JPMORGAN CHASE & CO | 2013 | FY | 3


Credit risk concentrations
Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities in the same geographic region, or when they have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions.
JPMorgan Chase regularly monitors various segments of its credit portfolios to assess potential concentration risks and to obtain collateral when deemed necessary. Senior management is significantly involved in the credit approval and review process, and risk levels are adjusted as needed to reflect the Firm’s risk appetite.
In the Firm’s consumer portfolio, concentrations are evaluated primarily by product and by U.S. geographic region, with a key focus on trends and concentrations at the portfolio level, where potential risk concentrations can be remedied through changes in underwriting policies and portfolio guidelines. In the wholesale portfolio, risk concentrations are evaluated primarily by industry and monitored regularly on both an aggregate portfolio level and on an individual customer basis. Management of the Firm’s wholesale exposure is accomplished through loan syndications and participations, loan sales, securitizations, credit derivatives, use of master netting agreements, and collateral and other risk-reduction techniques. For
additional information on loans see Note 14 on pages 258–283 of this Annual Report.
The Firm does not believe that its exposure to any particular loan product (e.g., option adjustable rate mortgages (“ARMs”)), industry segment (e.g., commercial real estate) or its exposure to residential real estate loans with high loan-to-value ratios results in a significant concentration of credit risk. Terms of loan products and collateral coverage are included in the Firm’s assessment when extending credit and establishing its allowance for loan losses.
Customer receivables representing primarily margin loans to prime and retail brokerage clients of $26.9 billion and $23.8 billion at December 31, 2013 and 2012, respectively, are included in the table below. These margin loans are generally over-collateralized through a pledge of assets maintained in clients’ brokerage accounts and are subject to daily minimum collateral requirements. In the event that the collateral value decreases, a maintenance margin call is made to the client to provide additional collateral into the account. If additional collateral is not provided by the client, the client’s positions may be liquidated by the Firm to meet the minimum collateral requirements. As a result of the Firm’s credit risk mitigation practices, the Firm did not hold any reserves for credit impairment on these receivables as of December 31, 2013 and 2012.
The table below presents both on–balance sheet and off–balance sheet consumer and wholesale-related credit exposure by the Firm’s three credit portfolio segments as of December 31, 2013 and 2012.
 
2013
 
2012
 
Credit exposure
On-balance sheet
Off-balance sheet(b)
 
Credit exposure
On-balance sheet
Off-balance sheet(b)
December 31, (in millions)
Loans
Derivatives
 
Loans
Derivatives
Total consumer, excluding credit card
$
345,259

$
289,063

$

$
56,057

 
$
352,889

$
292,620

$

$
60,156

Total credit card
657,174

127,791


529,383

 
661,011

127,993


533,018

Total consumer
1,002,433

416,854


585,440

 
1,013,900

420,613


593,174

Wholesale-related
 
 
 
 
 
 
 
 
 
Real Estate
87,102

69,151

460

17,491

 
76,198

60,740

1,084

14,374

Banks & Finance Cos
66,881

25,482

18,888

22,511

 
73,318

26,651

19,846

26,821

Oil & Gas
46,934

14,383

2,203

30,348

 
42,563

14,704

2,345

25,514

Healthcare
45,910

13,319

3,202

29,389

 
48,487

11,638

3,359

33,490

State & Municipal Govt
35,666

8,708

3,319

23,639

 
41,821

7,998

5,138

28,685

Consumer Products
34,145

9,099

715

24,331

 
32,778

9,151

826

22,801

Asset Managers
33,506

5,656

7,175

20,675

 
31,474

6,220

8,390

16,864

Utilities
28,983

5,582

2,248

21,153

 
29,533

6,814

2,649

20,070

Retail & Consumer Services
25,068

7,504

273

17,291

 
25,597

7,901

429

17,267

Technology
21,403

4,426

1,392

15,585

 
18,488

3,806

1,192

13,490

Central Govt
21,049

1,754

9,998

9,297

 
21,223

1,333

11,232

8,658

Machinery & Equipment Mfg
19,078

5,969

476

12,633

 
18,504

6,304

592

11,608

Metals/Mining
17,434

5,825

560

11,049

 
20,958

6,059

624

14,275

Business Services
14,601

4,497

594

9,510

 
13,577

4,550

190

8,837

Transportation
13,975

6,845

621

6,509

 
19,827

12,763

673

6,391

All other(a)
308,519

120,063

13,635

174,821

 
301,673

119,590

16,414

165,669

Subtotal
820,254

308,263

65,759

446,232

 
816,019

306,222

74,983

434,814

Loans held-for-sale and loans at fair value
13,301

13,301



 
6,961

6,961



Receivables from customers and other
26,744




 
23,648




Total wholesale-related
860,299

321,564

65,759

446,232

 
$
846,628

$
313,183

74,983

434,814

Total exposure(c)
$
1,862,732

$
738,418

$
65,759

$
1,031,672

 
$
1,860,528

$
733,796

$
74,983

$
1,027,988

(a)
For more information on exposures to SPEs included within All other see Note 16 on pages 288–299 of this Annual Report.
(b)
Represents lending-related financial instruments.
(c)
For further information regarding on–balance sheet credit concentrations by major product and/or geography, see Notes 6, 14 and 15 on pages 220–233, 258–283 and 284–287, respectively, of this Annual Report. For information regarding concentrations of off–balance sheet lending-related financial instruments by major product, see Note 29 on pages 318–324 of this Annual Report.

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