | 33 | (81) | (67) | 1 | (2) | 355 | (12) | ||||||||||||||||||||||||||||||||||||||||||||
Obligations of U.S. states and municipalities | 8 | — | — | — | — | — | — | 8 | — | ||||||||||||||||||||||||||||||||||||||||||||
Non-U.S. government debt securities | 182 | (8) | 202 | (186) | (7) | — | — | 183 | (7) | ||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 507 | 15 | 319 | (300) | — | 113 | (167) | 487 | 14 | ||||||||||||||||||||||||||||||||||||||||||||
Loans | 893 | 6 | 566 | (237) | (126) | 175 | (482) | 795 | 3 | ||||||||||||||||||||||||||||||||||||||||||||
Asset-backed securities | 28 | 7 | 38 | (39) | (1) | 2 | — | 35 | 7 | ||||||||||||||||||||||||||||||||||||||||||||
Total debt instruments | 2,098 | 11 | 1,158 | (843) | (201) | 291 | (651) | 1,863 | 5 | ||||||||||||||||||||||||||||||||||||||||||||
Equity securities | 476 | 3 | 253 | (70) | — | 78 | (50) | 690 | 13 | ||||||||||||||||||||||||||||||||||||||||||||
Other | 49 | 48 | 101 | — | (55) | 3 | (99) | 47 | 28 | ||||||||||||||||||||||||||||||||||||||||||||
Total trading assets – debt and equity instruments | 2,623 | 62 | (c) | 1,512 | (913) | (256) | 372 | (800) | 2,600 | 46 | (c) | ||||||||||||||||||||||||||||||||||||||||||
Net derivative receivables:(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate | 258 | 969 | 71 | (102) | (1,191) | 55 | (82) | (22) | 233 | ||||||||||||||||||||||||||||||||||||||||||||
Credit | (224) | 149 | 2 | (4) | 44 | (9) | 25 | (17) | 134 | ||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange | (434) | (198) | 39 | (54) | 99 | 11 | (46) | (583) | 32 | ||||||||||||||||||||||||||||||||||||||||||||
Equity | (3,862) | (918) | 475 | (1,245) | 726 | 19 | (131) | (4,936) | (1,258) | ||||||||||||||||||||||||||||||||||||||||||||
Commodity | (731) | (593) | 10 | (294) | 444 | (1) | (2) | (1,167) | (554) | ||||||||||||||||||||||||||||||||||||||||||||
Total net derivative receivables | (4,993) | (591) | (c) | 597 | (1,699) | 122 | 75 | (236) | (6,725) | (1,413) | (c) | ||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Total available-for-sale securities | — | — | (d) | — | — | — | — | — | — | — | (d) | ||||||||||||||||||||||||||||||||||||||||||
Loans | 2,305 | (66) | (c) | 307 | (325) | (519) | 600 | (568) | 1,734 | (72) | (c) | ||||||||||||||||||||||||||||||||||||||||||
Mortgage servicing rights | 3,276 | 269 | (e) | 1,397 | (24) | (369) | — | — | 4,549 | 269 | (e) | ||||||||||||||||||||||||||||||||||||||||||
Other assets | 538 | 44 | (c) | 7 | (18) | (52) | — | (1) | 518 | 63 | (c) | ||||||||||||||||||||||||||||||||||||||||||
Fair value measurements using significant unobservable inputs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, 2021 (in millions) | Fair value at Jan 1, 2021 | Total realized/unrealized (gains)/losses | Transfers into level 3 | Transfers (out of) level 3 | Fair value at June 30, 2021 | Change in unrealized (gains)/losses related to financial instruments held at June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Purchases | Sales | Issuances | Settlements(h) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities:(a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | $ | 2,913 | $ | (56) | (c)(f) | $ | — | $ | — | $ | 219 | $ | (188) | $ | 2 | $ | (206) | $ | 2,684 | $ | (56) | (c)(f) | |||||||||||||||||||||||||||||||
Short-term borrowings | 2,420 | (396) | (c)(f) | — | — | 4,313 | (3,212) | 9 | (59) | 3,075 | 18 | (c)(f) | |||||||||||||||||||||||||||||||||||||||||
Trading liabilities – debt and equity instruments | 51 | (4) | (c) | (92) | 34 | — | — | 59 | (12) | 36 | 10 | (c) | |||||||||||||||||||||||||||||||||||||||||
Accounts payable and other liabilities | 68 | (10) | (c) | — | 1 | — | — | — | (8) | 51 | (10) | (c) | |||||||||||||||||||||||||||||||||||||||||
Long-term debt | 23,397 | 406 | (c)(f) | — | — | 6,934 | (6,738) | 18 | (490) | 23,527 | 305 | (c)(f) |
(a)Level 3 assets at fair value as a percentage of total Firm assets at fair value (including assets measured at fair value on a nonrecurring basis) were 2% at both June 30, 2022 and December 31, 2021. Level 3 liabilities at fair value as a percentage of total Firm liabilities at fair value (including liabilities measured at fair value on a nonrecurring basis) were 8% and 10% at June 30, 2022 and December 31, 2021, respectively.
(b)All level 3 derivatives are presented on a net basis, irrespective of the underlying counterparty.
103
(c)Predominantly reported in principal transactions revenue, except for changes in fair value for CCB mortgage loans and lending-related commitments originated with the intent to sell, and mortgage loan purchase commitments, which are reported in mortgage fees and related income.
(d)Realized gains/(losses) on AFS securities are reported in investment securities gains/(losses). Unrealized gains/(losses) are reported in OCI. There were no realized gains/(losses) recorded in income on AFS securities for the three and six months ended June 30, 2022 and 2021, respectively. Unrealized gains/(losses) recorded on AFS securities in OCI were $(19) million and zero for the three months ended June 30, 2022 and 2021, respectively and $8 million and zero for the six months ended June 30, 2022 and 2021, respectively.
(e)Changes in fair value for MSRs are reported in mortgage fees and related income.
(f)Realized (gains)/losses due to DVA for fair value option elected liabilities are reported in principal transactions revenue, and were not material for the three and six months ended June 30, 2022 and 2021. Unrealized (gains)/losses are reported in OCI, and were $(344) million and $5 million for the three months ended June 30, 2022 and 2021, respectively and $(574) million and $(17) million for the six months ended June 30, 2022 and 2021, respectively.
(g)Loan originations are included in purchases.
(h)Includes financial assets and liabilities that have matured, been partially or fully repaid, impacts of modifications, deconsolidations associated with beneficial interests in VIEs and other items.
Level 3 analysis
Consolidated balance sheets changes
The following describes significant changes to level 3 assets since December 31, 2021, for those items measured at fair value on a recurring basis. Refer to Assets and liabilities measured at fair value on a nonrecurring basis on page 106 for further information on changes impacting items measured at fair value on a nonrecurring basis.
Three and six months ended June 30, 2022
Level 3 assets were $22.3 billion at June 30, 2022, reflecting an increase of $329 million from March 31, 2022, and an increase of $4.8 billion from December 31, 2021.
The increase for the six months ended June 30, 2022 was largely driven by:
•$1.6 billion increase in gross derivative receivables due to gains and purchases largely offset by net transfers.
•$1.9 billion increase in MSRs.
Refer to Note 14 for information on MSRs.
Refer to the sections below for additional information.
Transfers between levels for instruments carried at fair value on a recurring basis
For the three months ended June 30, 2022, there were no significant transfers from level 2 into level 3.
For the three months ended June 30, 2022, significant transfers from level 3 into level 2 included the following:
•$930 million of gross interest rate derivative receivables as a result of an increase in observability and a decrease in the significance of unobservable inputs.
For the six months ended June 30, 2022, significant transfers from level 2 into level 3 included the following:
•$1.6 billion of total debt and equity instruments, largely due to equity securities of $959 million driven by a decrease in observability predominantly as a result of restricted access to certain markets.
•$1.3 billion of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs.
For the six months ended June 30, 2022, significant transfers from level 3 into level 2 included the following:
•$965 million of gross interest rate derivative receivables as a result of an increase in observability and a decrease in the significance of unobservable inputs.
•$920 million and $1.4 billion of gross equity derivative receivables and gross equity derivative payables, respectively, as a result of an increase in observability and a decrease in the significance of unobservable inputs.
For the three and six months ended June 30, 2021, there were no significant transfers from level 2 into level 3.
For the three months ended June 30, 2021, significant transfers from level 3 into level 2 included the following:
•$1.0 billion of gross equity derivative receivables as a result of an increase in observability and a decrease in the significance of unobservable inputs.
For the six months ended June 30, 2021, significant transfers from level 3 into level 2 included the following:
•$800 million of total debt and equity instruments, largely trading loans, driven by an increase in observability.
•$1.3 billion and $1.1 billion of gross equity derivative receivables and gross equity derivative payables, respectively, as a result of an increase in observability and a decrease in the significance of unobservable inputs.
All transfers are based on changes in the observability and/or significance of the valuation inputs and are assumed to occur at the beginning of the quarterly reporting period in which they occur.
104
Gains and losses
The following describes significant components of total realized/unrealized gains/(losses) for instruments measured at fair value on a recurring basis for the periods indicated. These amounts exclude any effects of the Firm’s risk management activities where the financial instruments are classified as level 1 and 2 of the fair value hierarchy. Refer to Changes in level 3 recurring fair value measurements rollforward tables on pages 99-104 for further information on these instruments.
Three months ended June 30, 2022
•$3.4 billion of net gains on assets, largely driven by gains in net equity derivative receivables due to market movements and MSRs reflecting lower prepayment speeds on higher rates.
•$2.8 billion of net gains on liabilities, predominantly driven by gains in long-term debt due to market movements.
Three months ended June 30, 2021
•$1.3 billion of net losses on assets, driven by losses in net equity derivative receivables due to market movements and losses in MSRs reflecting faster prepayment speeds on lower rates.
•$468 million of net losses on liabilities, driven by losses in long-term debt partially offset by gains in short-term borrowings, due to market movements.
Six months ended June 30, 2022
•$5.5 billion of net gains on assets, predominantly driven by gains in net equity derivative receivables due to market movements and MSRs reflecting lower prepayment speeds on higher rates.
•$5.0 billion of net gains on liabilities, predominantly driven by gains in long-term debt due to market movements.
Six months ended June 30, 2021
•$282 million of net losses on assets, driven by losses in net derivative receivables due to market movements largely offset by gains in MSRs reflecting lower prepayment speeds on higher rates.
Refer to Note 14 for information on MSRs.
Credit and funding adjustments — derivatives
The following table provides the impact of credit and funding adjustments on principal transactions revenue in the respective periods, excluding the effect of any associated hedging activities. The FVA presented below includes the impact of the Firm’s own credit quality on the inception value of liabilities as well as the impact of changes in the Firm’s own credit quality over time.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Credit and funding adjustments: | |||||||||||||||||||||||
Derivatives CVA | $ | 147 | $ | 43 | $ | (165) | $ | 283 | |||||||||||||||
Derivatives FVA | 7 | (45) | (51) | 61 | |||||||||||||||||||
105
Assets and liabilities measured at fair value on a nonrecurring basis
The following tables present the assets and liabilities held as of June 30, 2022 and 2021, for which nonrecurring fair value adjustments were recorded during the six months ended June 30, 2022 and 2021, by major product category and fair value hierarchy.
Fair value hierarchy | Total fair value | |||||||||||||||||||
June 30, 2022 (in millions) | Level 1 | Level 2 | Level 3 | |||||||||||||||||
Loans | $ | — | $ | 1,516 | $ | 665 | (b) | $ | 2,181 | |||||||||||
Other assets(a) | — | 22 | 1,083 | 1,105 | ||||||||||||||||
Total assets measured at fair value on a nonrecurring basis | $ | — | $ | 1,538 | $ | 1,748 | $ | 3,286 | ||||||||||||
Accounts payable and other liabilities | — | — | 293 | 293 | ||||||||||||||||
Total liabilities measured at fair value on a nonrecurring basis | $ | — | $ | — | $ | 293 | $ | 293 |
Fair value hierarchy | Total fair value | |||||||||||||||||||
June 30, 2021 (in millions) | Level 1 | Level 2 | Level 3 | |||||||||||||||||
Loans | $ | — | $ | 2,048 | $ | 329 | $ | 2,377 | ||||||||||||
Other assets | — | 11 | 831 | 842 | ||||||||||||||||
Total assets measured at fair value on a nonrecurring basis | $ | — | $ | 2,059 | $ | 1,160 | $ | 3,219 | ||||||||||||
Accounts payable and other liabilities | — | — | 5 | 5 | ||||||||||||||||
Total liabilities measured at fair value on a nonrecurring basis | $ | — | $ | — | $ | 5 | $ | 5 |
(a)Primarily includes equity securities without readily determinable fair values that were adjusted based on observable price changes in orderly transactions from an identical or similar investment of the same issuer (measurement alternative). Of the $1.1 billion in level 3 assets measured at fair value on a nonrecurring basis as of June 30, 2022, $985 million related to equity securities adjusted based on the measurement alternative. These equity securities are classified as level 3 due to the infrequency of the observable prices and/or the restrictions on the shares.
(b)Of the $665 million in level 3 assets measured at fair value on a nonrecurring basis as of June 30, 2022, $55 million related to residential real estate loans carried at the net realizable value of the underlying collateral (e.g., collateral-dependent loans). These amounts are classified as level 3 as they are valued using information from broker’s price opinions, appraisals and automated valuation models and discounted based upon the Firm’s experience with actual liquidation values. These discounts ranged from 12% to 56% with a weighted average of 23%.
Nonrecurring fair value changes
The following table presents the total change in value of assets and liabilities for which fair value adjustments have been recognized for the three and six months ended June 30, 2022 and 2021, related to assets and liabilities held at those dates.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Loans | $ | (80) | $ | (11) | $ | (91) | $ | (32) | |||||||||||||||
Other assets(a) | (389) | 92 | (45) | 93 | |||||||||||||||||||
Accounts payable and other liabilities | (269) | 7 | (288) | 6 | |||||||||||||||||||
Total nonrecurring fair value gains/(losses) | $ | (738) | $ | 88 | $ | (424) | $ | 67 |
(a)Included $(387) million and $102 million for the three months ended June 30, 2022 and 2021, respectively, and $(29) million and $107 million for the six months ended June 30, 2022 and 2021, respectively, of net gains/(losses) as a result of the measurement alternative.
Refer to Note 11 for further information about the measurement of collateral-dependent loans.
106
Equity securities without readily determinable fair values
The Firm measures certain equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer (i.e., measurement alternative), with such changes recognized in other income.
In its determination of the new carrying values upon observable price changes, the Firm may adjust the prices if deemed necessary to arrive at the Firm’s estimated fair values. Such adjustments may include adjustments to reflect the different rights and obligations of similar securities, and other adjustments that are consistent with the Firm’s valuation techniques for private equity direct investments.
The following table presents the carrying value of equity securities without readily determinable fair values held as of June 30, 2022 and 2021, that are measured under the measurement alternative and the related adjustments recorded during the periods presented for those securities with observable price changes. These securities are included in the nonrecurring fair value tables when applicable price changes are observable.
Three months ended | Six months ended | |||||||||||||||||||||||||
June 30 | June 30 | |||||||||||||||||||||||||
As of or for the period ended, | ||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
Other assets | ||||||||||||||||||||||||||
Carrying value(a) | $ | 4,196 | $ | 2,798 | $ | 4,196 | $ | 2,798 | ||||||||||||||||||
Upward carrying value changes(b) | 76 | 109 | 445 | 116 | ||||||||||||||||||||||
Downward carrying value changes/impairment(c) | (463) | (7) | (474) | (9) | ||||||||||||||||||||||
(a)The carrying value as of December 31, 2021 was $3.6 billion. The period-end carrying values reflect cumulative purchases and sales in addition to upward and downward carrying value changes.
(b)The cumulative upward carrying value changes between January 1, 2018 and June 30, 2022 were $1.5 billion.
(c)The cumulative downward carrying value changes/impairment between January 1, 2018 and June 30, 2022 were $(844) million.
Included in other assets above is the Firm’s interest in approximately 40 million Visa Class B common shares, recorded at a nominal carrying value. These shares are subject to certain transfer restrictions currently and will be convertible into Visa Class A common shares upon final resolution of certain litigation matters involving Visa. The conversion rate of Visa Class B common shares into Visa Class A common shares is 1.6059 at June 30, 2022, and may be adjusted by Visa depending on developments related to the litigation matters.
107
Additional disclosures about the fair value of financial instruments that are not carried on the Consolidated balance sheets at fair value
The following table presents, by fair value hierarchy classification, the carrying values and estimated fair values at June 30, 2022, and December 31, 2021, 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.
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
Estimated fair value hierarchy | Estimated fair value hierarchy | ||||||||||||||||||||||||||||||||||
(in billions) | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | |||||||||||||||||||||||||
Financial assets | |||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | 27.2 | $ | 27.2 | $ | — | $ | — | $ | 27.2 | $ | 26.4 | $ | 26.4 | $ | — | $ | — | $ | 26.4 | |||||||||||||||
Deposits with banks | 642.0 | 642.0 | — | — | 642.0 | 714.4 | 714.4 | — | — | 714.4 | |||||||||||||||||||||||||
Accrued interest and accounts receivable | 144.5 | — | 144.4 | 0.1 | 144.5 | 102.1 | — | 102.0 | 0.1 | 102.1 | |||||||||||||||||||||||||
Federal funds sold and securities purchased under resale agreements | 3.0 | — | 3.0 | — | 3.0 | 9.0 | — | 9.0 | — | 9.0 | |||||||||||||||||||||||||
Securities borrowed | 128.4 | — | 128.4 | — | 128.4 | 124.6 | — | 124.6 | — | 124.6 | |||||||||||||||||||||||||
Investment securities, held-to-maturity | 441.6 | 212.9 | 202.7 | — | 415.6 | 363.7 | 183.3 | 179.3 | — | 362.6 | |||||||||||||||||||||||||
Loans, net of allowance for loan losses(a) | 1,039.3 | — | 193.1 | 835.0 | 1,028.1 | 1,002.5 | — | 202.1 | 821.1 | 1,023.2 | |||||||||||||||||||||||||
Other | 113.2 | — | 111.8 | 1.6 | 113.4 | 98.7 | — | 97.4 | 1.4 | 98.8 | |||||||||||||||||||||||||
Financial liabilities | |||||||||||||||||||||||||||||||||||
Deposits | $ | 2,458.3 | $ | — | $ | 2,458.4 | $ | — | $ | 2,458.4 | $ | 2,451.0 | $ | — | $ | 2,451.0 | $ | — | $ | 2,451.0 | |||||||||||||||
Federal funds purchased and securities loaned or sold under repurchase agreements | 66.4 | — | 66.4 | — | 66.4 | 67.9 | — | 67.9 | — | 67.9 | |||||||||||||||||||||||||
Short-term borrowings | 41.5 | — | 41.5 | — | 41.5 | 33.6 | — | 33.6 | — | 33.6 | |||||||||||||||||||||||||
Accounts payable and other liabilities | 272.7 | — | 266.7 | 5.3 | 272.0 | 217.6 | — | 212.1 | 4.9 | 217.0 | |||||||||||||||||||||||||
Beneficial interests issued by consolidated VIEs | 10.6 | — | 10.6 | — | 10.6 | 10.7 | — | 10.8 | — | 10.8 | |||||||||||||||||||||||||
Long-term debt | 222.1 | — | 214.9 | 3.1 | 218.0 | 226.0 | — | 229.5 | 3.1 | 232.6 |
(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. Carrying value of the loan takes into account the loan’s allowance for loan losses, which represents the loan’s expected credit losses over its remaining expected life. The difference between the estimated fair value and carrying value of a loan is generally attributable to changes in market interest rates, including credit spreads, market liquidity premiums and other factors that affect the fair value of a loan but do not affect its carrying value.
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 and the estimated fair value of these wholesale lending-related commitments were as follows for the periods indicated.
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
Estimated fair value hierarchy | Estimated fair value hierarchy | ||||||||||||||||||||||||||||||||||
(in billions) | Carrying value(a) (b) | Level 1 | Level 2 | Level 3 | Total estimated fair value | Carrying value(a) (b) | Level 1 | Level 2 | Level 3 | Total estimated fair value | |||||||||||||||||||||||||
Wholesale lending-related commitments | $ | 2.2 | $ | — | $ | — | $ | 3.4 | $ | 3.4 | $ | 2.1 | $ | — | $ | — | $ | 2.9 | $ | 2.9 |
(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)Includes the wholesale allowance for lending-related commitments.
The Firm does not estimate the fair value of consumer off-balance sheet 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 171 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of the valuation of lending-related commitments.
108
Note 3 – Fair value option
The fair value option provides an option to elect fair value for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments.
The Firm has elected to measure certain instruments at fair value for several reasons including to mitigate income statement volatility caused by the differences between the measurement basis of elected instruments (e.g., certain instruments that otherwise would be accounted for on an accrual basis) and the associated risk management arrangements that are accounted for on a fair value basis, as well as to better reflect those instruments that are managed on a fair value basis.
The Firm’s election of fair value includes the following instruments:
•Loans purchased or originated as part of securitization warehousing activity, subject to bifurcation accounting, or managed on a fair value basis, including lending-related commitments
•Certain securities financing agreements
•Owned beneficial interests in securitized financial assets that contain embedded credit derivatives, which would otherwise be required to be separately accounted for as a derivative instrument
•Structured notes and other hybrid instruments, which are predominantly financial instruments that contain embedded derivatives, that are issued or transacted as part of client-driven activities
•Certain long-term beneficial interests issued by CIB’s consolidated securitization trusts where the underlying assets are carried at fair value
Changes in fair value under the fair value option election
The following table presents the changes in fair value included in the Consolidated statements of income for the three and six months ended June 30, 2022 and 2021, for items for which the fair value option was elected. The profit and loss information presented below only includes the financial instruments that were elected to be measured at fair value; related risk management instruments, which are required to be measured at fair value, are not included in the table.
Three months ended June 30, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||||||||||||||
(in millions) | Principal transactions | All other income | Total changes in fair value recorded (e) | Principal transactions | All other income | Total changes in fair value recorded (e) | ||||||||||||||||||||||||||||||||
Federal funds sold and securities purchased under resale agreements | $ | (145) | $ | — | $ | (145) | $ | (2) | $ | — | $ | (2) | ||||||||||||||||||||||||||
Securities borrowed | (101) | — | (101) | (27) | — | (27) | ||||||||||||||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||||||||||||||
Debt and equity instruments, excluding loans | (1,255) | — | (1,255) | 444 | (f) | (1) | (c) | 443 | ||||||||||||||||||||||||||||||
Loans reported as trading assets: | ||||||||||||||||||||||||||||||||||||||
Changes in instrument-specific credit risk | 37 | — | 37 | 72 | — | 72 | ||||||||||||||||||||||||||||||||
Other changes in fair value | (11) | — | (11) | (7) | — | (7) | ||||||||||||||||||||||||||||||||
Loans: | ||||||||||||||||||||||||||||||||||||||
Changes in instrument-specific credit risk | (83) | 11 | (c) | (72) | 184 | (3) | (c) | 181 | ||||||||||||||||||||||||||||||
Other changes in fair value | (501) | (260) | (c) | (761) | 143 | 784 | (c) | 927 | ||||||||||||||||||||||||||||||
Other assets | (2) | 4 | (d) | 2 | 9 | (4) | (d) | 5 | ||||||||||||||||||||||||||||||
Deposits(a) | 382 | — | 382 | (258) | — | (258) | ||||||||||||||||||||||||||||||||
Federal funds purchased and securities loaned or sold under repurchase agreements | 124 | — | 124 | (3) | — | (3) | ||||||||||||||||||||||||||||||||
Short-term borrowings(a) | 471 | — | 471 | (489) | — | (489) | ||||||||||||||||||||||||||||||||
Trading liabilities | 54 | — | 54 | (1) | — | (1) | ||||||||||||||||||||||||||||||||
Beneficial interests issued by consolidated VIEs | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Other liabilities | (7) | — | (7) | 1 | — | 1 | ||||||||||||||||||||||||||||||||
Long-term debt(a)(b) | 5,405 | 14 | (c)(d) | 5,419 | (2,152) | — | (2,152) |
109
Six months ended June 30, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||||||||||||||
(in millions) | Principal transactions | All other income | Total changes in fair value recorded (e) | Principal transactions | All other income | Total changes in fair value recorded (e) | ||||||||||||||||||||||||||||||||
Federal funds sold and securities purchased under resale agreements | $ | (375) | $ | — | $ | (375) | $ | (14) | $ | — | $ | (14) | ||||||||||||||||||||||||||
Securities borrowed | (299) | — | (299) | (97) | — | (97) | ||||||||||||||||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||||||||||||||||
Debt and equity instruments, excluding loans | (911) | — | (911) | 1,067 | (f) | (1) | (c) | 1,066 | ||||||||||||||||||||||||||||||
Loans reported as trading assets: | — | — | ||||||||||||||||||||||||||||||||||||
Changes in instrument-specific credit risk | 31 | — | 31 | 276 | — | 276 | ||||||||||||||||||||||||||||||||
Other changes in fair value | (22) | — | (22) | (8) | — | (8) | ||||||||||||||||||||||||||||||||
Loans: | — | — | ||||||||||||||||||||||||||||||||||||
Changes in instrument-specific credit risk | (77) | 23 | (c) | (54) | 421 | (2) | (c) | 419 | ||||||||||||||||||||||||||||||
Other changes in fair value | (1,220) | (774) | (c) | (1,994) | (107) | 1,124 | (c) | 1,017 | ||||||||||||||||||||||||||||||
Other assets | 9 | 1 | (d) | 10 | 28 | (23) | (d) | 5 | ||||||||||||||||||||||||||||||
Deposits(a) | 784 | — | 784 | (91) | — | (91) | ||||||||||||||||||||||||||||||||
Federal funds purchased and securities loaned or sold under repurchase agreements | 206 | — | 206 | 31 | — | 31 | ||||||||||||||||||||||||||||||||
Short-term borrowings(a) | 773 | — | 773 | (611) | — | (611) | ||||||||||||||||||||||||||||||||
Trading liabilities | (12) | — | (12) | (1) | — | (1) | ||||||||||||||||||||||||||||||||
Beneficial interests issued by consolidated VIEs | (1) | — | (1) | — | — | — | ||||||||||||||||||||||||||||||||
Other liabilities | (4) | — | (4) | 2 | — | 2 | ||||||||||||||||||||||||||||||||
Long-term debt(a)(b) | 9,365 | 33 | (c)(d) | 9,398 | (905) | (5) | (c)(d) | (910) |
(a)Unrealized gains/(losses) due to instrument-specific credit risk (DVA) for liabilities for which the fair value option has been elected are recorded in OCI, while realized gains/(losses) are recorded in principal transactions revenue. Realized gains/(losses) due to instrument-specific credit risk recorded in principal transactions revenue were not material for the three months ended June 30, 2022 and 2021, respectively, and $(9) million and $(2) million for the six months ended June 30, 2022 and 2021, respectively.
(b)Long-term debt measured at fair value predominantly relates to structured notes. Although the risk associated with the structured notes is actively managed, the gains/(losses) reported in this table do not include the income statement impact of the risk management instruments used to manage such risk.
(c)Reported in mortgage fees and related income.
(d)Reported in other income.
(e)Changes in fair value exclude contractual interest, which is included in interest income and interest expense for all instruments other than certain hybrid financial instruments in CIB. Refer to Note 6 for further information regarding interest income and interest expense.
(f)Prior-period amounts have been revised to conform with the current presentation.
110
Difference between aggregate fair value and aggregate remaining contractual principal balance outstanding
The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of June 30, 2022, and December 31, 2021, for loans, long-term debt and long-term beneficial interests for which the fair value option has been elected.
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||
(in millions) | Contractual principal outstanding | Fair value | Fair value over/(under) contractual principal outstanding | Contractual principal outstanding | Fair value | Fair value over/(under) contractual principal outstanding | |||||||||||||||||||||||
Loans | |||||||||||||||||||||||||||||
Nonaccrual loans | |||||||||||||||||||||||||||||
Loans reported as trading assets | $ | 2,912 | $ | 391 | $ | (2,521) | $ | 3,263 | $ | 546 | $ | (2,717) | |||||||||||||||||
Loans | 942 | 833 | (109) | 918 | 797 | (121) | |||||||||||||||||||||||
Subtotal | 3,854 | 1,224 | (2,630) | 4,181 | 1,343 | (2,838) | |||||||||||||||||||||||
90 or more days past due and government guaranteed | |||||||||||||||||||||||||||||
Loans(a) | 220 | 209 | (11) | 293 | 281 | (12) | |||||||||||||||||||||||
All other performing loans(b) | |||||||||||||||||||||||||||||
Loans reported as trading assets | 8,883 | 7,407 | (1,476) | 8,594 | 7,528 | (1,066) | |||||||||||||||||||||||
Loans | 47,343 | 46,014 | (1,329) | 57,695 | 57,742 | 47 | |||||||||||||||||||||||
Subtotal | 56,226 | 53,421 | (2,805) | 66,289 | 65,270 | (1,019) | |||||||||||||||||||||||
Total loans | $ | 60,300 | $ | 54,854 | $ | (5,446) | $ | 70,763 | $ | 66,894 | $ | (3,869) | |||||||||||||||||
Long-term debt | |||||||||||||||||||||||||||||
Principal-protected debt | $ | 35,906 | (d) | $ | 27,591 | $ | (8,315) | $ | 35,957 | (d) | $ | 33,799 | $ | (2,158) | |||||||||||||||
Nonprincipal-protected debt(c) | NA | 38,471 | NA | NA | 41,135 | NA | |||||||||||||||||||||||
Total long-term debt | NA | $ | 66,062 | NA | NA | $ | 74,934 | NA | |||||||||||||||||||||
Long-term beneficial interests | |||||||||||||||||||||||||||||
Nonprincipal-protected debt(c) | NA | $ | 5 | NA | NA | $ | 12 | NA | |||||||||||||||||||||
Total long-term beneficial interests | NA | $ | 5 | NA | NA | $ | 12 | NA |
(a)These balances are excluded from nonaccrual loans as the loans are insured and/or guaranteed by U.S. government agencies.
(b)There were no performing loans that were ninety days or more past due as of June 30, 2022, and December 31, 2021, respectively.
(c)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.
(d)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 June 30, 2022, and December 31, 2021, the contractual amount of lending-related commitments for which the fair value option was elected was $10.0 billion and $11.9 billion, respectively, with a corresponding fair value of $30 million and $10 million, respectively. Refer to Note 28 of JPMorgan Chase’s 2021 Form 10-K, and Note 22 of this Form 10-Q for further information regarding off-balance sheet lending-related financial instruments.
111
Structured note products by balance sheet classification and risk component
The following table presents the fair value of structured notes, by balance sheet classification and the primary risk type.
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
(in millions) | Long-term debt | Short-term borrowings | Deposits | Total | Long-term debt | Short-term borrowings | Deposits | Total | |||||||||||||||||||||||||||
Risk exposure | |||||||||||||||||||||||||||||||||||
Interest rate | $ | 29,428 | $ | 21 | $ | 8,929 | $ | 38,378 | $ | 34,127 | $ | 1 | $ | 4,860 | $ | 38,988 | |||||||||||||||||||
Credit | 4,211 | 532 | — | 4,743 | 6,352 | 858 | — | 7,210 | |||||||||||||||||||||||||||
Foreign exchange | 2,670 | 696 | — | 3,366 | 3,386 | 315 | 1,066 | 4,767 | |||||||||||||||||||||||||||
Equity | 27,716 | 6,228 | 3,932 | 37,876 | 29,317 | 6,827 | 5,125 | 41,269 | |||||||||||||||||||||||||||
Commodity | 779 | 13 | 3 | (a) | 795 | 405 | — | 3 | (a) | 408 | |||||||||||||||||||||||||
Total structured notes | $ | 64,804 | $ | 7,490 | $ | 12,864 | $ | 85,158 | $ | 73,587 | $ | 8,001 | $ | 11,054 | $ | 92,642 |
(a)Excludes deposits linked to precious metals for which the fair value option has not been elected of $583 million and $692 million for the periods ended June 30, 2022 and December 31, 2021, respectively.
112
Note 4 – Derivative instruments
JPMorgan Chase makes markets in derivatives for clients and also uses derivatives to hedge or manage its own risk exposures. Refer to Note 5 of JPMorgan Chase’s 2021 Form 10-K for a further discussion of the Firm’s use of and accounting policies regarding derivative instruments.
The Firm’s disclosures are based on the accounting treatment and purpose of these derivatives. A limited number of the Firm’s derivatives are designated in hedge
accounting relationships and are disclosed according to the type of hedge (fair value hedge, cash flow hedge, or net investment hedge). Derivatives not designated in hedge accounting relationships include certain derivatives that are used to manage risks associated with specified assets and liabilities (“specified risk management” positions) as well as derivatives used in the Firm’s market-making businesses or for other purposes.
The following table outlines the Firm’s primary uses of derivatives and the related hedge accounting designation or disclosure category.
Type of Derivative | Use of Derivative | Designation and disclosure | Affected segment or unit | 10-Q page reference | ||||||||||
Manage specifically identified risk exposures in qualifying hedge accounting relationships: | ||||||||||||||
•Interest rate | Hedge fixed rate assets and liabilities | Fair value hedge | Corporate | 119-120 | ||||||||||
•Interest rate | Hedge floating-rate assets and liabilities | Cash flow hedge | Corporate | 121 | ||||||||||
•Foreign exchange | Hedge foreign currency-denominated assets and liabilities | Fair value hedge | Corporate | 119-120 | ||||||||||
•Foreign exchange | Hedge foreign currency-denominated forecasted revenue and expense | Cash flow hedge | Corporate | 121 | ||||||||||
•Foreign exchange | Hedge the value of the Firm’s investments in non-U.S. dollar functional currency entities | Net investment hedge | Corporate | 122 | ||||||||||
•Commodity | Hedge commodity inventory | Fair value hedge | CIB, AWM | 119-120 | ||||||||||
Manage specifically identified risk exposures not designated in qualifying hedge accounting relationships: | ||||||||||||||
•Interest rate | Manage the risk associated with mortgage commitments, warehouse loans and MSRs | Specified risk management | CCB | 123 | ||||||||||
•Credit | Manage the credit risk associated with wholesale lending exposures | Specified risk management | CIB | 123 | ||||||||||
•Interest rate and foreign exchange | Manage the risk associated with certain other specified assets and liabilities | Specified risk management | Corporate | 123 | ||||||||||
Market-making derivatives and other activities: | ||||||||||||||
•Various | Market-making and related risk management | Market-making and other | CIB | 123 | ||||||||||
•Various | Other derivatives | Market-making and other | CIB, AWM, Corporate | 123 |
113
Notional amount of derivative contracts
The following table summarizes the notional amount of free-standing derivative contracts outstanding as of June 30, 2022, and December 31, 2021.
Notional amounts(b) | ||||||||
(in billions) | June 30, 2022 | December 31, 2021 | ||||||
Interest rate contracts | ||||||||
Swaps | $ | 29,009 | $ | 24,075 | ||||
Futures and forwards | 3,631 | 2,520 | ||||||
Written options | 3,024 | 3,018 | ||||||
Purchased options | 2,959 | 3,188 | ||||||
Total interest rate contracts | 38,623 | 32,801 | ||||||
Credit derivatives(a) | 1,097 | 1,053 | ||||||
Foreign exchange contracts | ||||||||
Cross-currency swaps | 3,942 | 4,112 | ||||||
Spot, futures and forwards | 8,242 | 7,679 | ||||||
Written options | 874 | 741 | ||||||
Purchased options | 869 | 727 | ||||||
Total foreign exchange contracts | 13,927 | 13,259 | ||||||
Equity contracts | ||||||||
Swaps | 594 | 612 | ||||||
Futures and forwards | 147 | 139 | ||||||
Written options | 677 | 654 | ||||||
Purchased options | 623 | 598 | ||||||
Total equity contracts | 2,041 | 2,003 | ||||||
Commodity contracts | ||||||||
Swaps | 193 | 185 | ||||||
Spot, futures and forwards | 197 | 188 | ||||||
Written options | 126 | 135 | ||||||
Purchased options | 115 | 111 | ||||||
Total commodity contracts | 631 | 619 | ||||||
Total derivative notional amounts | $ | 56,319 | $ | 49,735 |
(a)Refer to the Credit derivatives discussion on page 124 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.
While the notional amounts disclosed above give an indication of the volume of the Firm’s derivatives activity, the notional amounts significantly exceed, in the Firm’s view, the possible losses that could arise from such transactions. For most derivative contracts, the notional amount is not exchanged; it is simply a reference amount used to calculate payments.
114
Impact of derivatives on the Consolidated balance sheets
The following table summarizes information on derivative receivables and payables (before and after netting adjustments) that are reflected on the Firm’s Consolidated balance sheets as of June 30, 2022, and December 31, 2021, by accounting designation (e.g., whether the derivatives were designated in qualifying hedge accounting relationships or not) and contract type.
Free-standing derivative receivables and payables(a) | |||||||||||||||||||||||||||||||||||||||||||||||
Gross derivative receivables | Gross derivative payables | ||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2022 (in millions) | Not designated as hedges | Designated as hedges | Total derivative receivables | Net derivative receivables(b) | Not designated as hedges | Designated as hedges | Total derivative payables | Net derivative payables(b) | |||||||||||||||||||||||||||||||||||||||
Trading assets and liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
Interest rate | $ | 253,143 | $ | 1 | $ | 253,144 | $ | 21,930 | $ | 237,212 | $ | — | $ | 237,212 | $ | 11,525 | |||||||||||||||||||||||||||||||
Credit | 13,578 | — | 13,578 | 1,607 | 11,323 | — | 11,323 | 890 | |||||||||||||||||||||||||||||||||||||||
Foreign exchange | 260,546 | 1,308 | 261,854 | 28,166 | 258,320 | 966 | 259,286 | 19,241 | |||||||||||||||||||||||||||||||||||||||
Equity | 76,181 | — | 76,181 | 10,177 | 76,719 | — | 76,719 | 10,164 | |||||||||||||||||||||||||||||||||||||||
Commodity | 42,017 | 6,732 | 48,749 | 19,437 | 35,218 | 7,771 | 42,989 | 10,597 | |||||||||||||||||||||||||||||||||||||||
Total fair value of trading assets and liabilities | $ | 645,465 | $ | 8,041 | $ | 653,506 | $ | 81,317 | $ | 618,792 | $ | 8,737 | $ | 627,529 | $ | 52,417 | |||||||||||||||||||||||||||||||
Gross derivative receivables | Gross derivative payables | ||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2021 (in millions) | Not designated as hedges | Designated as hedges | Total derivative receivables | Net derivative receivables(b) | Not designated as hedges | Designated as hedges | Total derivative payables | Net derivative payables(b) | |||||||||||||||||||||||||||||||||||||||
Trading assets and liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
Interest rate | $ | 270,562 | $ | 23 | $ | 270,585 | $ | 21,974 | $ | 240,731 | $ | — | $ | 240,731 | $ | 8,194 | |||||||||||||||||||||||||||||||
Credit | 9,839 | — | 9,839 | 1,031 | 10,912 | — | 10,912 | 880 | |||||||||||||||||||||||||||||||||||||||
Foreign exchange | 169,186 | 393 | 169,579 | 12,625 | 174,622 | 1,124 | 175,746 | 14,097 | |||||||||||||||||||||||||||||||||||||||
Equity | 68,631 | — | 68,631 | 9,981 | 79,727 | — | 79,727 | 17,233 | |||||||||||||||||||||||||||||||||||||||
Commodity | 21,233 | 5,420 | 26,653 | 11,470 | 20,837 | 7,091 | 27,928 | 9,712 | |||||||||||||||||||||||||||||||||||||||
Total fair value of trading assets and liabilities | $ | 539,451 | $ | 5,836 | $ | 545,287 | $ | 57,081 | $ | 526,829 | $ | 8,215 | $ | 535,044 | $ | 50,116 |
(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.
115
Derivatives netting
The following tables present, as of June 30, 2022, and December 31, 2021, gross and net derivative receivables and payables by contract and settlement type. Derivative receivables and payables, as well as the related cash collateral from the same counterparty, have been netted on the Consolidated balance sheets where the Firm has obtained an appropriate legal opinion with respect to the master netting agreement. Where such a legal opinion has not been either sought or obtained, amounts are not eligible for netting on the Consolidated balance sheets, and those derivative receivables and payables are shown separately in the tables below.
In addition to the cash collateral received and transferred that is presented on a net basis with derivative receivables and payables, the Firm receives and transfers additional collateral (financial instruments and cash). These amounts mitigate counterparty credit risk associated with the Firm’s derivative instruments, but are not eligible for net presentation:
•collateral that consists of liquid securities and other cash collateral held at third-party custodians, which are shown separately as “Collateral not nettable on the Consolidated balance sheets” in the tables below, up to the fair value exposure amount. For the purpose of this disclosure, the definition of liquid securities is consistent with the definition of high quality liquid assets as defined in the LCR rule;
•the amount of collateral held or transferred that exceeds the fair value exposure at the individual counterparty level, as of the date presented, which is excluded from the tables below; and
•collateral held or transferred that relates to derivative receivables or payables where an appropriate legal opinion has not been either sought or obtained with respect to the master netting agreement, which is excluded from the tables below.
June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||
(in millions) | Gross derivative receivables | Amounts netted on the Consolidated balance sheets | Net derivative receivables | Gross derivative receivables | Amounts netted on the Consolidated balance sheets | Net derivative receivables | ||||||||||||||||||||||||||||||||
U.S. GAAP nettable derivative receivables | ||||||||||||||||||||||||||||||||||||||
Interest rate contracts: | ||||||||||||||||||||||||||||||||||||||
Over-the-counter (“OTC”) | $ | 196,673 | $ | (178,520) | $ | 18,153 | $ | 251,953 | $ | (234,283) | $ | 17,670 | ||||||||||||||||||||||||||
OTC–cleared | 52,486 | (51,603) | 883 | 14,144 | (13,839) | 305 | ||||||||||||||||||||||||||||||||
Exchange-traded(a) | 1,124 | (1,091) | 33 | 498 | (489) | 9 | ||||||||||||||||||||||||||||||||
Total interest rate contracts | 250,283 | (231,214) | 19,069 | 266,595 | (248,611) | 17,984 | ||||||||||||||||||||||||||||||||
Credit contracts: | ||||||||||||||||||||||||||||||||||||||
OTC | 11,731 | (10,326) | 1,405 | 8,035 | (7,177) | 858 | ||||||||||||||||||||||||||||||||
OTC–cleared | 1,720 | (1,645) | 75 | 1,671 | (1,631) | 40 | ||||||||||||||||||||||||||||||||
Total credit contracts | 13,451 | (11,971) | 1,480 | 9,706 | (8,808) | 898 | ||||||||||||||||||||||||||||||||
Foreign exchange contracts: | ||||||||||||||||||||||||||||||||||||||
OTC | 256,164 | (232,544) | 23,620 | 166,185 | (156,251) | 9,934 | ||||||||||||||||||||||||||||||||
OTC–cleared | 1,144 | (1,142) | 2 | 789 | (703) | 86 | ||||||||||||||||||||||||||||||||
Exchange-traded(a) | 9 | (2) | 7 | 6 | — | 6 | ||||||||||||||||||||||||||||||||
Total foreign exchange contracts | 257,317 | (233,688) | 23,629 | 166,980 | (156,954) | 10,026 | ||||||||||||||||||||||||||||||||
Equity contracts: | ||||||||||||||||||||||||||||||||||||||
OTC | 37,384 | (33,060) | 4,324 | 25,704 | (23,977) | 1,727 | ||||||||||||||||||||||||||||||||
Exchange-traded(a) | 34,647 | (32,944) | 1,703 | 36,095 | (34,673) | 1,422 | ||||||||||||||||||||||||||||||||
Total equity contracts | 72,031 | (66,004) | 6,027 | 61,799 | (58,650) | 3,149 | ||||||||||||||||||||||||||||||||
Commodity contracts: | ||||||||||||||||||||||||||||||||||||||
OTC | 28,208 | (11,932) | 16,276 | 15,063 | (6,868) | 8,195 | ||||||||||||||||||||||||||||||||
OTC–cleared | 121 | (121) | — | 49 | (49) | — | ||||||||||||||||||||||||||||||||
Exchange-traded(a) | 17,291 | (17,259) | 32 | 8,279 | (8,266) | 13 | ||||||||||||||||||||||||||||||||
Total commodity contracts | 45,620 | (29,312) | 16,308 | 23,391 | (15,183) | 8,208 | ||||||||||||||||||||||||||||||||
Derivative receivables with appropriate legal opinion | 638,702 | (572,189) | 66,513 | (d) | 528,471 | (488,206) | 40,265 | (d) | ||||||||||||||||||||||||||||||
Derivative receivables where an appropriate legal opinion has not been either sought or obtained | 14,804 | 14,804 | 16,816 | 16,816 | ||||||||||||||||||||||||||||||||||
Total derivative receivables recognized on the Consolidated balance sheets | $ | 653,506 | $ | 81,317 | $ | 545,287 | $ | 57,081 | ||||||||||||||||||||||||||||||
Collateral not nettable on the Consolidated balance sheets(b)(c) | (19,801) | (10,102) | ||||||||||||||||||||||||||||||||||||
Net amounts | $ | 61,516 | $ | 46,979 |
116
June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||
(in millions) | Gross derivative payables | Amounts netted on the Consolidated balance sheets | Net derivative payables | Gross derivative payables | Amounts netted on the Consolidated balance sheets | Net derivative payables | ||||||||||||||||||||||||||||||||
U.S. GAAP nettable derivative payables | ||||||||||||||||||||||||||||||||||||||
Interest rate contracts: | ||||||||||||||||||||||||||||||||||||||
OTC | $ | 179,008 | $ | (169,819) | $ | 9,189 | $ | 223,576 | $ | (216,757) | $ | 6,819 | ||||||||||||||||||||||||||
OTC–cleared | 55,401 | (55,313) | 88 | 15,695 | (15,492) | 203 | ||||||||||||||||||||||||||||||||
Exchange-traded(a) | 564 | (555) | 9 | 292 | (288) | 4 | ||||||||||||||||||||||||||||||||
Total interest rate contracts | 234,973 | (225,687) | 9,286 | 239,563 | (232,537) | 7,026 | ||||||||||||||||||||||||||||||||
Credit contracts: | ||||||||||||||||||||||||||||||||||||||
OTC | 9,320 | (8,781) | 539 | 9,021 | (8,421) | 600 | ||||||||||||||||||||||||||||||||
OTC–cleared | 1,748 | (1,652) | 96 | 1,679 | (1,611) | 68 | ||||||||||||||||||||||||||||||||
Total credit contracts | 11,068 | (10,433) | 635 | 10,700 | (10,032) | 668 | ||||||||||||||||||||||||||||||||
Foreign exchange contracts: | ||||||||||||||||||||||||||||||||||||||
OTC | 252,909 | (238,853) | 14,056 | 171,610 | (160,946) | 10,664 | ||||||||||||||||||||||||||||||||
OTC–cleared | 1,245 | (1,190) | 55 | 706 | (703) | 3 | ||||||||||||||||||||||||||||||||
Exchange-traded(a) | 14 | (2) | 12 | 7 | — | 7 | ||||||||||||||||||||||||||||||||
Total foreign exchange contracts | 254,168 | (240,045) | 14,123 | 172,323 | (161,649) | 10,674 | ||||||||||||||||||||||||||||||||
Equity contracts: | ||||||||||||||||||||||||||||||||||||||
OTC | 36,948 | (33,598) | 3,350 | 31,379 | (27,830) | 3,549 | ||||||||||||||||||||||||||||||||
Exchange-traded(a) | 34,800 | (32,957) | 1,843 | 40,621 | (34,664) | 5,957 | ||||||||||||||||||||||||||||||||
Total equity contracts | 71,748 | (66,555) | 5,193 | 72,000 | (62,494) | 9,506 | ||||||||||||||||||||||||||||||||
Commodity contracts: | ||||||||||||||||||||||||||||||||||||||
OTC | 20,702 | (14,470) | 6,232 | 14,874 | (9,667) | 5,207 | ||||||||||||||||||||||||||||||||
OTC–cleared | 140 | (140) | — | 73 | (73) | — | ||||||||||||||||||||||||||||||||
Exchange-traded(a) | 18,848 | (17,782) | 1,066 | 8,954 | (8,476) | 478 | ||||||||||||||||||||||||||||||||
Total commodity contracts | 39,690 | (32,392) | 7,298 | 23,901 | (18,216) | 5,685 | ||||||||||||||||||||||||||||||||
Derivative payables with appropriate legal opinion | 611,647 | (575,112) | 36,535 | (d) | 518,487 | (484,928) | 33,559 | (d) | ||||||||||||||||||||||||||||||
Derivative payables where an appropriate legal opinion has not been either sought or obtained | 15,882 | 15,882 | 16,557 | 16,557 | ||||||||||||||||||||||||||||||||||
Total derivative payables recognized on the Consolidated balance sheets | $ | 627,529 | $ | 52,417 | $ | 535,044 | $ | 50,116 | ||||||||||||||||||||||||||||||
Collateral not nettable on the Consolidated balance sheets(b)(c) | (2,921) | (5,872) | ||||||||||||||||||||||||||||||||||||
Net amounts | $ | 49,496 | $ | 44,244 |
(a)Exchange-traded derivative balances that relate to futures contracts are settled daily.
(b)Includes liquid securities and other 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 $64.6 billion and $67.6 billion at June 30, 2022, and December 31, 2021, respectively. Net derivatives payable included cash collateral netted of $67.6 billion and $64.3 billion at June 30, 2022, and December 31, 2021, respectively. Derivative cash collateral relates to OTC and OTC-cleared derivative instruments.
117
Liquidity risk and credit-related contingent features
Refer to Note 5 of JPMorgan Chase’s 2021 Form 10-K for a more detailed discussion of liquidity risk and credit-related contingent features related to the Firm’s derivative contracts.
The following table shows the aggregate fair value of net derivative payables related to OTC and OTC-cleared derivatives that contain contingent collateral or termination features that may be triggered upon a ratings downgrade, and the associated collateral the Firm has posted in the normal course of business, at June 30, 2022, and December 31, 2021.
OTC and OTC-cleared derivative payables containing downgrade triggers | |||||||||||||||||
(in millions) | June 30, 2022 | December 31, 2021 | |||||||||||||||
Aggregate fair value of net derivative payables | $ | 16,037 | $ | 20,114 | |||||||||||||
Collateral posted | 14,926 | 19,402 |
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 June 30, 2022, and December 31, 2021, 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.
Liquidity impact of downgrade triggers on OTC and OTC-cleared derivatives | |||||||||||||||||
June 30, 2022 | December 31, 2021 | ||||||||||||||||
(in millions) | Single-notch downgrade | Two-notch downgrade | Single-notch downgrade | Two-notch downgrade | |||||||||||||
Amount of additional collateral to be posted upon downgrade(a) | $ | 273 | $ | 1,552 | $ | 219 | $ | 1,577 | |||||||||
Amount required to settle contracts with termination triggers upon downgrade(b) | 85 | 700 | 98 | 787 |
(a)Includes the additional collateral to be posted for initial margin.
(b)Amounts represent fair values of derivative payables, and do not reflect collateral posted.
Derivatives executed in contemplation of a sale of the underlying financial asset
In certain instances the Firm enters into transactions in which it transfers financial assets but maintains the economic exposure to the transferred assets by entering into a derivative with the same counterparty in contemplation of the initial transfer. The Firm generally accounts for such transfers as collateralized financing transactions as described in Note 10, but in limited circumstances they may qualify to be accounted for as a sale and a derivative under U.S. GAAP. The amount of such transfers accounted for as a sale where the associated derivative was outstanding was not material at June 30, 2022 and December 31, 2021.
118
Impact of derivatives on the Consolidated statements of income
The following tables provide information related to gains and losses recorded on derivatives based on their hedge accounting designation or purpose.
Fair value hedge gains and losses
The following tables present derivative instruments, by contract type, used in fair value hedge accounting relationships, as well as pre-tax gains/(losses) recorded on such derivatives and the related hedged items for the three and six months ended June 30, 2022 and 2021, respectively. The Firm includes gains/(losses) on the hedging derivative in the same line item in the Consolidated statements of income as the related hedged item.
Gains/(losses) recorded in income | Income statement impact of excluded components(f) | OCI impact | ||||||||||||||||||||||||||||||
Three months ended June 30, 2022 (in millions) | Derivatives | Hedged items | Income statement impact | Amortization approach | Changes in fair value | Derivatives - Gains/(losses) recorded in OCI(f) | ||||||||||||||||||||||||||
Contract type | ||||||||||||||||||||||||||||||||
Interest rate(a)(b) | $ | (4,467) | $ | 4,367 | $ | (100) | $ | — | $ | (79) | $ | — | ||||||||||||||||||||
Foreign exchange(c) | (818) | 830 | 12 | (115) | 12 | 67 | ||||||||||||||||||||||||||
Commodity(d) | (1,536) | 1,464 | (72) | — | (73) | — | ||||||||||||||||||||||||||
Total | $ | (6,821) | $ | 6,661 | $ | (160) | $ | (115) | $ | (140) | $ | 67 |
Gains/(losses) recorded in income | Income statement impact of excluded components(e) | OCI impact | ||||||||||||||||||||||||||||||
Three months ended June 30, 2021 (in millions) | Derivatives | Hedged items | Income statement impact | Amortization approach | Changes in fair value | Derivatives - Gains/(losses) recorded in OCI(f) | ||||||||||||||||||||||||||
Contract type | ||||||||||||||||||||||||||||||||
Interest rate(a)(b) | $ | 2,184 | $ | (2,265) | $ | (81) | $ | — | $ | (90) | $ | — | ||||||||||||||||||||
Foreign exchange(c) | 230 | (221) | 9 | (72) | 9 | (31) | ||||||||||||||||||||||||||
Commodity(d) | (3,126) | 3,155 | 29 | — | 20 | — | ||||||||||||||||||||||||||
Total | $ | (712) | $ | 669 | $ | (43) | $ | (72) | $ | (61) | $ | (31) |
Gains/(losses) recorded in income | Income statement impact of excluded components(e) | OCI impact | ||||||||||||||||||||||||||||||
Six months ended June 30, 2022 (in millions) | Derivatives | Hedged items | Income statement impact | Amortization approach | Changes in fair value | Derivatives - Gains/(losses) recorded in OCI(f) | ||||||||||||||||||||||||||
Contract type | ||||||||||||||||||||||||||||||||
Interest rate(a)(b) | $ | (11,537) | $ | 11,348 | $ | (189) | $ | — | $ | (145) | $ | — | ||||||||||||||||||||
Foreign exchange(c) | (1,508) | 1,518 | 10 | (180) | 10 | 212 | ||||||||||||||||||||||||||
Commodity(d) | (1,712) | 1,611 | (101) | — | (110) | — | ||||||||||||||||||||||||||
Total | $ | (14,757) | $ | 14,477 | $ | (280) | $ | (180) | $ | (245) | $ | 212 |
Gains/(losses) recorded in income | Income statement impact of excluded components(e) | OCI impact | ||||||||||||||||||||||||||||||
Six months ended June 30, 2021 (in millions) | Derivatives | Hedged items | Income statement impact | Amortization approach | Changes in fair value | Derivatives - Gains/(losses) recorded in OCI(f) | ||||||||||||||||||||||||||
Contract type | ||||||||||||||||||||||||||||||||
Interest rate(a)(b) | $ | (2,937) | $ | 2,571 | $ | (366) | $ | — | $ | (264) | $ | — | ||||||||||||||||||||
Foreign exchange(c) | (552) | (g) | 579 | (g) | 27 | (150) | 27 | (68) | ||||||||||||||||||||||||
Commodity(d) | (4,387) | 4,443 | 56 | — | 32 | — | ||||||||||||||||||||||||||
Total | $ | (7,876) | $ | 7,593 | $ | (283) | $ | (150) | $ | (205) | $ | (68) |
(a)Primarily consists of hedges of the benchmark (e.g., London Interbank Offered Rate (“LIBOR”), Secured Overnight Financing Rate (“SOFR”)) interest rate risk of fixed-rate long-term debt and AFS securities. Gains and losses were recorded in net interest income.
(b)Effective January 1, 2022, the Firm updated its presentation in the table above to include the amortization of income/expense associated with the inception hedge accounting adjustment applied to the hedged item; prior-period amounts have been revised to conform with the current presentation. 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)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.
(f)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.
(g)Prior-period amounts have been revised to conform with the current presentation.
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As of June 30, 2022 and December 31, 2021, the following amounts were recorded on the Consolidated balance sheets related to certain cumulative fair value hedge basis adjustments that are expected to reverse through the income statement in future periods as an adjustment to yield.
Carrying amount of the hedged items(a)(b) | Cumulative amount of fair value hedging adjustments included in the carrying amount of hedged items: | |||||||||||||||||||
June 30, 2022 (in millions) | Active hedging relationships(d) | Discontinued hedging relationships(d)(e) | Total | |||||||||||||||||
Assets | ||||||||||||||||||||
Investment securities - AFS | $ | 84,552 | (c) | $ | (3,650) | $ | 598 | $ | (3,052) | |||||||||||
Liabilities | ||||||||||||||||||||
Long-term debt | $ | 179,048 | $ | (15,722) | $ | 6,182 | $ | (9,540) | ||||||||||||
Beneficial interests issued by consolidated VIEs | 750 | — | — | — | ||||||||||||||||
Carrying amount of the hedged items(a)(b) | Cumulative amount of fair value hedging adjustments included in the carrying amount of hedged items: | |||||||||||||||||||
December 31, 2021 (in millions) | Active hedging relationships(d) | Discontinued hedging relationships(d)(e) | Total | |||||||||||||||||
Assets | ||||||||||||||||||||
Investment securities - AFS | $ | 65,746 | (c) | $ | 417 | $ | 661 | $ | 1,078 | |||||||||||
Liabilities | ||||||||||||||||||||
Long-term debt | $ | 195,642 | $ | (1,999) | $ | 8,834 | $ | 6,835 | ||||||||||||
Beneficial interests issued by consolidated VIEs | 749 | — | (1) | (1) |
(a)Excludes physical commodities with a carrying value of $22.2 billion and $25.7 billion at June 30, 2022 and December 31, 2021, 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 June 30, 2022 and December 31, 2021, the carrying amount excluded for AFS securities is $15.7 billion and $14.0 billion, respectively, and for long-term debt is $224 million and $9.7 billion, respectively. Prior-period amount has been revised to conform with the current presentation.
(c)Carrying amount represents the amortized cost, net of allowance if applicable. Refer to Note 9 for additional information.
(d)Positive (negative) amounts related to assets represent cumulative fair value hedge basis adjustments that will reduce (increase) net interest income in future periods. Positive (negative) amounts related to liabilities represent cumulative fair value hedge basis adjustments that will increase (reduce) net interest income in future periods.
(e)Represents basis adjustments existing on the balance sheet date associated with hedged items that have been de-designated from qualifying fair value hedging relationships.
120
Cash flow hedge gains and losses
The following tables present derivative instruments, by contract type, used in cash flow hedge accounting relationships, and the pre-tax gains/(losses) recorded on such derivatives, for the three and six months ended June 30, 2022 and 2021, respectively. The Firm includes the gains/(losses) on the hedging derivative in the same line item in the Consolidated statements of income as the change in cash flows on the related hedged item.
Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | ||||||||||||||
Three months ended June 30, 2022 (in millions) | Amounts reclassified from AOCI to income | Amounts recorded in OCI | Total change in OCI for period | |||||||||||
Contract type | ||||||||||||||
Interest rate(a) | $ | 86 | $ | (1,509) | $ | (1,595) | ||||||||
Foreign exchange(b) | (62) | (241) | (179) | |||||||||||
Total | $ | 24 | $ | (1,750) | $ | (1,774) | ||||||||
Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | ||||||||||||||
Three months ended June 30, 2021 (in millions) | Amounts reclassified from AOCI to income | Amounts recorded in OCI | Total change in OCI for period | |||||||||||
Contract type | ||||||||||||||
Interest rate(a) | $ | 262 | $ | 1,122 | $ | 860 | ||||||||
Foreign exchange(b) | 78 | (4) | (82) | |||||||||||
Total | $ | 340 | $ | 1,118 | $ | 778 | ||||||||
Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | ||||||||||||||
Six months ended June 30, 2022 (in millions) | Amounts reclassified from AOCI to income | Amounts recorded in OCI | Total change in OCI for period | |||||||||||
Contract type | ||||||||||||||
Interest rate(a) | $ | 329 | $ | (4,870) | $ | (5,199) | ||||||||
Foreign exchange(b) | (68) | (316) | (248) | |||||||||||
Total | $ | 261 | $ | (5,186) | $ | (5,447) | ||||||||
Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | ||||||||||||||
Six months ended June 30, 2021 (in millions) | Amounts reclassified from AOCI to income | Amounts recorded in OCI | Total change in OCI for period | |||||||||||
Contract type | ||||||||||||||
Interest rate(a) | $ | 499 | $ | (1,639) | $ | (2,138) | ||||||||
Foreign exchange(b) | 105 | 62 | (43) | |||||||||||
Total | $ | 604 | $ | (1,577) | $ | (2,181) |
(a)Primarily consists of hedges of LIBOR-indexed and SOFR-indexed floating-rate assets. 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.
The Firm did not experience any forecasted transactions that failed to occur for the three and six months ended June 30, 2022 and 2021.
Over the next 12 months, the Firm expects that approximately $(1.1) billion (after-tax) of net losses recorded in AOCI at June 30, 2022, 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 eight 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 six years. The Firm’s longer-dated forecasted transactions relate to core lending and borrowing activities.
121
Net investment hedge gains and losses
The following table presents hedging instruments, by contract type, that were used in net investment hedge accounting relationships, and the pre-tax gains/(losses) recorded on such instruments for the three and six months ended June 30, 2022 and 2021.
Gains/(losses) recorded in income and other comprehensive income/(loss) | |||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Three months ended June 30, (in millions) | Amounts recorded in income(a)(b) | Amounts recorded in OCI | Amounts recorded in income(a)(b) | Amounts recorded in OCI | |||||||||||||||||||||||||
Foreign exchange derivatives | $ | (116) | $ | 3,520 | $ | (79) | $ | (270) | |||||||||||||||||||||
Gains/(losses) recorded in income and other comprehensive income/(loss) | |||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Six months ended June 30, (in millions) | Amounts recorded in income(a)(b) | Amounts recorded in OCI | Amounts recorded in income(a)(b) | Amounts recorded in OCI | |||||||||||||||||||||||||
Foreign exchange derivatives | $ | (247) | $ | 3,858 | $ | (107) | $ | 930 |
(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 amounts reclassified for the three and six months ended June 30, 2022 and 2021 were not material. Refer to Note 19 for further information.
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Gains and losses on derivatives used for specified risk management purposes
The following table presents pre-tax gains/(losses) recorded on a limited number of derivatives, not designated in hedge accounting relationships, that are used to manage risks associated with certain specified assets and liabilities, including certain risks arising from mortgage commitments, warehouse loans, MSRs, wholesale lending exposures, and foreign currency-denominated assets and liabilities.
Derivatives gains/(losses) recorded in income | |||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Contract type | |||||||||||||||||
Interest rate(a) | $ | (309) | $ | 644 | $ | (538) | $ | 502 | |||||||||
Credit(b) | 89 | (27) | 122 | (67) | |||||||||||||
Foreign exchange(c) | 6 | (30) | (76) | 68 | |||||||||||||
Total | $ | (214) | $ | 587 | $ | (492) | $ | 503 |
(a)Primarily represents interest rate derivatives used to hedge the interest rate risk inherent in mortgage commitments, warehouse loans and MSRs, as well as written commitments to originate warehouse loans. Gains and losses were recorded predominantly in mortgage fees and related income.
(b)Relates to credit derivatives used to mitigate credit risk associated with lending exposures in the Firm’s wholesale businesses. These derivatives do not include credit derivatives used to mitigate counterparty credit risk arising from derivative receivables, which is included in gains and losses on derivatives related to market-making activities and other derivatives. Gains and losses were recorded in principal transactions revenue.
(c)Primarily relates to derivatives used to mitigate foreign exchange risk of specified foreign currency-denominated assets and liabilities. Gains and losses were recorded in principal transactions revenue.
Gains and losses on derivatives related to market-making activities and other derivatives
The Firm makes markets in derivatives in order to meet the needs of customers and uses derivatives to manage certain risks associated with net open risk positions from its market-making activities, including the counterparty credit risk arising from derivative receivables. All derivatives not included in the hedge accounting or specified risk management categories above are included in this category. Gains and losses on these derivatives are primarily recorded in principal transactions revenue. Refer to Note 5 for information on principal transactions revenue.
123
Credit derivatives
Refer to Note 5 of JPMorgan Chase’s 2021 Form 10-K for a more detailed discussion of credit derivatives. The following tables present a summary of the notional amounts of credit derivatives and credit-related notes the Firm sold and purchased as of June 30, 2022 and December 31, 2021. The Firm does not use notional amounts of credit derivatives as the primary measure of risk management for such derivatives, because the notional amount does not take into account the probability of the occurrence of a credit event, the recovery value of the reference obligation, or related cash instruments and economic hedges, each of which reduces, in the Firm’s view, the risks associated with such derivatives.
Total credit derivatives and credit-related notes
Maximum payout/Notional amount | ||||||||||||||||||||||||||
June 30, 2022 (in millions) | Protection sold | Protection purchased with identical underlyings(c) | Net protection (sold)/purchased(d) | Other protection purchased(e) | ||||||||||||||||||||||
Credit derivatives | ||||||||||||||||||||||||||
Credit default swaps | $ | (473,223) | $ | 482,758 | $ | 9,535 | $ | 3,290 | ||||||||||||||||||
Other credit derivatives(a) | (52,837) | 68,842 | 16,005 | 16,088 | ||||||||||||||||||||||
Total credit derivatives | (526,060) | 551,600 | 25,540 | 19,378 | ||||||||||||||||||||||
Credit-related notes(b) | — | — | — | 9,004 | ||||||||||||||||||||||
Total | $ | (526,060) | $ | 551,600 | $ | 25,540 | $ | 28,382 | ||||||||||||||||||
Maximum payout/Notional amount | ||||||||||||||||||||||||||
December 31, 2021 (in millions) | Protection sold | Protection purchased with identical underlyings(c) | Net protection (sold)/purchased(d) | Other protection purchased(e) | ||||||||||||||||||||||
Credit derivatives | ||||||||||||||||||||||||||
Credit default swaps | $ | (443,481) | $ | 458,180 | $ | 14,699 | $ | 2,269 | ||||||||||||||||||
Other credit derivatives(a) | (56,130) | 79,586 | 23,456 | 13,435 | ||||||||||||||||||||||
Total credit derivatives | (499,611) | 537,766 | 38,155 | 15,704 | ||||||||||||||||||||||
Credit-related notes(b) | — | — | — | 9,437 | ||||||||||||||||||||||
Total | $ | (499,611) | $ | 537,766 | $ | 38,155 | $ | 25,141 |
(a)Other credit derivatives predominantly consist of credit swap options and total return swaps.
(b)Represents Other protection purchased by CIB, primarily in its market-making businesses.
(c)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.
(d)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.
(e)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 as of June 30, 2022, and December 31, 2021, 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 where JPMorgan Chase is the purchaser of protection are comparable to the profile reflected below.
Protection sold — credit derivatives ratings(a)/maturity profile | |||||||||||||||||||||||||||||||||||||||||
June 30, 2022 (in millions) | <1 year | 1–5 years | >5 years | Total notional amount | Fair value of receivables(b) | Fair value of payables(b) | Net fair value | ||||||||||||||||||||||||||||||||||
Risk rating of reference entity | |||||||||||||||||||||||||||||||||||||||||
Investment-grade | $ | (81,541) | $ | (278,902) | $ | (29,619) | $ | (390,062) | $ | 1,749 | $ | (2,470) | $ | (721) | |||||||||||||||||||||||||||
Noninvestment-grade | (36,026) | (92,132) | (7,840) | (135,998) | 867 | (5,278) | (4,411) | ||||||||||||||||||||||||||||||||||
Total | $ | (117,567) | $ | (371,034) | $ | (37,459) | $ | (526,060) | $ | 2,616 | $ | (7,748) | $ | (5,132) |
December 31, 2021 (in millions) | <1 year | 1–5 years | >5 years | Total notional amount | Fair value of receivables(b) | Fair value of payables(b) | Net fair value | ||||||||||||||||||||||||||||||||||
Risk rating of reference entity | |||||||||||||||||||||||||||||||||||||||||
Investment-grade | $ | (91,155) | $ | (255,106) | $ | (29,035) | $ | (375,296) | $ | 3,645 | $ | (623) | $ | 3,022 | |||||||||||||||||||||||||||
Noninvestment-grade | (32,175) | (84,851) | (7,289) | (124,315) | 2,630 | (2,003) | 627 | ||||||||||||||||||||||||||||||||||
Total | $ | (123,330) | $ | (339,957) | $ | (36,324) | $ | (499,611) | $ | 6,275 | $ | (2,626) | $ | 3,649 |
(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 including cash collateral netting.
124
Note 5 – Noninterest revenue and noninterest expense
Noninterest revenue
Refer to Note 6 of JPMorgan Chase’s 2021 Form 10-K for a discussion of the components of and accounting policies for the Firm’s noninterest revenue.
Investment banking fees
The following table presents the components of investment banking fees.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Underwriting | |||||||||||||||||||||||
Equity | $ | 230 | $ | 1,073 | $ | 472 | $ | 2,135 | |||||||||||||||
Debt | 711 | 1,473 | 1,685 | 2,694 | |||||||||||||||||||
Total underwriting | 941 | 2,546 | 2,157 | 4,829 | |||||||||||||||||||
Advisory | 645 | 924 | 1,437 | 1,611 | |||||||||||||||||||
Total investment banking fees | $ | 1,586 | $ | 3,470 | $ | 3,594 | $ | 6,440 |
Principal transactions
The following table presents all realized and unrealized gains and losses recorded in principal transactions revenue. This table excludes interest income and interest expense on trading assets and liabilities, which are an integral part of the overall performance of the Firm’s client-driven market-making activities in CIB and fund deployment activities in Treasury and CIO. Refer to Note 6 for further information on interest income and interest expense.
Trading revenue is presented primarily by instrument type. The Firm’s client-driven market-making businesses generally utilize a variety of instrument types in connection with their market-making and related risk-management activities; accordingly, the trading revenue presented in the table below is not representative of the total revenue of any individual LOB.
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
Trading revenue by instrument type | ||||||||||||||||||||||||||
Interest rate(a) | $ | 376 | $ | 464 | $ | 845 | $ | 1,387 | ||||||||||||||||||
Credit(b) | 279 | (c) | 759 | 736 | (c) | 2,029 | ||||||||||||||||||||
Foreign exchange | 1,425 | 641 | 2,749 | 1,639 | ||||||||||||||||||||||
Equity | 2,303 | 1,929 | 4,558 | 4,586 | ||||||||||||||||||||||
Commodity | 499 | 301 | 1,246 | 850 | ||||||||||||||||||||||
Total trading revenue | 4,882 | 4,094 | 10,134 | 10,491 | ||||||||||||||||||||||
Private equity gains/(losses) | 108 | (18) | (39) | 85 | ||||||||||||||||||||||
Principal transactions | $ | 4,990 | $ | 4,076 | $ | 10,095 | $ | 10,576 |
(a)Includes the impact of changes in funding valuation adjustments on derivatives.
(b)Includes the impact of changes in credit valuation adjustments on derivatives, net of the associated hedging activities.
(c)Includes markdowns on held-for-sale positions, primarily unfunded commitments, in the bridge financing portfolio.
Lending- and deposit-related fees
The following table presents the components of lending- and deposit-related fees.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Lending-related fees | $ | 362 | $ | 370 | $ | 724 | $ | 728 | |||||||||||||||
Deposit-related fees | 1,511 | 1,390 | 2,988 | 2,719 | |||||||||||||||||||
Total lending- and deposit-related fees | $ | 1,873 | $ | 1,760 | $ | 3,712 | $ | 3,447 |
Asset management, administration and commissions
The following table presents the components of asset management, administration and commissions.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Asset management fees | |||||||||||||||||||||||
Investment management fees(a) | $ | 3,425 | $ | 3,421 | $ | 6,987 | $ | 6,678 | |||||||||||||||
All other asset management fees(b) | 92 | 95 | 182 | 189 | |||||||||||||||||||
Total asset management fees | 3,517 | 3,516 | 7,169 | 6,867 | |||||||||||||||||||
Total administration fees(c) | 590 | 650 | 1,223 | 1,283 | |||||||||||||||||||
Commissions and other fees | |||||||||||||||||||||||
Brokerage commissions(d) | 738 | 761 | 1,548 | 1,561 | |||||||||||||||||||
All other commissions and fees | 395 | 267 | 662 | 512 | |||||||||||||||||||
Total commissions and fees | 1,133 | 1,028 | 2,210 | 2,073 | |||||||||||||||||||
Total asset management, administration and commissions | $ | 5,240 | $ | 5,194 | $ | 10,602 | $ | 10,223 |
(a)Represents fees earned from managing assets on behalf of the Firm’s clients, including investors in Firm-sponsored funds and owners of separately managed investment accounts.
(b)Represents fees for services that are ancillary to investment management services, such as commissions earned on the sales or distribution of mutual funds to clients.
(c)Predominantly includes fees for custody, securities lending, funds services and securities clearance.
(d)Represents commissions earned when the Firm acts as a broker, by facilitating its clients’ purchases and sales of securities and other financial instruments.
125
Card income
The following table presents the components of card income.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Interchange and merchant processing income | $ | 7,214 | $ | 5,974 | $ | 13,449 | $ | 10,842 | |||||||||||||||
Rewards costs and partner payments | (5,641) | (4,282) | (10,511) | (7,816) | |||||||||||||||||||
Other card income(a) | (440) | (45) | (830) | (29) | |||||||||||||||||||
Total card income | $ | 1,133 | $ | 1,647 | $ | 2,108 | $ | 2,997 |
(a)Predominantly represents the amortization of account origination costs and annual fees.
Refer to Note 14 for further information on mortgage fees and related income.
Refer to Note 16 for information on operating lease income included within other income.
Noninterest expense
Other expense
Other expense on the Firm’s Consolidated statements of income includes the following:
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Legal expense | $ | 73 | $ | 185 | $ | 192 | $ | 213 | |||||||||||||||
Note 6 – Interest income and Interest expense
Refer to Note 7 of JPMorgan Chase’s 2021 Form 10-K for a description of JPMorgan Chase’s accounting policies regarding interest income and interest expense.
The following table presents the components of interest income and interest expense.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Interest income | |||||||||||||||||||||||
Loans(a) | $ | 11,626 | $ | 10,145 | $ | 22,259 | $ | 20,332 | |||||||||||||||
Taxable securities | 2,289 | 1,577 | 4,268 | 3,182 | |||||||||||||||||||
Non-taxable securities(b) | 245 | 270 | 490 | 547 | |||||||||||||||||||
Total investment securities(a) | 2,534 | 1,847 | 4,758 | 3,729 | |||||||||||||||||||
Trading assets - debt instruments | 2,049 | 1,711 | 3,816 | 3,493 | |||||||||||||||||||
Federal funds sold and securities purchased under resale agreements | 543 | 175 | 940 | 408 | |||||||||||||||||||
Securities borrowed(c) | 173 | (90) | 86 | (167) | |||||||||||||||||||
Deposits with banks | 1,079 | 103 | 1,317 | 168 | |||||||||||||||||||
All other interest-earning assets(d) | 642 | 203 | 966 | 402 | |||||||||||||||||||
Total interest income | $ | 18,646 | $ | 14,094 | $ | 34,142 | $ | 28,365 | |||||||||||||||
Interest expense | |||||||||||||||||||||||
Interest-bearing deposits | $ | 898 | $ | 132 | $ | 1,080 | $ | 278 | |||||||||||||||
Federal funds purchased and securities loaned or sold under repurchase agreements | 468 | 60 | 585 | 75 | |||||||||||||||||||
Short-term borrowings(e) | 90 | 33 | 130 | 66 | |||||||||||||||||||
Trading liabilities – debt and all other interest-bearing liabilities(c)(f) | 471 | 51 | 662 | 78 | |||||||||||||||||||
Long-term debt | 1,561 | 1,056 | 2,637 | 2,190 | |||||||||||||||||||
Beneficial interest issued by consolidated VIEs | 30 | 21 | 48 | 48 | |||||||||||||||||||
Total interest expense | $ | 3,518 | $ | 1,353 | $ | 5,142 | $ | 2,735 | |||||||||||||||
Net interest income | $ | 15,128 | $ | 12,741 | $ | 29,000 | $ | 25,630 | |||||||||||||||
Provision for credit losses | 1,101 | (2,285) | 2,564 | (6,441) | |||||||||||||||||||
Net interest income after provision for credit losses | $ | 14,027 | $ | 15,026 | $ | 26,436 | $ | 32,071 |
(a)Includes the amortization/accretion of unearned income (e.g., purchase premiums/discounts and net deferred fees/costs).
(b)Represents securities which are tax-exempt for U.S. federal income tax purposes.
(c)Negative interest income is related to the impact of interest rates combined with the fees paid on client-driven securities borrowed balances. The negative interest expense related to prime brokerage customer payables is recognized in interest expense and reported within trading liabilities - debt and all other interest-bearing liabilities.
(d)Includes interest earned on 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.
(e)Includes commercial paper.
(f)All other interest-bearing liabilities includes interest expense on brokerage-related customer payables.
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Note 7 – Pension and other postretirement employee benefit plans
Refer to Note 8 of JPMorgan Chase’s 2021 Form 10-K for a discussion of JPMorgan Chase’s pension and OPEB plans.
The following table presents the net periodic benefit costs reported in the Consolidated statements of income for the Firm’s defined benefit pension, defined contribution and OPEB plans.
(in millions) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Pension and OPEB plans | Pension and OPEB plans | ||||||||||||||||||||||
Total net periodic defined benefit plan cost/(credit) | $ | (75) | $ | (60) | $ | (139) | $ | (119) | |||||||||||||||
Total defined contribution plans | 357 | 350 | 701 | 671 | |||||||||||||||||||
Total pension and OPEB cost included in noninterest expense | $ | 282 | $ | 290 | $ | 562 | $ | 552 | |||||||||||||||
At June 30, 2022 and December 31, 2021, the fair values of plan assets for the Firm’s defined benefit pension and OPEB plans were $20.9 billion and $25.7 billion, respectively.
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Note 8 – Employee share-based incentives
Refer to Note 9 of JPMorgan Chase’s 2021 Form 10-K for a discussion of the accounting policies and other information relating to employee share-based incentives.
The Firm recognized the following noncash compensation expense related to its various employee share-based incentive plans in its Consolidated statements of income.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Cost of prior grants of restricted stock units (“RSUs”), performance share units (“PSUs”) and stock appreciation rights (“SARs”) that are amortized over their applicable vesting periods | $ | 378 | $ | 280 | $ | 649 | $ | 636 | |||||||||||||||
Accrual of estimated costs of share-based awards to be granted in future periods, predominantly those to full-career eligible employees | 441 | 463 | 976 | 1,011 | |||||||||||||||||||
Total noncash compensation expense related to employee share-based incentive plans | $ | 819 | $ | 743 | $ | 1,625 | $ | 1,647 |
In the first quarter of 2022, in connection with its annual incentive grant for the 2021 performance year, the Firm granted 19 million RSUs and 720 thousand PSUs with weighted-average grant date fair values of $151.06 per RSU and $149.99 per PSU.
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Note 9 – Investment securities
Investment securities consist of debt securities that are classified as AFS or HTM. Debt securities classified as trading assets are discussed in Note 2. Predominantly all of the Firm’s AFS and HTM securities are held by Treasury and CIO in connection with its asset-liability management activities. At June 30, 2022, the investment securities portfolio consisted of debt securities with an average credit rating of AA+ (based upon external ratings where available, and where not available, based primarily upon internal risk ratings).
During the second quarter of 2022, the Firm transferred $73.2 billion of investment securities from AFS to HTM for capital management purposes. AOCI included pretax unrealized losses of $4.6 billion on the securities at the date of transfer.
Refer to Note 10 of JPMorgan Chase’s 2021 Form 10-K for additional information regarding the investment securities portfolio.
The amortized costs and estimated fair values of the investment securities portfolio were as follows for the dates indicated.
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
(in millions) | Amortized cost(b)(c) | Gross unrealized gains | Gross unrealized losses | Fair value | Amortized cost(b)(c) | Gross unrealized gains | Gross unrealized losses | Fair value | |||||||||||||||||||||||||||
Available-for-sale securities | |||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||
U.S. GSEs and government agencies | $ | 68,511 | $ | 252 | $ | 5,074 | $ | 63,689 | $ | 72,800 | $ | 736 | $ | 993 | $ | 72,543 | |||||||||||||||||||
Residential: | |||||||||||||||||||||||||||||||||||
U.S. | 1,764 | 1 | 55 | 1,710 | 2,128 | 38 | 2 | 2,164 | |||||||||||||||||||||||||||
Non-U.S. | 3,776 | 9 | 20 | 3,765 | 3,882 | 25 | 1 | 3,906 | |||||||||||||||||||||||||||
Commercial | 2,271 | — | 118 | 2,153 | 4,944 | 22 | 17 | 4,949 | |||||||||||||||||||||||||||
Total mortgage-backed securities | 76,322 | 262 | 5,267 | 71,317 | 83,754 | 821 | 1,013 | 83,562 | |||||||||||||||||||||||||||
U.S. Treasury and government agencies | 113,811 | 323 | 4,150 | 109,984 | 178,038 | 668 | 1,243 | 177,463 | |||||||||||||||||||||||||||
Obligations of U.S. states and municipalities | 10,381 | 98 | 346 | 10,133 | 14,890 | 972 | 2 | 15,860 | |||||||||||||||||||||||||||
Non-U.S. government debt securities | 16,223 | 36 | 451 | 15,808 | 16,163 | 92 | 46 | 16,209 | |||||||||||||||||||||||||||
Corporate debt securities | 353 | — | 34 | 319 | 332 | 8 | 19 | 321 | |||||||||||||||||||||||||||
Asset-backed securities: | |||||||||||||||||||||||||||||||||||
Collateralized loan obligations | 11,268 | 1 | 297 | 10,972 | 9,674 | 6 | 18 | 9,662 | |||||||||||||||||||||||||||
Other | 3,546 | 23 | 33 | 3,536 | 5,403 | 47 | 2 | 5,448 | |||||||||||||||||||||||||||
Total available-for-sale securities | 231,904 | 743 | 10,578 | 222,069 | 308,254 | 2,614 | 2,343 | 308,525 | |||||||||||||||||||||||||||
Held-to-maturity securities(a) | |||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||
U.S. GSEs and government agencies | 117,088 | 7 | 8,734 | 108,361 | 102,556 | 1,400 | 853 | 103,103 | |||||||||||||||||||||||||||
U.S. Residential | 11,206 | 1 | 834 | 10,373 | 7,316 | 1 | 106 | 7,211 | |||||||||||||||||||||||||||
Commercial | 10,076 | 2 | 545 | 9,533 | 3,730 | 11 | 54 | 3,687 | |||||||||||||||||||||||||||
Total mortgage-backed securities | 138,370 | 10 | 10,113 | 128,267 | 113,602 | 1,412 | 1,013 | 114,001 | |||||||||||||||||||||||||||
U.S. Treasury and government agencies | 226,362 | — | 13,506 | 212,856 | 185,204 | 169 | 2,103 | 183,270 | |||||||||||||||||||||||||||
Obligations of U.S. states and municipalities | 19,167 | 78 | 939 | 18,306 | 13,985 | 453 | 44 | 14,394 | |||||||||||||||||||||||||||
Asset-backed securities: | |||||||||||||||||||||||||||||||||||
Collateralized loan obligations | 55,121 | — | 1,521 | 53,600 | 48,869 | 75 | 22 | 48,922 | |||||||||||||||||||||||||||
Other | 2,629 | — | 71 | 2,558 | 2,047 | 1 | 7 | 2,041 | |||||||||||||||||||||||||||
Total held-to-maturity securities | 441,649 | 88 | 26,150 | 415,587 | 363,707 | 2,110 | 3,189 | 362,628 | |||||||||||||||||||||||||||
Total investment securities, net of allowance for credit losses | $ | 673,553 | $ | 831 | $ | 36,728 | $ | 637,656 | $ | 671,961 | $ | 4,724 | $ | 5,532 | $ | 671,153 | |||||||||||||||||||
(a)The Firm purchased $14.3 billion and $27.5 billion of HTM securities for the three and six months ended June 30, 2022, respectively, and $31.8 billion and $63.1 billion for the three and six months ended June 30, 2021, respectively.
(b)The amortized cost of investment securities is reported net of allowance for credit losses of $47 million and $42 million at June 30, 2022 and December 31, 2021, respectively.
(c)Excludes $2.0 billion and $1.9 billion of accrued interest receivables at June 30, 2022 and December 31, 2021, respectively. The Firm did not reverse through interest income any accrued interest receivables for the three and six months ended June 30, 2022 and 2021. Refer to Note 10 of JPMorgan Chase’s 2021 Form 10-K for further discussion of accounting policies for accrued interest receivables on investment securities.
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AFS securities impairment
The following tables present the fair value and gross unrealized losses by aging category for AFS securities at June 30, 2022 and December 31, 2021. The tables exclude U.S. Treasury and government agency securities and U.S. GSE and government agency MBS with unrealized losses of $9.2 billion and $2.2 billion, at June 30, 2022 and December 31, 2021, respectively; changes in the value of these securities are generally driven by changes in interest rates rather than changes in their credit profile given the explicit or implicit guarantees provided by the U.S. government.
Available-for-sale securities with gross unrealized losses | |||||||||||||||||||||||
Less than 12 months | 12 months or more | ||||||||||||||||||||||
June 30, 2022 (in millions) | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Total fair value | Total gross unrealized losses | |||||||||||||||||
Available-for-sale securities | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
Residential: | |||||||||||||||||||||||
U.S. | $ | 1,603 | $ | 54 | $ | 30 | $ | 1 | $ | 1,633 | $ | 55 | |||||||||||
Non-U.S. | 3,392 | 20 | — | — | 3,392 | 20 | |||||||||||||||||
Commercial | 1,827 | 93 | 326 | 25 | 2,153 | 118 | |||||||||||||||||
Total mortgage-backed securities | 6,822 | 167 | 356 | 26 | 7,178 | 193 | |||||||||||||||||
Obligations of U.S. states and municipalities | 4,258 | 341 | 13 | 5 | 4,271 | 346 | |||||||||||||||||
Non-U.S. government debt securities | 9,832 | 374 | 1,313 | 77 | 11,145 | 451 | |||||||||||||||||
Corporate debt securities | 249 | 4 | 37 | 30 | 286 | 34 | |||||||||||||||||
Asset-backed securities: | |||||||||||||||||||||||
Collateralized loan obligations | 9,392 | 258 | 1,538 | 39 | 10,930 | 297 | |||||||||||||||||
Other | 2,606 | 30 | 149 | 3 | 2,755 | 33 | |||||||||||||||||
Total available-for-sale securities with gross unrealized losses | $ | 33,159 | $ | 1,174 | $ | 3,406 | $ | 180 | $ | 36,565 | $ | 1,354 | |||||||||||
Available-for-sale securities with gross unrealized losses | |||||||||||||||||||||||
Less than 12 months | 12 months or more | ||||||||||||||||||||||
December 31, 2021 (in millions) | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Total fair value | Total gross unrealized losses | |||||||||||||||||
Available-for-sale securities | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
Residential: | |||||||||||||||||||||||
U.S. | $ | 303 | $ | 1 | $ | 45 | $ | 1 | $ | 348 | $ | 2 | |||||||||||
Non-U.S. | 133 | 1 | — | — | 133 | 1 | |||||||||||||||||
Commercial | 2,557 | 5 | 349 | 12 | 2,906 | 17 | |||||||||||||||||
Total mortgage-backed securities | 2,993 | 7 | 394 | 13 | 3,387 | 20 | |||||||||||||||||
Obligations of U.S. states and municipalities | 120 | 2 | — | — | 120 | 2 | |||||||||||||||||
Non-U.S. government debt securities | 5,060 | 37 | 510 | 9 | 5,570 | 46 | |||||||||||||||||
Corporate debt securities | 166 | 1 | 46 | 18 | 212 | 19 | |||||||||||||||||
Asset-backed securities: | |||||||||||||||||||||||
Collateralized loan obligations | 8,110 | 18 | 208 | — | 8,318 | 18 | |||||||||||||||||
Other | 89 | — | 178 | 2 | 267 | 2 | |||||||||||||||||
Total available-for-sale securities with gross unrealized losses | $ | 16,538 | $ | 65 | $ | 1,336 | $ | 42 | $ | 17,874 | $ | 107 |
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HTM securities – credit risk
Credit quality indicator
The primary credit quality indicator for HTM securities is the risk rating assigned to each security. At both June 30, 2022 and December 31, 2021, all HTM securities were rated investment grade and were current and accruing, with approximately 98% rated at least AA+.
Allowance for credit losses on investment securities
The allowance for credit losses on investment securities was $47 million and $87 million as of June 30, 2022 and 2021, respectively.
Refer to Note 10 of JPMorgan Chase’s 2021 Form 10-K for further discussion of accounting policies for AFS and HTM securities.
Selected impacts of investment securities on the Consolidated statements of income
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
Realized gains | $ | 69 | $ | 184 | $ | 82 | $ | 421 | ||||||||||||
Realized losses | (222) | (339) | (629) | (562) | ||||||||||||||||
Investment securities gains/(losses) | $ | (153) | $ | (155) | $ | (547) | $ | (141) | ||||||||||||
Provision for credit losses | $ | 6 | $ | (7) | $ | 5 | $ | 9 |
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Contractual maturities and yields
The following table presents the amortized cost and estimated fair value at June 30, 2022, of JPMorgan Chase’s investment securities portfolio by contractual maturity.
By remaining maturity June 30, 2022 (in millions) | Due in one year or less | Due after one year through five years | Due after five years through 10 years | Due after 10 years(b) | Total | |||||||||||||||
Available-for-sale securities | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
Amortized cost | $ | 2 | $ | 3,358 | $ | 4,197 | $ | 68,765 | $ | 76,322 | ||||||||||
Fair value | 2 | 3,197 | 4,296 | 63,822 | 71,317 | |||||||||||||||
Average yield(a) | 0.23 | % | 1.08 | % | 2.56 | % | 2.73 | % | 2.64 | % | ||||||||||
U.S. Treasury and government agencies | ||||||||||||||||||||
Amortized cost | $ | 12,135 | $ | 84,714 | $ | 10,105 | $ | 6,857 | $ | 113,811 | ||||||||||
Fair value | 12,106 | 81,398 | 9,460 | 7,020 | 109,984 | |||||||||||||||
Average yield(a) | 1.56 | % | 0.54 | % | 1.60 | % | 1.89 | % | 0.83 | % | ||||||||||
Obligations of U.S. states and municipalities | ||||||||||||||||||||
Amortized cost | $ | 17 | $ | 132 | $ | 801 | $ | 9,431 | $ | 10,381 | ||||||||||
Fair value | 17 | 132 | 812 | 9,172 | 10,133 | |||||||||||||||
Average yield(a) | 5.75 | % | 4.91 | % | 4.71 | % | 4.32 | % | 4.36 | % | ||||||||||
Non-U.S. government debt securities | ||||||||||||||||||||
Amortized cost | $ | 6,924 | $ | 4,608 | $ | 3,530 | $ | 1,161 | $ | 16,223 | ||||||||||
Fair value | 6,920 | 4,507 | 3,315 | 1,066 | 15,808 | |||||||||||||||
Average yield(a) | 1.94 | % | 2.59 | % | 1.30 | % | 1.18 | % | 1.93 | % | ||||||||||
Corporate debt securities | ||||||||||||||||||||
Amortized cost | $ | — | $ | 339 | $ | 14 | $ | — | $ | 353 | ||||||||||
Fair value | — | 306 | 13 | — | 319 | |||||||||||||||
Average yield(a) | — | % | 12.26 | % | 2.33 | % | — | % | 11.86 | % | ||||||||||
Asset-backed securities | ||||||||||||||||||||
Amortized cost | $ | 112 | $ | 1,730 | $ | 3,697 | $ | 9,275 | $ | 14,814 | ||||||||||
Fair value | 110 | 1,715 | 3,635 | 9,048 | 14,508 | |||||||||||||||
Average yield(a) | 1.88 | % | 2.99 | % | 2.09 | % | 2.38 | % | 2.37 | % | ||||||||||
Total available-for-sale securities | ||||||||||||||||||||
Amortized cost | $ | 19,190 | $ | 94,881 | $ | 22,344 | $ | 95,489 | $ | 231,904 | ||||||||||
Fair value | 19,155 | 91,255 | 21,531 | 90,128 | 222,069 | |||||||||||||||
Average yield(a) | 1.70 | % | 0.75 | % | 1.93 | % | 2.77 | % | 1.78 | % | ||||||||||
Held-to-maturity securities | ||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||
Amortized cost | $ | — | $ | 1,736 | $ | 11,890 | $ | 124,754 | $ | 138,380 | ||||||||||
Fair value | — | 1,652 | 10,975 | 115,640 | 128,267 | |||||||||||||||
Average yield(a) | — | % | 1.99 | % | 2.44 | % | 2.78 | % | 2.74 | % | ||||||||||
U.S. Treasury and government agencies | ||||||||||||||||||||
Amortized cost | $ | 24,373 | $ | 132,070 | $ | 69,919 | $ | — | $ | 226,362 | ||||||||||
Fair value | 24,162 | 126,512 | 62,182 | — | 212,856 | |||||||||||||||
Average yield(a) | 0.63 | % | 0.67 | % | 1.25 | % | — | % | 0.84 | % | ||||||||||
Obligations of U.S. states and municipalities | ||||||||||||||||||||
Amortized cost | $ | — | $ | 79 | $ | 2,014 | $ | 17,111 | $ | 19,204 | ||||||||||
Fair value | — | 75 | 2,000 | 16,231 | 18,306 | |||||||||||||||
Average yield(a) | — | % | 2.96 | % | 3.96 | % | 4.13 | % | 4.10 | % | ||||||||||
Asset-backed securities | ||||||||||||||||||||
Amortized cost | $ | — | $ | — | $ | 15,143 | $ | 42,607 | $ | 57,750 | ||||||||||
Fair value | — | — | 14,928 | 41,230 | 56,158 | |||||||||||||||
Average yield(a) | — | % | — | % | 2.01 | % | 2.02 | % | 2.02 | % | ||||||||||
Total held-to-maturity securities | ||||||||||||||||||||
Amortized cost | $ | 24,373 | $ | 133,885 | $ | 98,966 | $ | 184,472 | $ | 441,696 | ||||||||||
Fair value | 24,162 | 128,239 | 90,085 | 173,101 | 415,587 | |||||||||||||||
Average yield(a) | 0.63 | % | 0.69 | % | 1.56 | % | 2.73 | % | 1.73 | % |
(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. However, for certain callable debt securities, the average yield is calculated to the earliest call date.
(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 eight years for agency residential MBS, seven years for agency residential collateralized mortgage obligations and six years for nonagency residential collateralized mortgage obligations.
132
Note 10 – Securities financing activities
Refer to Note 11 of JPMorgan Chase’s 2021 Form 10-K for a discussion of accounting policies relating to securities financing activities. Refer to Note 3 for further information regarding securities borrowed and securities lending agreements for which the fair value option has been elected. Refer to Note 23 for further information regarding assets pledged and collateral received in securities financing agreements.
The table below summarizes the gross and net amounts of the Firm’s securities financing agreements as of June 30, 2022 and December 31, 2021. When the Firm has obtained an appropriate legal opinion with respect to a master netting agreement with a counterparty and where other relevant netting criteria under U.S. GAAP are met, the Firm nets, on the Consolidated balance sheets, the balances outstanding under its securities financing agreements with the same counterparty. In addition, the Firm exchanges securities and/or cash collateral with its counterparty to reduce the economic exposure with the counterparty, but
such collateral is not eligible for net Consolidated balance sheet presentation. Where the Firm has obtained an appropriate legal opinion with respect to the counterparty master netting agreement, such collateral, along with securities financing balances that do not meet all these relevant netting criteria under U.S. GAAP, is presented in the table below as “Amounts not nettable on the Consolidated balance sheets,” and reduces the “Net amounts” presented. Where a legal opinion has not been either sought or obtained, the securities financing balances are presented gross in the “Net amounts” below. In transactions where the Firm is acting as the lender in a securities-for-securities lending agreement and receives securities that can be pledged or sold as collateral, 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 on the Consolidated balance sheets.
June 30, 2022 | ||||||||||||||||||||
(in millions) | Gross amounts | Amounts netted on the Consolidated balance sheets | Amounts presented on the Consolidated balance sheets | Amounts not nettable on the Consolidated balance sheets(b) | Net amounts(c) | |||||||||||||||
Assets | ||||||||||||||||||||
Securities purchased under resale agreements | $ | 615,597 | $ | (293,460) | $ | 322,137 | $ | (313,022) | $ | 9,115 | ||||||||||
Securities borrowed | 243,655 | (41,262) | 202,393 | (146,087) | 56,306 | |||||||||||||||
Liabilities | ||||||||||||||||||||
Securities sold under repurchase agreements | $ | 511,697 | $ | (293,460) | $ | 218,237 | $ | (184,439) | $ | 33,798 | ||||||||||
Securities loaned and other(a) | 54,094 | (41,262) | 12,832 | (12,777) | 55 |
December 31, 2021 | ||||||||||||||||||||
(in millions) | Gross amounts | Amounts netted on the Consolidated balance sheets | Amounts presented on the Consolidated balance sheets | Amounts not nettable on the Consolidated balance sheets |