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JPM JPMorgan Chase & Co.

Filed: 7 May 20, 4:37pm
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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 
March 31, 2020
 number1-5805 
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 classTrading Symbol(s)Name of each exchange on which registered
Common stockJPMThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.10% Non-Cumulative Preferred Stock, Series AAJPM PR GThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.15% Non-Cumulative Preferred Stock, Series BBJPM PR HThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 5.75% Non-Cumulative Preferred Stock, Series DDJPM PR DThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.00% Non-Cumulative Preferred Stock, Series EEJPM PR CThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 4.75% Non-Cumulative Preferred Stock, Series GGJPM PR JThe New York Stock Exchange
Alerian MLP Index ETNs due May 24, 2024AMJNYSE Arca, Inc.
Guarantee of Callable Step-Up Fixed Rate Notes due April 26, 2028 of JPMorgan Chase Financial Company LLCJPM/28The 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 filerSmaller 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 March 31, 2020: 3,047,022,877
 



FORM 10-Q
TABLE OF CONTENTS
Page
Item 1. 
  
 80
 81
 82
 83
 84
 85
 169
 170
 171
Item 2. 
 3
 4
 5
 12
 15
 18
 19
 21
 38
 39
 45
 52
 56
 66
 67
 72
 73
 74
 75
 78
 79
Item 3.180
Item 4.180
 
Item 1.180
Item 1A.180
Item 2.181
Item 3.182
Item 4.182
Item 5.182
Item 6.182


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)

     
1Q20
4Q19
3Q19
2Q19
1Q19
Selected income statement data     
Total net revenue$28,251
$28,331
$29,341
$28,832
$29,123
Total noninterest expense16,850
16,339
16,422
16,341
16,395
Pre-provision profit(a)
11,401
11,992
12,919
12,491
12,728
Provision for credit losses8,285
1,427
1,514
1,149
1,495
Income before income tax expense3,116
10,565
11,405
11,342
11,233
Income tax expense251
2,045
2,325
1,690
2,054
Net income$2,865
$8,520
$9,080
$9,652
$9,179
      
Earnings per share data     
Net income:        Basic$0.79
$2.58
$2.69
$2.83
$2.65
        Diluted0.78
2.57
2.68
2.82
2.65
Average shares: Basic3,095.8
3,140.7
3,198.5
3,250.6
3,298.0
        Diluted3,100.7
3,148.5
3,207.2
3,259.7
3,308.2
      
Market and per common share data     
Market capitalization274,323
429,913
369,133
357,479
328,387
Common shares at period-end3,047.0
3,084.0
3,136.5
3,197.5
3,244.0
Book value per share75.88
75.98
75.24
73.88
71.78
Tangible book value per share (“TBVPS”)(a)
60.71
60.98
60.48
59.52
57.62
Cash dividends declared per share0.90
0.90
0.90
0.80
0.80
      
Selected ratios and metrics     
Return on common equity (“ROE”)(b)
4%14%15%16%16%
Return on tangible common equity (“ROTCE”)(a)(b)
5
17
18
20
19
Return on assets(b)
0.40
1.22
1.30
1.41
1.39
Overhead ratio60
58
56
57
56
Loans-to-deposits ratio55
61
62
63
64
Liquidity coverage ratio (“LCR”) (average)114
116
115
113
111
Common equity Tier 1 (“CET1”) capital ratio(c)
11.5
12.4
12.3
12.2
12.1
Tier 1 capital ratio(c)
13.3
14.1
14.1
14.0
13.8
Total capital ratio(c)
15.5
16.0
15.9
15.8
15.7
Tier 1 leverage ratio(c)
7.5
7.9
7.9
8.0
8.1
Supplementary leverage ratio (“SLR”)(c)
6.0
6.3
6.3
6.4
6.4
      
Selected balance sheet data (period-end)     
Trading assets$548,580
$411,103
$495,875
$523,373
$533,402
Investment securities, net of allowance for credit losses471,144
398,239
394,251
307,264
267,365
Loans1,015,375
959,769
945,218
956,889
956,245
Total assets3,139,431
2,687,379
2,764,661
2,727,379
2,737,188
Deposits1,836,009
1,562,431
1,525,261
1,524,361
1,493,441
Long-term debt299,344
291,498
296,472
288,869
290,893
Common stockholders’ equity231,199
234,337
235,985
236,222
232,844
Total stockholders’ equity261,262
261,330
264,348
263,215
259,837
Headcount256,720
256,981
257,444
254,983
255,998
      
Credit quality metrics     
Allowances for loan losses and lending-related commitments$25,391
$14,314
$14,400
$14,295
$14,591
Allowance for loan losses to total retained loans2.32%1.39%1.42%1.39%1.43%
Nonperforming assets$6,421
$4,497
$5,343
$5,260
$5,616
Net charge-offs1,469
1,494
1,371
1,403
1,361
Net charge-off rate0.62%0.63%0.58%0.60%0.58%
Effective January 1, 2020, the Firm adopted the Financial Instruments – Credit Losses (“CECL”) accounting guidance. Refer to Note 1 for further information.
(a)Pre-provision profit, TBVPS and ROTCE are each non-GAAP financial measures. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 19–20 for a further discussion of these measures.
(b)Quarterly ratios are based upon annualized amounts.
(c)As of March 31, 2020, the capital measures reflect the CECL capital transition provisions. Refer to Capital Risk Management on pages 85-92 of JPMorgan Chase’s 2019 Form 10-K and pages 39–44 of this Form 10-Q for additional information on these measures.


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 first quarter of 2020.
This Quarterly Report on Form 10-Q for the first quarter of 2020 (“Form 10-Q”) should be read together with JPMorgan Chase’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). Refer to the Glossary of terms and acronyms and line of business (“LOB”) metrics on pages 171–179 for definitions of terms and acronyms used throughout this Form 10-Q.
This document 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. 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, refer to Forward-looking Statements on page 79 of this Form 10-Q, Part II, Item 1A, Risk Factors on pages 180-181 of this Form 10-Q and Part I, Item 1A, Risk factors, on pages 6-28 of the 2019 Form 10-K.
JPMorgan Chase & Co. (NYSE: JPM), a financial holding company incorporated under Delaware law in 1968, is a leading global financial services firm and one of the largest banking institutions in the United States of America (U.S.), with operations worldwide; JPMorgan Chase had $3.1 trillion in assets and $261.3 billion in stockholders’
 
equity as of March 31, 2020. 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 in the U.S. and many of the world’s most prominent corporate, institutional and government clients.
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 38 states and Washington, D.C. as of March 31, 2020. 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 subsidiary outside the U.S. is J.P. Morgan Securities plc, a U.K.-based subsidiary of JPMorgan Chase Bank, N.A.
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 Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM). For a description of the Firm’s business segments and the products and services they provide to their respective
client bases, refer to Note 26 of this Form 10-Q and Note 32 of JPMorgan Chase’s 2019 Form 10-K.



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 and its various LOBs, this Form 10-Q and the 2019 Form 10-K should be read together and in their entirety.
Effective January 1, 2020, the Firm adopted the CECL accounting guidance. Refer to Note 1 for further information.
Financial performance of JPMorgan Chase  
(unaudited)
As of or for the period ended,
(in millions, except per share data and ratios)
Three months ended March 31,
2020
 2019
 Change
Selected income statement data     
Total net revenue$28,251
 $29,123
 (3)%
Total noninterest expense16,850
 16,395
 3
Pre-provision profit11,401
 12,728
 (10)
Provision for credit losses8,285
 1,495
 454
Net income2,865
 9,179
 (69)
Diluted earnings per share$0.78
 $2.65
 (71)
Selected ratios and metrics     
Return on common equity4% 16%  
Return on tangible common equity5
 19
  
Book value per share$75.88
 $71.78
 6
Tangible book value per share60.71
 57.62
 5
Capital ratios(a)
     
CET111.5% 12.1%  
Tier 1 capital13.3
 13.8
  
Total capital15.5
 15.7
  
(a)As of March 31, 2020, the capital measures reflect the CECL capital transition provisions. Refer to Capital Risk Management on pages 85-92 of JPMorgan Chase’s 2019 Form 10-K and pages 39–44 of this Form 10-Q for additional information on these measures.

Comparisons noted in the sections below are for the first quarter of 2020 versus the first quarter of 2019, unless otherwise specified.
Firmwide overview
JPMorgan Chase reported net income of $2.9 billion for the first quarter of 2020, or $0.78 per share, on net revenue of $28.3 billion. The Firm reported ROE of 4% and ROTCE of 5%. The Firm recorded a number of significant items in the first quarter of 2020, including an addition to the allowance for credit losses of $6.8 billion, a $951 million loss in Credit Adjustments & Other in CIB predominantly driven by funding spread widening on derivatives, and $896 million of markdowns on held-for-sale positions, including unfunded commitments, in the bridge financing portfolio in CIB and CB.
Net income was down 69%, predominantly driven by an increase in the provision for credit losses across the Firm reflecting deterioration in the macroeconomic environment as a result of the impact of the COVID-19 pandemic and continued pressure on oil prices.
Total net revenue decreased 3%. Net interest income was $14.4 billion, flat versus the prior year, with the impact of lower rates offset by balance sheet growth and mix, as
 
well as higher net interest income in CIB Markets. Noninterest revenue was $13.8 billion, down 6%. The reduction in revenue included a $951 million loss in Credit Adjustments & Other in CIB predominantly driven by funding spread widening on derivatives and $896 million of markdowns on held-for-sale positions, including unfunded commitments, in the bridge financing portfolio in CIB and CB; these items were partially offset by higher CIB Markets noninterest revenue.
Noninterest expense was $16.9 billion, up 3%, driven by higher volume- and revenue-related expense and investments, as well as higher legal expense, partially offset by lower structural expense.
The provision for credit losses was $8.3 billion, up $6.8 billion from the prior year driven by the additions to the allowance for credit losses.
The total allowance for credit losses was $25.4 billion at March 31, 2020, and the Firm had a loan loss coverage ratio of 2.32%, compared with 1.43% in the prior year, driven by the additions to allowance for credit losses and the adoption of CECL. The Firm’s nonperforming assets totaled $6.4 billion at March 31, 2020, an increase from $5.6 billion in the prior year, driven by the inclusion of purchased credit deteriorated loans in the mortgage portfolio, which are subject to nonaccrual loan treatment following the adoption of CECL.
Firmwide end-of-period (“EOP”) loans of $1.0 trillion were up 6% driven by drawdowns on committed revolving credit facilities in March within the wholesale LOBs. Excluding the impact of certain loan sales in Home Lending, EOP loans would have been up 9%. Firmwide average loans were $963 billion, down 1%. Excluding the impact of certain loan sales in Home Lending, average loans would have been up 3%.
On March 15, 2020, in response to the COVID-19 pandemic, the Firm temporarily suspended share repurchases through the second quarter of 2020.
Selected capital-related metrics
The Firm’s CET1 capital was $184 billion, and the Standardized and Advanced CET1 ratios were 11.5% and 12.3%, respectively.
The Firm’s SLR was 6.0%.
The Firm grew TBVPS, ending the first quarter of 2020 at $60.71, up 5% versus the prior year.
ROTCE and TBVPS are non-GAAP financial measures. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 19–20 for a further discussion of each of these measures.

5


Business segment highlights
Selected business metrics for each of the Firm’s four LOBs are presented below for the first quarter of 2020.
CCB
ROE
1%
 
EOP loans down 7%; Home Lending loans down 15% impacted by loan sales; credit card loans up 2%
EOP Deposits up 10%; client investment assets up 3%; credit card sales volume up 4%
Provision for credit losses of $5.8 billion, including an addition to the allowance for credit losses of $4.5 billion
CIB
ROE
9%
 
#1 ranking for Global Investment Banking fees with 9.1% wallet share in 1Q20
Total Markets revenue of $7.2 billion, up 32%
EOP loans up 30%; deposits up 37%
Provision for credit losses of $1.4 billion, including an addition to the allowance for credit losses of $1.3 billion
CB
ROE
2%
 
Gross Investment Banking revenue of $686 million, down 16%
EOP loans up 14%; deposits up 39%
Provision for credit losses of $1.0 billion, including an addition to the allowance for credit losses of approximately $900 million
AWM
ROE 25%
 
Assets under management (AUM) of $2.2 trillion, up 7%
EOP loans up 16%; deposits up 18%
Provision for credit losses of $94 million driven by an addition to the allowance for credit losses
Refer to the Business Segment Results on pages 21–37 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 three months of 2020, consisting of:
$638 billion Total credit provided and capital raised
   
$63
billion
 Credit for consumers
   
$8
billion
 Credit for U.S. small businesses
   
$213 billion Credit for corporations
   
$334 billion Capital raised for corporate clients and non-U.S. government entities
   
$20 billion 
Credit and capital raised for nonprofit and U.S. government entities(a)
(a)Includes states, municipalities, hospitals and universities.

6


2020 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 79 and Risk Factors on page 180 of this Form 10-Q and pages 6–28 of JPMorgan Chase’s 2019 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 in the full year of 2020 will be in line with the outlook set forth below, and the Firm does not undertake to update any forward-looking statements.
JPMorgan Chase’s current outlook for the remainder of 2020 should be viewed against the backdrop of the global and U.S. economies, the COVID-19 pandemic, 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 and its LOBs. 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. The outlook information contained in the 2019 Form 10-K, in the Firm’s Current Report on Form 8-K dated February 25, 2020, containing copies of the slides furnished at the Firm’s 2020 Investor Day, and in the Firm’s Current Reports on Form 8-K dated April 14, 2020, to review 2020 first quarter earnings, is superseded by the information contained in this
Form 10-Q.
Firmwide
Management expects second quarter 2020 net interest income, on a managed basis, to be approximately $14 billion, market dependent. For the full-year 2020, management expects net interest income, on a managed basis, to be approximately $56 billion, market dependent.
Management expects adjusted expense for the full-year 2020 to be below $65 billion.
Management expects additions to the allowance for credit losses in the second quarter of 2020. Depending on the extent of the deterioration in macroeconomic conditions, the additions to the Firm’s allowance for credit losses could be meaningfully higher in aggregate over the next several quarters versus the additions in the first quarter of 2020.


7


Business Developments
COVID-19 Pandemic
In response to the COVID-19 pandemic, the Firm established a corporate crisis team (“CCT”) along with crisis response teams that are connected across countries, regions and globally. The CCT includes representation from each LOB and critical functions including Human Resources, Risk and Compliance, Legal, Security and Technology, and it engages directly with the Firm’s Operating Committee on a frequent basis. The CCT provides a central point for the gathering of data which allows for rapid identification and prioritization of issues. The CCT also monitors key operational metrics, risks and concerns on an ongoing basis.
The Firm invoked resiliency plans to allow its businesses to remain operational, utilizing disaster recovery sites and implementing alternative work arrangements globally. The Firm now has more than 180,000 employees globally working from home from every LOB and corporate function, including traders, bankers, portfolio managers, operations, finance, risk and compliance, legal and call center teams globally. The Firm is monitoring the status of work-from-home arrangements and has been updating relevant local authorities as appropriate. Management continues to monitor key operational metrics as well as thematic cross-business risks and concerns.
In addition, the Firm implemented strategies and procedures designed to help it respond to increased market volatility, client demand for credit and liquidity, distress in certain industries/sectors and the ongoing impacts to consumers and small businesses.
Supporting clients and customers
The Firm has continued to support its clients and customers as they navigate the challenging conditions caused by the COVID-19 pandemic by providing liquidity and advice. In March 2020, the Firm extended more than $100 billion of new and renewed credit to its clients and customers.
In the wholesale businesses, clients drew more than $50 billion on their committed revolving credit facilities, and the Firm approved over $25 billion of new credit extensions for clients most impacted by the COVID-19 pandemic, during the first quarter
In the consumer businesses, the Firm extended approximately $20 billion in new credit across Home Lending, Credit Card and Auto.
The Firm is actively participating in the Small Business Association’s (“SBA”) Paycheck Protection Program (“PPP”) and as of May 4th the Firm has funded approximately $29 billion under the program.
For customers that are experiencing financial hardships as a result of the COVID-19 pandemic, the Firm developed a payment assistance program to allow mortgage, auto and card customers to delay payments for three months, as well as waiving or refunding certain fees.
Three-quarters of the Firm’s branch network continues to operate, ATMs remain accessible and the Firm continues to
 
provide a wide range of banking services accessible to customers online.
Protecting and supporting employees
In addition to widespread work-from-home arrangements, the Firm has taken further actions to protect and support its employees including;
For employees with jobs that can only be performed on-site, modified business operations, implemented staggered shifts, changed seating arrangements, closed buildings to nonessential visitors and intensified and increased frequency of cleaning of all offices and branches worldwide
Ensured that all branch employees are being paid for their regularly scheduled hours even if those hours are reduced or their branch is temporarily closed
Continued to pay employees who are at home due to potential exposure to the virus or whose health is at higher risk as well as provided paid medical leave to affected employees
Deployed clinical staff internally to support employees
Granted a special payment of up to $1,000 to full- and part-time employees whose jobs require them to continue working on-site and whose annual cash compensation is less than $60,000
Provided all employees with up to five additional paid days off to manage personal needs, which may include dependent care, child care or other issues, as well as offering free COVID-19 related medical treatment for all of the Firm’s U.S. employees and their dependents.
Giving to communities
The Firm has taken steps to help address immediate humanitarian needs and long-term economic challenges posed by the COVID-19 pandemic on the communities in which it operates. To help the most vulnerable and hardest hit communities, the Firm has announced a $150 million loan program to deploy capital to underserved small businesses and nonprofits, as well as a $50 million philanthropic commitment. An initial $15 million commitment is intended to:
Provide immediate healthcare, food and other humanitarian relief globally
Help existing nonprofit partners around the world that are responding in their communities to the COVID-19 pandemic
Assist small businesses that are vulnerable to economic hardships.
Regulatory actions and programs
Refer to Regulatory Developments Relating to the COVID-19 Pandemic on pages 10-11 for information concerning relevant regulatory actions and the significant financing programs in which the Firm is participating in order to support its customers and clients.
The impact of the COVID-19 pandemic on the Firm’s results and operations are discussed throughout this document.

8


Departure of the U.K. from the EU
The Firm continues to execute on its Firmwide Brexit Implementation program and remains focused on the following key areas to ensure continuation of service to its EU clients: regulatory and legal entity readiness; client readiness; and business and operational readiness. However, the COVID-19 pandemic has added incremental risk to the program due to the potential impact on execution of changes such as relocation of employees given travel restrictions, or the ability of clients to be operationally ready to the extent that they have diverted resources to address the effects of the pandemic. It has also slowed down the political process to finalize the legal and regulatory framework that will be in place after the transition period that is scheduled to expire on December 31, 2020, thus lengthening the period of planning uncertainty.
 
Interbank Offered Rate (“IBOR”) transition
On March 12, 2020, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update providing optional expedients and exceptions for applying generally accepted accounting principles to contracts and hedge relationships affected by benchmark reform. The Firm expects to apply certain of the practical expedients and is evaluating the timing and application of those elections. Refer to Accounting and Reporting Developments on page 78 for additional information. The Firm continues to monitor the transition relief being considered by the International Accounting Standards Board (“IASB”) and U.S. Treasury Department regarding accounting and tax implications of reference rate reform.
The Firm also continues to develop and implement plans to appropriately mitigate the risks associated with IBOR discontinuation. Refer to Business Developments on page 47 of the 2019 Form 10-K for a discussion of the Firm’s initiatives to address the expected discontinuation of the London Interbank Offered Rate (“LIBOR”) and other IBORs.


9


Regulatory Developments Relating to the COVID-19 Pandemic
Beginning in March 2020, the U.S. government as well as central banks around the world have taken a series of actions to help individuals, households and businesses that have been adversely affected by the economic disruption caused by the COVID-19 pandemic. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law on March 27, 2020, provides, among other things, funding to support loan facilities to assist consumers and businesses. Set forth below is a summary as of the date of this Form 10-Q of U.S. government actions currently impacting the Firm and U.S. government programs in which the Firm is participating to support individuals, businesses, and the broader economy. The Firm will continue to assess ongoing developments in government actions in response to the COVID-19 pandemic.
U.S. government actions
Eligible retained income definition. On March 17, 2020, the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (“Federal Reserve”), and the Federal Deposit Insurance Corporation (“FDIC”), collectively the “federal banking agencies,” issued an interim final rule that revised the definition of “eligible retained income” in the regulatory capital rules that apply to all U.S. banking organizations. On March 23, 2020, the Federal Reserve issued an interim final rule that revised the definition of “eligible retained income” for purposes of the total loss-absorbing capacity (“TLAC”) buffer requirements that apply to global systemically important banking organizations. The revised definition of eligible retained income makes any automatic limitations on payout distributions that could apply under the agencies’ capital rules or TLAC rule take effect on a more graduated basis in the event that a banking organization’s capital, leverage and TLAC ratios were to decline below regulatory requirements (including buffers). The March 17 interim final rule was issued, in conjunction with an interagency statement encouraging banking organizations to use their capital and liquidity buffers, to further support banking organizations’ abilities to lend to households and businesses affected by the COVID-19 pandemic.
Reserve requirements. On March 26, 2020, the Federal Reserve reduced reserve requirement ratios to zero percent, effectively eliminating the reserve requirement for all depository institutions, an action that frees up liquidity in the banking system to support lending to households and businesses.
Refer to Liquidity Risk Management on pages 45–49 and Note 21 for additional information on the reduction to the reserve requirement.
Regulatory Capital - Current Expected Credit Losses (“CECL”) transition delay. On March 31, 2020, the federal banking agencies issued an interim final rule that provided the option to temporarily delay the effects of CECL on
 
regulatory capital for two years, followed by a three-year transition period (“CECL capital transition provisions”). The Firm elected to apply the CECL capital transition provisions.
Refer to Capital Risk Management on pages 39–44 and Note 22 on pages 159-160 for additional information on the CECL capital transition provisions and the impact to the Firm’s capital measures.
Supplementary leverage ratio (“SLR”) temporary revision. On April 1, 2020, the Federal Reserve issued an interim final rule that revises, on a temporary basis, the calculation of total leverage exposure for purposes of calculating the SLR for bank holding companies, to exclude the on-balance sheet amounts of U.S. Treasury securities and deposits at Federal Reserve Banks. These exclusions will allow the Firm to continue to support U.S. Treasury markets and to serve as financial intermediaries for households and businesses. This exclusion is effective April 1, 2020, and will remain in effect through March 31, 2021. 
Refer to Capital Risk Management on pages 39–44 for additional information on the Firm’s SLR.
Loan modifications. On April 7, 2020, the federal banking agencies along with the National Credit Union Administration, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators, issued an interagency statement revising a March 22, 2020 interagency statement on loan modifications and the reporting for financial institutions working with customers affected by the COVID-19 pandemic (the “IA Statement”). The IA Statement reconfirmed that efforts to work with borrowers where the loans are prudently underwritten, and not considered past due or carried on nonaccrual status, should not result in the loans automatically being considered modified in a troubled debt restructuring (“TDR”) for accounting and financial reporting purposes, or for purposes of their respective risk-based capital rules, which would otherwise require financial institutions subject to the capital rules to hold more capital. The IA Statement also clarifies the interaction between its previous guidance and Section 4013 of the CARES Act, which provides certain financial institutions the option to suspend the application of accounting guidance for TDRs for a limited period of time for loan modifications made to address the effects of the COVID-19 pandemic. The special considerations addressed in the IA Statement and Section 4013 of the CARES Act, if applied, would have had no impact on the accounting for the Firm’s modification activities in the three months ended March 31, 2020 but may be relevant for modifications offered in the future.
Refer to Credit Portfolio on pages 50-51 and Note 12 for additional information on the Firm’s loan modification activities.
U.S. government facilities and programs. Beginning in March 2020, the Federal Reserve announced a suite of facilities using its emergency lending powers under section 13(3) of

10


the Federal Reserve Act to support the flow of credit to individuals, households and businesses adversely affected by the COVID-19 pandemic and to support the broader economy. These facilities include the Money Market Mutual Fund Liquidity Facility (“MMLF”), Primary Dealer Credit Facility (“PDCF”) and Commercial Paper Funding Facility (“CPFF”). The Firm is currently participating in the MMLF and PDCF to support the broader economy by providing liquidity to money market mutual funds and supporting the functioning of the secured financing market, respectively. Under the CPFF, the Firm is acting as a dealer to purchase eligible commercial paper. In addition, beginning April 3, 2020, the PPP, established by the CARES Act and administered by the SBA, authorized eligible lenders to provide nonrecourse loans to small businesses to provide an incentive for these businesses to keep their workers on their payroll. The Firm is currently participating in the PPP to support its small business clients.
Refer to Capital Risk Management on pages 39–44, Liquidity Risk Management on pages 45–49 and Note 22 for additional information of the Firm’s participation in the MMLF. Refer to Liquidity Risk Management on pages 45–49 for additional information of the Firm’s participation in the PDCF. Refer to Business Developments on pages 8-9 for additional information on the Firm’s participation in the PPP.


11


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 months ended March 31, 2020 and 2019, unless otherwise specified. Factors that relate primarily to a single business segment are discussed in more detail within that business segment. Refer to pages 75–77 of this Form 10-Q and pages 136–138 of JPMorgan Chase’s 2019 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 March 31,
(in millions)2020
 2019
 Change
Investment banking fees$1,866
 $1,840
 1 %
Principal transactions2,937
 4,076
 (28)
Lending- and deposit-related fees(a)
1,706
 1,559
 9
Asset management, administration and commissions(a)
4,540
 4,037
 12
Investment securities gains233
 13
 NM
Mortgage fees and related income320
 396
 (19)
Card income1,054
 1,274
 (17)
Other income(b)
1,156
 1,475
 (22)
Noninterest revenue13,812
 14,670
 (6)
Net interest income14,439
 14,453
 
Total net revenue$28,251
 $29,123
 (3)%
(a) In the first quarter of 2020, the Firm reclassified certain fees from asset management, administration and commissions to lending- and deposit-related fees. Prior-period amounts were revised to conform with the current presentation.
(b) Included operating lease income of $1.4 billion and $1.3 billion for the three months ended March 31, 2020 and 2019.
Investment banking fees increased, driven by CIB, reflecting:
higher debt underwriting fees driven by both increased industry-wide fees and wallet share gains in investment-grade bonds, particularly in March, as clients sought to access liquidity,
higher equity underwriting fees driven by increased industry-wide fees primarily in the IPO market, with strong activity in January and February, compared to a weak prior year,
largely offset by
lower advisory fees compared to a strong prior year, driven by a lower number of completed transactions, as well as the impact of delays in regulatory approvals.
Refer to CIB segment results on pages 26–30 and Note 6 for additional information.
Principal transactions revenue decreased reflecting two significant items:
a $951 million loss in CIB’s Credit Adjustments & Other predominantly driven by funding spread widening on derivatives, and
$896 million of markdowns on held-for-sale positions, including unfunded commitments, in the bridge financing portfolio in CIB and CB, as high-yield spreads widened significantly.
 
Excluding these two items, principal transactions revenue increased driven by Fixed Income Markets on strong client activity, primarily in Rates and Currencies & Emerging Markets, as a result of higher trading volume, and in Equity Markets on strong client activity in derivatives, particularly in March for both businesses.
Principal transactions revenue in CIB may in certain cases have offsets across other revenue lines, including net interest income. The Firm assesses its CIB Markets business performance on a total revenue basis.
Refer to CIB, CB and Corporate segment results on pages 26–30, pages 34–36 and page 37, and Note 6 for additional information.
Lending- and deposit-related fees increased primarily due to higher deposit-related fees in CCB, reflecting growth in customer accounts and transactions, and in CIB and CB from an increase in cash management transactions.
Refer to CCB segment results on pages 23–25, CIB on pages 26–30 and CB on pages 31–33, respectively, and Note 6 for additional information.
Asset management, administration and commissions revenue increased driven by:
higher brokerage commissions in CIB and AWM on higher client-driven volume particularly in March, and
higher asset management fees in AWM and CCB as a result of higher asset values at the beginning of 2020, driven by higher average market levels and strong net inflows into long-term products over the past year, despite the impact of market volatility in March.
Refer to CCB, CIB and AWM segment results on pages 23–25, pages 26–30 and pages 34–36 , respectively, and Note 6 for additional information.
Investment securities gains in both periods reflected the impact of repositioning the investment securities portfolio. Refer to Corporate segment results on page 37 and Note 10 for additional information.
Mortgage fees and related income decreased due to:
lower net mortgage servicing revenue reflecting faster prepayment speeds on lower rates and a lower level of third-party loans serviced, as well as lower MSR risk management results,
largely offset by
higher net mortgage production revenue reflecting higher production volumes and margins, and the absence of a gain on a loan sale in the prior year.
Refer to CCB segment results on pages 23–25, Note 6 and 15 for further information.

12


Card income decreased driven by lower net interchange income reflecting higher rewards costs and partner payments, partially offset by higher card sales volume, despite a decline in March.
Refer to CCB segment results on pages 23–25 and Note 6 for further information.
Other income decreased reflecting:
losses on certain equity investments in CIB
net valuation losses on certain investments in AWM, compared with gains in the prior year
higher amortization on a higher level of alternative energy investments in CIB. The increased amortization is more than offset by lower income tax expense from the associated tax credits.
largely offset by
higher operating lease income from growth in auto operating lease volume in CCB
Refer to Note 6 for further information.
Net interest income was flat as the impact of lower rates was offset by balance sheet growth and mix, as well as higher CIB Markets net interest income.
The Firm’s average interest-earning assets were $2.5 trillion, up $167 billion, and the yield was 3.14%, down 66 bps. The net yield on these assets, on an FTE basis, was 2.37%, a decrease of 20 bps. The net yield excluding CIB Markets was 3.01%, down 42bps.
Net yield excluding CIB Markets is a non-GAAP financial measure. Refer to the Consolidated average balance sheets, interest and rates schedule on page 170 for further details; and the Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 19–20 for a further discussion of Net interest yield excluding CIB markets.
 
Provision for credit losses     
 Three months ended March 31,
(in millions)

2020
 2019
 Change
Consumer, excluding credit card$619
 $120
 416%
Credit card5,063
 1,202
 321
Total consumer5,682
 1,322
 330
Wholesale2,594
 173
 NM
Investment securities9
 NA
 NM
Total provision for credit losses$8,285
 $1,495
 454%
Effective January 1, 2020, the Firm adopted the CECL accounting guidance. In conjunction with the adoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied in determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 1 for further information.
The provision for credit losses increased driven by additions to both the consumer and wholesale allowance for credit losses.
The increase in total consumer was driven by:
additions of $4.4 billion to the allowance for credit losses, reflecting the deterioration in the macroeconomic environment as a result of the impact of the COVID-19 pandemic, consisting of $3.8 billion for Card, $300 million for Home Lending, $235 million for Auto, and $80 million for CBB;
net charge-offs were flat reflecting higher net charge-offs in Card on loan growth, in line with prior expectations, offset by higher recoveries in Home Lending on a current period loan sale.
The increase in wholesale reflects a net addition of $2.4 billion to the allowance for credit losses across the LOBs. The net addition was predominantly driven by the deterioration in the macroeconomic environment as a result of the impact of the COVID-19 pandemic across multiple sectors, and continued pressure on oil prices, with the largest impacts in the Oil & Gas, Real Estate, and Consumer & Retail industries.
Refer to CCB segment results on pages 23–25, CIB on pages 26–30, CB on pages 31–33, AWM on pages 34–36, the Allowance for Credit Losses on pages 64–65, and Note 13 for additional information on the credit portfolio and the allowance for credit losses.

13


Noninterest expense     
 Three months ended March 31,
(in millions)

2020
 2019
 Change
Compensation expense$8,895
 $8,937
 
Noncompensation expense:     
Occupancy1,066
 1,068
 
Technology, communications and equipment2,578
 2,364
 9
Professional and outside services2,028
 2,039
 (1)
Marketing859
 879
 (2)
Other expense(a)(b)
1,424
 1,108
 29
Total noncompensation expense7,955
 7,458
 7
Total noninterest expense$16,850
 $16,395
 3 %
(a)Included Firmwide legal expense/(benefit) of $197 million and $(81) million for the three months ended March 31, 2020 and 2019.
(b)Included FDIC-related expense of $99 million and $143 million for the three months ended March 31, 2020 and 2019.
Compensation expense was flat as efficiencies in several businesses and lower compensation expense in CIB was offset by investments in new hires.
Noncompensation expense increased as a result of:
higher legal expense in CIB and Corporate
higher volume-related expense, including depreciation from growth in auto lease assets in CCB, and brokerage expense in CIB
higher investments across the businesses, including technology,
partially offset by lower other structural expense.



 
Income tax expense 
 Three months ended March 31,
(in millions)

2020
 2019
 Change
Income before income tax expense$3,116
 $11,233
 (72)%
Income tax expense251
 2,054
 (88)
Effective tax rate8.1% 18.3%  
The effective tax rate decreased driven by changes in the level and mix of income and expenses subject to U.S. federal, and state and local taxes, as well as the more significant effect of certain tax benefits on a lower level of pre-tax income.


14


CONSOLIDATED BALANCE SHEETS AND CASH FLOWS ANALYSIS
Effective January 1, 2020, the Firm adopted the CECL accounting guidance. Refer to Note 1 for further information.
Consolidated balance sheets analysis
The following is a discussion of the significant changes between March 31, 2020, and December 31, 2019.
Selected Consolidated balance sheets data
(in millions)March 31,
2020

 December 31,
2019

Change
Assets    
Cash and due from banks$24,001
 $21,704
11 %
Deposits with banks343,533
 241,927
42
Federal funds sold and securities purchased under resale agreements248,580
 249,157

Securities borrowed139,839
 139,758

Trading assets548,580
 411,103
33
Available-for-sale securities399,944
 350,699
14
Held-to-maturity securities, net of allowance for credit losses71,200
 47,540
50
Investment securities, net of allowance for credit losses471,144
 398,239
18
Loans1,015,375
 959,769
6
Allowance for loan losses(23,244) (13,123)77
Loans, net of allowance for loan losses992,131
 946,646
5
Accrued interest and accounts receivable122,064
 72,861
68
Premises and equipment25,882
 25,813

Goodwill, MSRs and other intangible assets51,867
 53,341
(3)
Other assets171,810
 126,830
35
Total assets$3,139,431
 $2,687,379
17 %
Cash and due from banks and deposits with banks increased primarily as a result of significant deposit inflows, which also funded asset growth across the Firm. 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 was flat as the reduction in the deployment of cash in Treasury and CIO was offset by an increase in client-driven market-making activities and higher collateral requirements as a result of changes in market conditions in March, as well as higher demand for securities to cover short positions when compared with lower levels at year-end in CIB. Refer to Liquidity Risk Management on pages 45–49 and Note 11 for additional information.
Trading assets increased, reflecting growth in client-driven market-making activities in CIB, predominantly debt instruments in Fixed Income Markets and when compared with lower levels at year-end, as well as higher derivative receivables in CIB as a result of market movements, including the impact of the COVID-19 pandemic.
Refer to Notes 2 and 5 for additional information.
Investment securities increased, reflecting:
in the available-for-sale (“AFS”) portfolio, net purchases of U.S. GSE and government agency MBS and U.S. Treasuries driven by interest rate risk management activities, partially offset by a non-cash transfer of $26.1 billion of U.S. GSE and government agency MBS from the AFS to the held-to-maturity (“HTM”) portfolio, resulting in a comparable increase in HTM.
 
Refer to Corporate segment results on page 37, Investment Portfolio Risk Management on page 66, and Notes 2 and 10 for additional information on Investment securities.
Loans increased predominantly reflecting drawdowns on committed revolving credit facilities in March in CIB, CB and AWM, partially offset by a reduction in Card due to seasonality and a decline in sales volume in March as a result of the COVID-19 pandemic.
The allowance for loan losses increased driven by:
additions of $5.9 billion, consisting of
$4.4 billion in consumer, predominantly in Credit Card, reflecting the deterioration in the macroeconomic environment as a result of the impact of the COVID-19 pandemic, and
a net $1.6 billion in wholesale, primarily reflecting the deterioration in the macroeconomic environment as a result of the impact of the COVID-19 pandemic across multiple sectors, and continued pressure on oil prices, with the largest impacts in the Oil & Gas, Real Estate, and Consumer & Retail industries, and
a net $4.2 billion addition as a result of the adoption of CECL.
There were also additions to the allowance for lending-related commitments, which is included in other liabilities on the consolidated balance sheets, of $858 million related to the impact of the COVID-19 pandemic and continued pressure on oil prices, and $98 million related to the adoption of CECL, resulting in total additions to the allowance for credit losses of $6.8 billion and $4.3 billion, respectively, as of March 31, 2020.

15


Refer to Credit and Investment Risk Management on pages 50–66, and Notes 1, 2, 3, 12 and 13 for a more detailed discussion of loans and the allowance for loan losses.
Accrued interest and accounts receivable increased predominantly driven by higher client receivables in CIB during a period of heightened market volatility.
Goodwill, MSRs and other intangibles decreased reflecting lower MSRs as a result of faster prepayment speeds on lower rates and the realization of expected cash flows, partially offset by net additions to the MSRs. Refer to Note 15 for additional information.
 
Other assets increased reflecting higher cash collateral placed with central counterparties during a period of heightened market volatility, and the Firm’s participation in the Federal Reserve Bank of Boston’s (“FRBB”) MMLF. The assets purchased from money market mutual fund clients related to the MMLF were funded by nonrecourse advances from the FRBB, which are recorded in short-term borrowings. Refer to Regulatory Developments Relating to the COVID-19 Pandemic on pages 10-11 and Liquidity Risk Management on pages 45–49 for additional information.
Selected Consolidated balance sheets data (continued) 
(in millions)March 31,
2020

 December 31,
2019

Change
Liabilities    
Deposits$1,836,009
 $1,562,431
18 %
Federal funds purchased and securities loaned or sold under repurchase agreements233,207
 183,675
27
Short-term borrowings51,909
 40,920
27
Trading liabilities184,196
 119,277
54
Accounts payable and other liabilities253,874
 210,407
21
Beneficial interests issued by consolidated variable interest entities (“VIEs”)19,630
 17,841
10
Long-term debt299,344
 291,498
3
Total liabilities2,878,169
 2,426,049
19
Stockholders’ equity261,262
 261,330

Total liabilities and stockholders’ equity$3,139,431
 $2,687,379
17 %
Deposits increased driven by significant inflows in CIB, CB and AWM as clients focused on increasing their cash balances as a result of changes in market conditions driven by the COVID-19 pandemic. Deposits also increased in CCB due to seasonal growth in existing and new accounts.
Refer to Liquidity Risk Management on pages 45–49 and Notes 2 and 16 for additional information.
Federal funds purchased and securities loaned or sold under repurchase agreements increased from client-driven market-making activities as a result of changes in market conditions in March and higher financing of trading assets-debt instruments when compared with lower levels at year-end in CIB. Refer to Liquidity Risk Management on pages 45–49 and Note 11 for additional information.
Short-term borrowings increased driven by the Firm’s participation in the FRBB’s MMLF. The nonrecourse advances from the FRBB funded the assets purchased from money market mutual fund clients related to the MMLF, which are recorded in other assets. Refer to Regulatory Developments Relating to the COVID-19 Pandemic on pages 10-11 and Liquidity Risk Management on pages 45–49 for additional information.
Trading liabilities increased due to client-driven market-making activities in CIB, which resulted in higher levels of short positions in both debt and equity instruments in Markets, as well as higher derivative payables as a result of market movements, including the impact of the COVID-19 pandemic. Refer to Notes 2 and 5 for additional information.
Accounts payable and other liabilities increased reflecting higher client payables related to client-driven activities in CIB during a period of heightened market volatility.
 
Beneficial interests issued by consolidated VIEs increased due to higher levels of Firm-administered multi-seller conduit commercial paper issued to third parties, partially offset by activity in municipal bond vehicles.
Refer to Off-Balance Sheet Arrangements on page 18 and Notes 14 and 23 for further information on Firm-sponsored VIEs and loan securitization trusts.
Long-term debt increased as a result of
higher FHLB advances and an increase in senior debt reflecting fair value hedge accounting adjustments related to lower interest rates, partially offset by net maturities in Treasury and CIO,
partially offset by
a decrease in the fair value of structured notes in CIB related to market movements in March.
Refer to Liquidity Risk Management on pages 45–49 for additional information on the Firm’s long-term debt activities.
Stockholders’ equity was flat reflecting the net impact of capital actions, net income, the adoption of CECL and an increase in accumulated other comprehensive income (“AOCI”). The increase in AOCI was driven by higher valuation of interest rate cash flow hedges, debit valuation adjustment on fair value option-elected liabilities, and net unrealized gains on AFS securities. Refer to page 83 for information on changes in stockholders’ equity and Capital actions on pages 42–43.

16


Consolidated cash flows analysis
The following is a discussion of cash flow activities during the three months ended March 31, 2020 and 2019.
(in millions) Three months ended March 31,
 2020
 2019
Net cash provided by/(used in)    
Operating activities $(120,772) $(80,880)
Investing activities (135,150) 36,301
Financing activities 362,305
 69,435
Effect of exchange rate changes on cash (2,480) (1,045)
Net increase in cash and due from banks and deposits with banks $103,903
 $23,811
Operating activities
In 2020, cash used primarily resulted from higher trading assets, other assets and accrued interest and accounts receivable, partially offset by higher trading liabilities and accounts payable and other liabilities.
In 2019, cash used primarily resulted from higher trading assets-debt and equity instruments and securities borrowed, partially offset by increased trading liabilities and accounts payable and other liabilities, and net proceeds from loans held-for-sale.
 
Investing activities
In 2020, cash used primarily resulted from net purchases of investment securities, net loan originations and purchases of assets from money market mutual fund clients pursuant to nonrecourse advances provided by the FRBB under the MMLF.
In 2019, cash provided resulted from a decrease in securities purchased under resale agreements, and net proceeds from sales of loans held-for-investment.
Financing activities
In 2020, cash provided resulted from higher deposits, federal funds purchased and securities loaned or sold under repurchase agreements, and net proceeds from long- and short-term borrowings, which included the non-recourse advances provided by the FRBB.
In 2019, cash provided resulted from higher securities loaned or sold under repurchase agreements and higher deposits.
For both periods, cash was used for repurchases of common stock and cash dividends on common and preferred stock. On March 15, 2020, in response to the COVID-19 pandemic, the Firm temporarily suspended share repurchases through the second quarter of 2020.
* * *
Refer to Consolidated Balance Sheets Analysis on pages 15-16, Capital Risk Management on pages 39–44, and Liquidity Risk Management on pages 45–49 of this Form 10-Q, and pages 93–98 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of the activities affecting the Firm’s cash flows.

17


OFF-BALANCE SHEET ARRANGEMENTS
In the normal course of business, the Firm enters into various off-balance sheet arrangements and contractual obligations that may require future cash payments. Certain obligations are recognized on-balance sheet, while others are disclosed as off-balance sheet under accounting principles generally accepted in the U.S. (“U.S. GAAP”).
Special-purpose entities
The Firm has several types of off–balance sheet arrangements, including through nonconsolidated special-purpose entities (“SPEs”), which are a type of VIE, and through lending-related financial instruments (e.g., commitments and guarantees).
The Firm holds capital, as appropriate, against all SPE-related transactions and related exposures, such as derivative contracts and lending-related commitments and guarantees.
The Firm has no commitments to issue its own stock to support any SPE transaction, and its policies require that transactions with SPEs be conducted at arm’s length and reflect market pricing.
The table below provides an index of where in this Form 10-Q a discussion of the Firm’s various off-balance sheet arrangements can be found. Refer to Note 1 for additional information about the Firm’s consolidation policies.
Type of off-balance sheet arrangementLocation of disclosurePage references
Special-purpose entities: variable interests and other obligations, including contingent obligations, arising from variable interests in nonconsolidated VIEsRefer to Note 14145-150
Off-balance sheet lending-related financial instruments, guarantees, and other commitmentsRefer to Note 23161-164



18


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 pages 80–84.
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 noninterest expense
Net interest income and net yield excluding CIB’s Markets businesses
Tangible common equity (“TCE”), ROTCE, and TBVPS
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 57–59 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of management’s use of non-GAAP financial measures.
The following summary table provides a reconciliation from the Firm’s reported U.S. GAAP results to managed basis.
 Three months ended March 31,
 2020 2019
(in millions, except ratios)Reported 
Fully taxable-equivalent adjustments(a)
 Managed
basis
 Reported 
Fully taxable-equivalent adjustments(a)
 Managed
basis
Other income$1,156
 $708
  $1,864
 $1,475
 $585
  $2,060
Total noninterest revenue13,812
 708
  14,520
 14,670
 585
  15,255
Net interest income14,439
 110
  14,549
 14,453
 143
  14,596
Total net revenue28,251
 818
  29,069
 29,123
 728
  29,851
Total noninterest expense16,850
 NA
  16,850
 16,395
 NA
  16,395
Pre-provision profit11,401
 818
  12,219
 12,728
 728
  13,456
Provision for credit losses8,285
 NA
  8,285
 1,495
 NA
  1,495
Income before income tax expense3,116
 818
  3,934
 11,233
 728
  11,961
Income tax expense251
 818
  1,069
 2,054
 728
  2,782
Net income$2,865
 NA
  $2,865
 $9,179
 NA
  $9,179
              
Overhead ratio60% NM
  58% 56% NM
  55%
(a)Predominantly recognized in CIB, CB and Corporate.

19


The following table provides information on net interest income and net yield excluding CIB’s Markets businesses.

(in millions, except rates)
Three months ended March 31,
2020
2019
 Change
Net interest income – reported$14,439
$14,453
  %
Fully taxable-equivalent adjustments110
143
 (23)
Net interest income – managed basis(a)
$14,549
$14,596
 
Less: CIB Markets net interest income(b)
1,596
624
 156
Net interest income excluding CIB Markets(a)
$12,953
$13,972
 (7)
     
Average interest-earning assets$2,465,732
$2,298,894
 7
Less: Average CIB Markets interest-earning assets(b)
736,035
649,180
 13
Average interest-earning assets excluding CIB Markets$1,729,697
$1,649,714
 5 %
Net yield on average interest-earning assets – managed basis2.37%2.57%  
Net yield on average CIB Markets interest-earning assets(b)
0.87
0.39
  
Net yield on average interest-earning assets excluding CIB Markets3.01%3.43%  
(a)Interest includes the effect of related hedges. Taxable-equivalent amounts are used where applicable.
(b)Refer to page 29 for further information on CIB’s Markets businesses.

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)Mar 31,
2020

Dec 31,
2019

 Three months ended March 31,
 2020
2019
Common stockholders’ equity$231,199
$234,337
 $234,530
$230,051
Less: Goodwill47,800
47,823
 47,812
47,475
Less: Other intangible assets800
819
 812
744
Add: Certain Deferred tax liabilities(a)
2,389
2,381
 2,385
2,287
Tangible common equity$184,988
$188,076
 $188,291
$184,119
      
Return on tangible common equityNA
NA
 5%19%
Tangible book value per share$60.71
$60.98
 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.

20


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 19–20 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.
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 and expense are 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.
 
Business segment capital allocation
The amount of capital assigned to each business is referred to as equity. Periodically, the assumptions and methodologies used to allocate capital are assessed and as a result, the capital allocated to the LOBs may change. Refer to Line of business equity on page 90 of JPMorgan Chase’s 2019 Form 10-K for additional information on business segment capital allocation.
Refer to Business Segment Results – Description of business segment reporting methodology on pages 60–61 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of those methodologies.
Business segment changes
In the first quarter of 2020, the Firm began reporting a Wholesale Payments business unit within CIB following a realignment of the Firm’s wholesale payments businesses. The Wholesale Payments business comprises:
Merchant Services, which was realigned from CCB to CIB
Treasury Services and Trade Finance in CIB. Trade Finance was previously reported in Lending in CIB.
In connection with the alignment of Wholesale Payments, the assets, liabilities and headcount associated with the Merchant Services business were realigned to CIB from CCB, and the revenue and expenses of the Merchant Services business is reported across CCB, CIB and CB based primarily on client relationships. Prior periods have been revised to reflect this realignment and revised allocation methodology.
 JPMorgan Chase
  
 Consumer Businesses Wholesale Businesses
  
 Consumer & Community Banking Corporate & Investment Bank Commercial Banking Asset & Wealth Management
              
 Consumer &
Business Banking
 Home Lending Card & Auto Banking Markets &
Securities Services
  • Middle Market Banking  • Asset Management
 
 • Consumer Banking/Chase Wealth Management
 • Business Banking
 
 • Home Lending Production
 • Home Lending Servicing
 • Real Estate Portfolios
 • Credit Card
 • Auto

 • Investment Banking
 • Wholesale Payments
 • Lending
 • Fixed Income Markets • Corporate Client Banking
 • Wealth Management

 
 • Equity Markets
 • Securities Services
 • Credit Adjustments & Other
 • Commercial Real Estate Banking
 
 

21


Segment results – managed basis
The following tables summarize the Firm’s results by segment for the periods indicated.
Three months ended March 31,Consumer & Community Banking Corporate & Investment Bank Commercial Banking
(in millions, except ratios)2020
2019
Change
 2020
2019
Change
 2020
2019
Change
Total net revenue$13,171
$13,490
(2)% $9,948
$10,034
(1)% $2,178
$2,413
(10)%
Total noninterest expense7,161
6,970
3
 5,896
5,629
5
 988
938
5
Pre-provision profit/(loss)6,010
6,520
(8) 4,052
4,405
(8) 1,190
1,475
(19)
Provision for credit losses5,772
1,314
339
 1,401
87
NM
 1,010
90
NM
Net income/(loss)191
3,947
(95) 1,988
3,260
(39) 147
1,060
(86)
Return on equity (“ROE”)1%30%  9%16%  2%19% 
Three months ended March 31,Asset & Wealth Management Corporate Total
(in millions, except ratios)2020
2019
Change 2020
2019
Change
 2020
2019
Change
Total net revenue$3,606
$3,489
3 $166
$425
(61)% $29,069
$29,851
(3)%
Total noninterest expense2,659
2,647
 146
211
(31) 16,850
16,395
3
Pre-provision profit/(loss)947
842
12 20
214
(91) 12,219
13,456
(9)
Provision for credit losses94
2
NM 8
2
300
 8,285
1,495
454
Net income/(loss)664
661
 (125)251
NM
 2,865
9,179
(69)
ROE25%25%  NM
NM
  4%16% 
In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The prior-period amounts were 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 months ended March 31, 2020 versus the corresponding periods in the prior year, unless otherwise specified.

22



CONSUMER & COMMUNITY BANKING
Consumer & Community Banking offers services to consumers and businesses through bank branches, ATMs, digital (including mobile and online) and telephone banking. CCB is organized into Consumer & Business Banking (including Consumer Banking/Chase Wealth Management and Business Banking), Home Lending (including Home Lending Production, Home Lending Servicing and Real Estate Portfolios) and Card & Auto. Consumer & Business Banking offers deposit and investment products and services to consumers, and lending, deposit, and cash management and payment solutions to small businesses. Home Lending includes mortgage origination and servicing activities, as well as portfolios consisting of residential mortgages and home equity loans. Card & Auto issues credit cards to consumers and small businesses and originates and services auto loans and leases.
Refer to Line of Business Metrics on page 177 for a discussion of the business profile of CCB.
 
Selected income statement data    
 Three months ended March 31,
(in millions, except ratios)2020
 2019
 Change
Revenue     
Lending- and deposit-related fees(a)
$972
 $909
 7 %
Asset management, administration and commissions(a)
585
 581
 1
Mortgage fees and related income320
 396
 (19)
Card income768
 909
 (16)
All other income1,373
 1,290
 6
Noninterest revenue4,018
 4,085
 (2)
Net interest income9,153
 9,405
 (3)
Total net revenue13,171
 13,490
 (2)
      
Provision for credit losses5,772
 1,314
 339
      
Noninterest expense     
Compensation expense2,597
 2,566
 1
Noncompensation expense(b)
4,564
 4,404
 4
Total noninterest expense7,161
 6,970
 3
Income before income tax expense238
 5,206
 (95)
Income tax expense47
 1,259
 (96)
Net income$191
 $3,947
 (95)
      
Revenue by line of business     
Consumer & Business Banking$6,091
 $6,661
 (9)
Home Lending1,161
 1,346
 (14)
Card & Auto5,919
 5,483
 8
      
Mortgage fees and related income details:     
Net production revenue319
 200
 60
Net mortgage servicing revenue(c)
1
 196
 (99)
Mortgage fees and related income$320
 $396
 (19)%
      
Financial ratios     
Return on equity1% 30%  
Overhead ratio54
 52
  
In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The prior-period amounts were revised to conform with the current presentation.
(a)In the first quarter of 2020, the Firm reclassified certain fees from asset management, administration and commissions to lending- and deposit-related fees. The prior-period amounts were revised to conform with the current presentation.
(b)Included depreciation expense on leased assets of $1.1 billion and $967 million for the three months ended March 31, 2020 and 2019, respectively.
(c)Included MSR risk management results of $(90) million and $(9) million for the three months ended March 31, 2020 and 2019, respectively.

23



Quarterly results
Net income was $191 million, a decrease of 95%, predominantly driven by an increase in the provision for credit losses.
Net revenue was $13.2 billion, a decrease of 2%.
Net interest income was $9.2 billion, down 3%, driven by:
the impact of deposit margin compression, partially offset by growth in deposit balances in CBB, and
lower loan balances in Home Lending predominantly due to prior year loan sales,
largely offset by
higher loan balances and margin expansion in Card.
Noninterest revenue was $4.0 billion, down 2%, driven by:
lower card income due to lower net interchange income reflecting higher rewards costs and partner payments, partially offset by higher card sales volume, despite a decline in March, and
lower net mortgage servicing revenue reflecting faster prepayment speeds on lower rates and a lower level of third-party loans serviced, as well as lower MSR risk management results,
predominantly offset by
higher net mortgage production revenue reflecting higher production volumes and margins, and the absence of a gain on a loan sale in the prior year,
higher auto lease volume, and
higher deposit-related fees.
Refer to Note 15 for further information regarding changes in value of the MSR asset and related hedges, and mortgage fees and related income.
Noninterest expense was $7.2 billion, up 3%, driven by:
higher volume- and revenue-related expense, including depreciation on auto lease assets, and investments in the business,
partially offset by
lower structural expense.
The provision for credit losses was $5.8 billion, an increase of $4.5 billion, driven by additions to the allowance for credit losses reflecting deterioration in the macroeconomic environment as a result of the impact of the COVID-19 pandemic, consisting of:
$3.8 billion for Card, $300 million for Home Lending, $250 million for Auto and $159 million in CBB
net charge-offs were flat reflecting higher net charge-offs in Card on loan growth, in line with prior expectations, offset by higher recoveries in Home Lending on a current period loan sale.
Refer to Credit and Investment Risk Management on pages 50–66 and Allowance for Credit Losses on pages 64–65 for further discussions of the credit portfolios and the allowance for credit losses.
 
Selected metrics     
 As of or for the three months
ended March 31,
(in millions, except headcount)2020
 2019
 Change
Selected balance sheet data (period-end)     
Total assets$506,147
 $539,127
 (6)%
Loans:     
Consumer & Business Banking27,709
 26,492
 5
Home Lending196,401
 230,599
 (15)
Card154,021
 150,527
 2
Auto61,468
 62,786
 (2)
Total loans439,599
 470,404
 (7)
Deposits775,068
 702,587
 10
Equity52,000
 52,000
 
Selected balance sheet data (average)     
Total assets$517,213
 $546,042
 (5)
Loans:     
Consumer & Business Banking27,261
 26,488
 3
Home Lending198,042
 238,949
 (17)
Card162,660
 151,134
 8
Auto60,893
 62,763
 (3)
Total loans448,856
 479,334
 (6)
Deposits733,648
 681,013
 8
Equity52,000
 52,000
 
      
Headcount122,081
 124,305
 (2)%
In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The prior-period amounts were revised to conform with the current presentation, including a decrease to period-end assets and headcount of $13.4 billion and 4,114, respectively, as of March 31, 2019.

24



Selected metrics    
 As of or for the three months
ended March 31,
(in millions, except ratio data)2020

2019
 Change
Credit data and quality statistics     
Nonaccrual loans(a)(b)
$4,008

$3,265

23 %
      
Net charge-offs/(recoveries)     
Consumer & Business Banking74
 59
 25
Home Lending(122) (5) NM
Card1,313
 1,202
 9
Auto48
 58
 (17)
Total net charge-offs/(recoveries)$1,313
 $1,314
 
      
Net charge-off/(recovery) rate     
Consumer & Business Banking1.09% 0.90%  
Home Lending(0.25) (0.01)  
Card3.25
 3.23
  
Auto0.32
 0.37
  
Total net charge-off/(recovery) rate1.18% 1.11%  
      
30+ day delinquency rate     
Home Lending(c)(d)
1.48% 1.62%  
Card1.96
 1.85
  
Auto0.89
 0.63
  
      
90+ day delinquency rate — Card1.02% 0.97%  
      
Allowance for loan losses     
Consumer & Business Banking$882
 $796
 11
Home Lending2,137
 2,741
 (22)
Card14,950
 5,183
 188
Auto732
 465
 57
Total allowance for loan losses$18,701
 $9,185
 104 %
Effective January 1, 2020, the Firm adopted the CECL accounting guidance. The adoption resulted in a change in the accounting for PCI loans, which are considered purchased credit deteriorated (“PCD”) loans under CECL. Refer to Note 1 for further information.
(a)At March 31, 2020, nonaccrual loans included $970 million of PCD loans. Prior to the adoption of CECL, nonaccrual loans excluded PCI loans as the Firm recognized interest income on each pool of PCI loans as each of the pools was performing.
(b)At March 31, 2020 and 2019, nonaccrual loans excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $616 million and $2.2 billion, respectively. These amounts have been excluded based upon the government guarantee.
(c)At March 31, 2020, the 30+ day delinquency rates included PCD loans. The rate prior to January 1, 2020 was revised to include the impact of PCI loans.
(d)At March 31, 2020 and 2019, excluded mortgage loans insured by U.S. government agencies of $1.0 billion and $3.2 billion, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.

 
Selected metrics    
 As of or for the three months
ended March 31,
(in billions, except ratios and where otherwise noted)2020
 2019
 Change
Business Metrics     
Number of branches4,967
 5,028
 (1)%
Active digital customers
(in thousands)(a)
53,799
 50,651
 6
Active mobile customers
(in thousands)(b)
38,236
 34,371
 11
Debit and credit card sales volume$266.0

$255.1

4
      
Consumer & Business Banking     
Average deposits$718.9
 $668.5
 8
Deposit margin2.06% 2.62%  
Business banking origination volume$1.5
 $1.5
 1
Client investment assets323.0
 312.3
 3
      
Home Lending     
Mortgage origination volume by channel     
Retail$14.1
 $7.9
 78
Correspondent14.0
 7.1
 97
Total mortgage origination volume(c)
$28.1
 $15.0
 87
      
Total loans serviced (period-end)$737.8
 $791.5
 (7)
Third-party mortgage loans serviced (period-end)505.0
 529.6
 (5)
MSR carrying value (period-end)3.3
 6.0
 (45)
Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end)0.65% 1.13%  
      
MSR revenue multiple(d)
2.10x 3.32x  
      
Credit Card     
Credit card sales volume, excluding Commercial Card$179.1
 $172.5
 4
Net revenue rate10.68% 10.68%  
      
Auto     
Loan and lease origination volume$8.3
 $7.9
 5
Average auto operating lease assets23.1
 20.8
 11 %
(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)Firmwide mortgage origination volume was $31.9 billion and $16.4 billion for the three months ended March 31, 2020 and 2019, respectively.
(d)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).

25


CORPORATE & INVESTMENT BANK
The Corporate & Investment Bank, which consists of Banking and Markets & Securities Services, offers a broad suite of investment banking, market-making, prime brokerage, and treasury and securities products and services to a global client base of corporations, investors, financial institutions, merchants, government and municipal entities. Banking offers a full range of investment banking products and services in all major capital markets, including advising on corporate strategy and structure, capital-raising in equity and debt markets, as well as loan origination and syndication. Banking also includes Wholesale Payments, which provides payments services enabling clients to manage payments and receipts globally, and cross-border financing. Markets & Securities Services includes Markets, a global market-maker in cash securities and derivative instruments, which also offers sophisticated risk management solutions, prime brokerage, and research. Markets & Securities Services also includes Securities Services, a leading global custodian which provides custody, fund accounting and administration, and securities lending products principally for asset managers, insurance companies and public and private investment funds.
Refer to Line of Business Metrics on page 177 for a discussion of the business profile of CIB.
 
Selected income statement data  
 Three months ended March 31,
(in millions, except ratios)2020 2019 Change
Revenue     
Investment banking fees$1,907
 $1,844
 3 %
Principal transactions3,188
 4,164
 (23)
Lending- and deposit-related fees(a)
450
 396
 14
Asset management, administration and commissions(a)

1,261
 1,067
 18
All other income35
 365
 (90)
Noninterest revenue6,841
 7,836
 (13)
Net interest income3,107
 2,198
 41
Total net revenue(b)
9,948
 10,034
 (1)
      
Provision for credit losses1,401
 87
 NM
      
Noninterest expense     
Compensation expense3,006
 3,091
 (3)
Noncompensation expense2,890
 2,538
 14
Total noninterest expense5,896
 5,629
 5
Income before income tax expense2,651
 4,318
 (39)
Income tax expense663
 1,058
 (37)
Net income$1,988
 $3,260
 (39)%
Financial ratios     
Return on equity9% 16%  
Overhead ratio59
 56
  
Compensation expense as percentage of total net revenue30
 31
  
In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The prior-period amounts were revised to conform with the current presentation.
(a)In the first quarter of 2020, the Firm reclassified certain fees from asset management, administration and commissions to lending- and deposit-related fees. Prior-period amounts were revised to conform with the current presentation.
(b)Includes tax-equivalent adjustments, predominantly due to income tax credits 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 $667 million and $539 million for the three months ended March 31, 2020 and 2019, respectively.

26


Selected income statement data  
 Three months ended March 31,
(in millions)2020 2019 Change
Revenue by business     
Investment Banking$886
 $1,745
 (49)%
Wholesale Payments
1,359
 1,415
 (4)
Lending350
 258
 36
Total Banking2,595
 3,418
 (24)
Fixed Income Markets4,993
 3,725
 34
Equity Markets2,237
 1,741
 28
Securities Services1,074
 1,014
 6
Credit Adjustments & Other(a)
(951) 136
 NM
Total Markets & Securities Services7,353
 6,616
 11
Total net revenue$9,948
 $10,034
 (1)%
In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The prior-period amounts were revised to conform with the current presentation.
(a)Includes credit valuation adjustments (“CVA”) managed centrally within CIB and funding valuation adjustments (“FVA”) on derivatives 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.
Quarterly results
Net income was $2.0 billion, down 39%, predominantly driven by an increase in the provision for credit losses.
Net revenue was $9.9 billion, down 1%.
Banking revenue was $2.6 billion, down 24%.
Investment Banking revenue was $886 million, down 49%, predominantly driven by $820 million of markdowns on held-for-sale positions, including unfunded commitments, in the bridge financing portfolio as high-yield spreads widened significantly. The decline was partially offset by higher Investment Banking fees, up 3%. The Firm maintained its #1 ranking for Global Investment Banking fees, according to Dealogic.
Debt underwriting fees were $1.1 billion, up 15%, driven by both increased industry-wide fees and wallet share gains in investment-grade bonds, particularly in March as clients sought to access liquidity.
Equity underwriting fees were $331 million, up 25%, driven by increased industry-wide fees primarily in the IPO market, with strong activity in January and February, compared to a weak prior year.
Advisory fees were $503 million, down 22%, compared to a strong prior year, driven by a lower number of completed transactions as well as the impact of delays in regulatory approvals.
Wholesale Payments revenue was $1.4 billion, down 4%, driven by a reporting re-classification for certain expenses which are now reported as contra revenue in Merchant Services. In addition, deposit margin
 
compression was offset by higher balances and fee growth.
Lending revenue was $350 million, up 36%, predominantly driven by fair value gains on hedges of accrual loans.
Markets & Securities Services revenue was $7.4 billion, up 11%. Markets revenue was $7.2 billion, up 32%.
Fixed Income Markets revenue was $5.0 billion, up 34%, driven by strong client activity across products primarily in Rates and Currencies & Emerging Markets reflecting higher trading volume particularly in March.
Equity Markets revenue was $2.2 billion, up 28%, driven by strong client activity in derivatives and higher revenue in Cash Equities, particularly in March.
Securities Services revenue was $1.1 billion, up 6%, predominantly driven by deposit balance and fee growth partially offset by deposit margin compression.
Credit Adjustments & Other was a loss of $951 million, predominantly driven by funding spread widening on derivatives.
Noninterest expense was $5.9 billion, up 5%, driven by higher legal expense, volume- and revenue-related expenses and investments in the business, partially offset by lower structural expense.
The provision for credit losses was $1.4 billion, compared with $87 million in the prior year. The increase was predominantly driven by additions to the allowance for credit losses from the impact of the COVID-19 pandemic across multiple sectors and continued pressure on oil prices, with the largest impact in the Oil & Gas and Consumer & Retail industries.
Refer to Credit and Investment Risk Management on pages 50–66 and Allowance for Credit Losses on pages 64–65 for further discussions of the credit portfolios and the allowance for credit losses.


27


Selected metrics    
 As of or for the three months
ended March 31,
(in millions, except headcount)2020 2019 Change
Selected balance sheet data (period-end)     
Assets$1,217,459
 $1,019,470
 19%
Loans:     
Loans retained(a)
165,376
 127,086
 30
Loans held-for-sale and loans at fair value9,326
 7,783
 20
Total loans174,702
 134,869
 30
Equity80,000
 80,000
 
Selected balance sheet data (average)     
Assets$1,082,820
 $967,632
 12
Trading assets-debt and equity instruments427,316
 381,312
 12
Trading assets-derivative receivables55,133
 50,609
 9
Loans:     
Loans retained(a)
$128,838
 $126,990
 1
Loans held-for-sale and loans at fair value9,818
 8,615
 14
Total loans$138,656
 $135,605
 2
Equity80,000
 80,000
 
Headcount60,245
 58,811
 2%
In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The prior-period amounts were revised to conform with the current presentation, including an increase to period-end assets and headcount of $13.4 billion and 4,114, respectively, as of March 31, 2019.
(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.

 
Selected metrics     
 As of or for the three months
ended March 31,
(in millions, except ratios)2020 2019 Change
Credit data and quality statistics     
Net charge-offs/(recoveries)$55
 $30
 83 %
Nonperforming assets:     
Nonaccrual loans:     
Nonaccrual loans retained(a)
$689
 $812
 (15)%
Nonaccrual loans held-for-sale and loans at fair value
138
 313
 (56)
Total nonaccrual loans827
 1,125
 (26)
Derivative receivables85
 44
 94
Assets acquired in loan satisfactions43
 58
 (26)
Total nonperforming assets$955
 $1,227
 (22)
Allowance for credit losses:     
Allowance for loan losses$1,422
 $1,252
 14
Allowance for lending-related commitments1,468
 758
 94
Total allowance for credit losses$2,890
 $2,010
 44 %
Net charge-off/(recovery) rate(b)
0.17% 0.10%  
Allowance for loan losses to period-end loans retained0.86
 0.99
  
Allowance for loan losses to period-end loans retained, excluding trade finance and conduits(c)
1.11
 1.34
  
Allowance for loan losses to nonaccrual loans retained(a)
206
 154
  
Nonaccrual loans to total period-end loans0.47% 0.83%  
(a)Allowance for loan losses of $317 million and $252 million were held against these nonaccrual loans at March 31, 2020 and 2019, respectively.
(b)Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.
(c)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.
Investment banking fees    
 Three months ended March 31,
(in millions)2020 2019 Change
Advisory$503
 $644
 (22)%
Equity underwriting331
 265
 25
Debt underwriting(a)
1,073
 935
 15
Total investment banking fees$1,907
 $1,844
 3 %
(a)Represents long-term debt and loan syndications.

28


League table results – wallet share    
 Three months ended March 31, Full-year 2019
 2020 2019 
 Rank Share Rank Share Rank Share
Based on fees(a)
          
M&A(b)
           
Global#2
 8.6 #2
 9.8 #2
 9.0%
U.S.2
 9.0 2
 10.1 2
 9.3
Equity and equity-related(c)
           
Global2
 8.8 3
 8.7 1
 9.3
U.S.2
 12.5 1
 12.4 1
 13.3
Long-term debt(d)
           
Global1
 9.5 1
 7.8 1
 7.8
U.S.1
 12.8 1
 11.8 1
 12.0
Loan syndications           
Global1
 9.8 1
 13.0 1
 10.2
U.S.2
 9.1 1
 16.4 1
 12.5
Global investment banking fees(e)
#1
 9.1 #1
 9.6 #1
 8.9%
(a)Source: Dealogic as of April 1, 2020. 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 deals.
Markets revenue
The following table summarizes select income statement data for the Markets businesses. Markets includes both Fixed Income Markets and Equity Markets. Markets revenue comprises 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
 
recorded in principal transactions revenue. Refer to Notes 6 and 7 for a description of the composition of these income statement line items. Refer to Markets revenue on page 69 of JPMorgan Chase’s 2019 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 March 31, Three months ended March 31,
 2020 2019

(in millions)
Fixed Income MarketsEquity
Markets
Total
Markets
 Fixed Income MarketsEquity
Markets
Total
Markets
Principal transactions$3,143
$1,723
$4,866
 $2,482
$1,557
$4,039
Lending- and deposit-related fees47
2
49
 49
2
51
Asset management, administration and commissions111
608
719
 103
434
537
All other income1
(1)
 219
(4)215
Noninterest revenue3,302
2,332
5,634
 2,853
1,989
4,842
Net interest income1,691
(95)1,596
 872
(248)624
Total net revenue$4,993
$2,237
$7,230
 $3,725
$1,741
$5,466
In the first quarter of 2020, CIB Markets had two loss days. Loss days represent the number of days for which CIB Markets, which consists of Fixed Income Markets and Equity Markets, posted losses to total net revenue. The loss days determined under this measure differ from the measure used to determine backtesting gains and losses. Daily backtesting gains and losses include positions in the Firm’s Risk Management value-at-risk (“VaR”) measure and exclude select components of total net revenue, which may more than offset backtesting gains or losses on a particular day. For more information on daily backtesting gains and losses, refer to the VaR discussion on pages 67–69.


29


Selected metrics     
 As of or for the three months
ended March 31,
(in millions, except where otherwise noted)2020 2019 Change
Assets under custody (“AUC”) by asset class (period-end)
(in billions):
     
Fixed Income$13,572
 $12,772
 6 %
Equity7,819
 9,028
 (13)
Other(a)
3,018
 2,916
 3
Total AUC$24,409

$24,716
 (1)
Merchant processing volume (in billions)(b)
$374.8
 $356.5
 5
Client deposits and other third-party liabilities (average)(c)
$514,464

$444,055
 16 %
In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The prior-period amounts were revised to conform with the current presentation.
(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 Wholesale Payments and Securities Services businesses.
 
International metrics     
 As of or for the three months
ended March 31,
(in millions, except where
 otherwise noted)
2020 
2019(c)
 Change
Total net revenue(a)
     
Europe/Middle East/Africa$2,590
 $3,180
 (19)%
Asia-Pacific1,776
 1,407
 26
Latin America/Caribbean507
 406
 25
Total international net revenue4,873
 4,993
 (2)
North America5,075
 5,041
 1
Total net revenue$9,948
 $10,034
 (1)
      
Loans retained (period-end)(a)
    
Europe/Middle East/Africa$29,184
 $26,329
 11
Asia-Pacific16,822
 18,006
 (7)
Latin America/Caribbean8,197
 7,397
 11
Total international loans54,203
 51,732
 5
North America111,173
 75,354
 48
Total loans retained$165,376
 $127,086
 30
      
Client deposits and other third-party liabilities (average)(b)
     
Europe/Middle East/Africa$190,976
 $164,138
 16
Asia-Pacific103,792
 85,082
 22
Latin America/Caribbean30,849
 27,482
 12
Total international$325,617
 $276,702
 18
North America188,847
 167,353
 13
Total client deposits and other third-party liabilities$514,464
 $444,055
 16
      
AUC (period-end)(b)
(in billions)
     
North America$15,590
 $15,352
 2
All other regions8,819
 9,364
 (6)
Total AUC$24,409
 $24,716
 (1)%
In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The prior-period amounts were revised to conform with the current presentation.
(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 Wholesale Payments and Securities Services businesses, and AUC, are based on the domicile of the client.
(c)The prior-period amounts have been revised to conform with the current period presentation.

30


COMMERCIAL BANKING
Commercial Banking provides comprehensive financial solutions, including lending, wholesale payments, investment banking and asset management products across three primary client segments: Middle Market Banking, Corporate Client Banking and Commercial Real Estate Banking. Other includes amounts not aligned with a primary client segment.

Middle Market Banking covers small business and midsized corporations, local governments and nonprofit clients.

Corporate Client Banking covers large corporations.

Commercial Real Estate Banking covers investors, developers, and owners of multifamily, office, retail, industrial and affordable housing properties.
Refer to Line of Business Metrics on page 178 for a discussion of the business profile of CB.
Selected income statement data
 Three months ended March 31,
(in millions)2020
 2019
 Change
Revenue     
Lending- and deposit-related fees(a)
$261
 $233
 12 %
All other income(a)
360
 500
 (28)
Noninterest revenue621
 733
 (15)
Net interest income1,557
 1,680
 (7)
Total net revenue(b)
2,178
 2,413
 (10)
      
Provision for credit losses1,010
 90
 NM
      
Noninterest expense     
Compensation expense472
 449
 5
Noncompensation expense513
 489
 5
Amortization of intangibles3
 
 NM
Total noninterest expense988
 938
 5
      
Income before income tax expense180
 1,385
 (87)
Income tax expense33
 325
 (90)
Net income$147
 $1,060
 (86)%
In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB and the revenue and expense of the business is reported across CCB, CIB and CB based primarily on client relationship. In conjunction with this realignment, treasury services product revenue has been renamed wholesale payments. Prior period revenue and expense amounts were revised to conform with the current presentation.
(a)In the first quarter of 2020, the Firm reclassified certain fees from asset management, administration and commissions (which are included in all other income) to lending- and deposit-related fees. Prior-period amounts were revised to conform with the current presentation.
(b)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 $81 million and $94 million for the three months ended March 31, 2020 and 2019, respectively.
 
Quarterly results
Net income was $147 million, a decrease of 86%, predominantly driven by an increase in the provision for credit losses.
Net revenue was $2.2 billion, down 10%. Net interest income was $1.6 billion, down 7%, driven by lower deposit margins, partially offset by higher deposit balances. Noninterest revenue was $621 million, a decrease of 15%, driven by markdowns on held-for-sale positions, including unfunded commitments in the bridge financing portfolio, and lower investment banking revenue, partially offset by higher deposit-related fees.
Noninterest expense was $988 million, up 5%, predominantly driven by investments in the business.
The provision for credit losses was $1.0 billion, compared with $90 million in the prior year. The increase was predominantly driven by additions to the allowance for credit losses from the impact of the COVID-19 pandemic across multiple sectors and continued pressure on oil prices, with the largest impacts in the Oil & Gas, Real Estate, and Consumer & Retail industries.
Refer to Credit and Investment Risk Management on pages 50–66 and Allowance for Credit Losses on pages 64–65 for further discussions of the credit portfolios and the allowance for credit losses.
CB product revenue consists of the following:
Lending includes a variety of financing alternatives, which are primarily provided on a secured basis; collateral includes receivables, inventory, equipment, real estate or other assets. Products include term loans, revolving lines of credit, bridge financing, asset-based structures, leases, and standby letters of credit.
Wholesale payments includes revenue from a broad range of products and services that enable CB clients to manage payments and receipts, as well as invest and manage funds.
Investment banking includes revenue from a range of products providing CB clients with sophisticated capital-raising alternatives, as well as balance sheet and risk management tools through advisory, equity underwriting, and loan syndications. Revenue from Fixed Income and Equity Markets products used by CB clients is also included.
Other product revenue primarily includes tax-equivalent adjustments generated from Community Development Banking activities and certain income derived from principal transactions.


31


Selected income statement data (continued)
 Three months ended March 31,
(in millions, except ratios)2020
 2019
 Change
Revenue by product     
Lending$954
 $1,012
 (6)%
Wholesale payments991
 1,104
 (10)
Investment banking(a)
235
 289
 (19)
Other(2) 8
 NM
Total Commercial Banking net revenue$2,178
 $2,413
 (10)
      
Investment banking revenue, gross(b)
$686
 $818
 (16)
      
Revenue by client segments     
Middle Market Banking$946
 $974
 (3)
Corporate Client Banking681
 851
 (20)
Commercial Real Estate Banking541
 547
 (1)
Other10
 41
 (76)
Total Commercial Banking net revenue$2,178
 $2,413
 (10)%
      
Financial ratios     
Return on equity2% 19%  
Overhead ratio45
 39
  
In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB and the revenue and expense of the business is reported across CCB, CIB and CB based primarily on client relationship. In conjunction with this realignment, treasury services product revenue has been renamed wholesale payments. Prior period revenue and expense amounts were revised to conform with the current presentation.
(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 21 for discussion of revenue sharing.

 
Selected metrics  
 As of or for the three months
ended March 31,
(in millions, except headcount)2020
2019
Change
Selected balance sheet data (period-end)   
Total assets$247,786
$216,111
15 %
Loans:   
Loans retained232,254
204,927
13
Loans held-for-sale and loans at fair value1,112
410
171
Total loans$233,366
$205,337
14
Equity22,000
22,000

    
Period-end loans by client segment   
Middle Market Banking$60,317
$56,846
6
Corporate Client Banking69,540
46,897
48
Commercial Real Estate Banking102,799
100,622
2
Other710
972
(27)
Total Commercial Banking loans$233,366
$205,337
14
    
Selected balance sheet data (average)   
Total assets$226,071
$218,297
4
Loans:   
Loans retained209,988
204,462
3
Loans held-for-sale and loans at fair value1,831
1,634
12
Total loans$211,819
$206,096
3
    
Average loans by client segment   
Middle Market Banking$56,045
$56,723
(1)
Corporate Client Banking53,032
48,141
10
Commercial Real Estate Banking101,526
100,264
1
Other1,216
968
26
Total Commercial Banking loans$211,819
$206,096
3
    
Client deposits and other third-party liabilities$188,808
$167,260
13
Equity22,000
22,000

    
Headcount11,779
11,033
7 %

32


Selected metrics (continued)  
 As of or for the three months
ended March 31,
(in millions, except ratios)2020
2019
Change
Credit data and quality statistics   
Net charge-offs/(recoveries)$100
$11
NM
Nonperforming assets   
Nonaccrual loans:   
Nonaccrual loans retained(a)
$793
$544
46 %
Nonaccrual loans held-for-sale and loans at fair value


Total nonaccrual loans$793
$544
46
Assets acquired in loan satisfactions24

NM
Total nonperforming assets$817
$544
50
Allowance for credit losses:   
Allowance for loan losses$2,680
$2,766
(3)
Allowance for lending-related commitments505
250
102
Total allowance for credit losses$3,185
$3,016
6 %
Net charge-off/(recovery) rate(b)
0.19%0.02% 
Allowance for loan losses to period-end loans retained
1.15
1.35
 
Allowance for loan losses to nonaccrual loans retained(a)
338
508
 
Nonaccrual loans to period-end total loans0.34
0.26
 
(a)Allowance for loan losses of $175 million and $132 million was held against nonaccrual loans retained at March 31, 2020 and 2019, respectively.
(b)Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.


33


ASSET & WEALTH MANAGEMENT
Refer to pages 74–76 of JPMorgan Chase’s 2019 Form 10-K and Line of Business Metrics on pages 178–179 for a discussion of the business profile of AWM.
Selected income statement data
(in millions, except ratios)Three months ended March 31,
2020
2019
Change
Revenue   
Asset management, administration and commissions$2,706
$2,416
12 %
All other income3
177
(98)
Noninterest revenue2,709
2,593
4
Net interest income897
896

Total net revenue3,606
3,489
3
    
Provision for credit losses94
2
NM
    
Noninterest expense   
Compensation expense1,411
1,462
(3)
Noncompensation expense1,248
1,185
5
Total noninterest expense2,659
2,647

    
Income before income tax expense853
840
2
Income tax expense189
179
6
Net income$664
$661

    
Revenue by line of business   
Asset Management$1,740
$1,761
(1)
Wealth Management1,866
1,728
8
Total net revenue$3,606
$3,489
3 %
    
Financial ratios   
Return on equity25%25% 
Overhead ratio74
76
 
Pre-tax margin ratio:   
Asset Management24
23
 
Wealth Management24
25
 
Asset & Wealth Management24
24
 
 
Quarterly results
Net income was $664 million, flat versus the prior year.
Net revenue of $3.6 billion was up 3%. Net interest income of $897 million was flat, reflecting deposit and loan growth, offset by deposit margin compression. Noninterest revenue was $2.7 billion, up 4%, largely driven by:
higher asset management fees as a result of higher asset values at the beginning of 2020 driven by higher average market levels, and strong net inflows into long-term products over the past year despite the impact of market volatility in March, and
increased brokerage commissions on higher client-driven volume particularly in March,
largely offset by
net valuation losses on certain investments, compared with gains in the prior year.
Revenue from Asset Management was $1.7 billion, down 1%, driven by:
net valuation losses on certain investments, compared with gains in the prior year,
largely offset by
higher asset management fees as a result of higher average market levels, despite the impact of market volatility in March.
Revenue from Wealth Management was $1.9 billion, up 8%, predominantly driven by:
increased brokerage commissions on higher client-driven volume particularly in March,
deposit and loan growth, and
higher asset management fees as a result of higher average market levels and strong net inflows into long-term products over the past year, despite the impact of market volatility in March,
partially offset by
deposit margin compression.
Noninterest expense of $2.7 billion was flat, as higher investments and volume-and revenue-related expense, were predominantly offset by lower structural expense.
The provision for credit losses was $94 million, driven by additions to the allowance for credit losses from the impact of the COVID-19 pandemic, as well as loan growth.
Refer to Credit and Investment Risk Management on pages 50–66 and Allowance for Credit Losses on pages 64–65 for further discussions of the credit portfolios and the allowance for credit losses.


34


Selected metrics   
 As of or for the three months
ended March 31,
(in millions, except ranking data, headcount and ratios)2020
2019
Change
% of JPM mutual fund assets rated as 4- or 5-star(a)
62%60% 
% of JPM mutual fund assets ranked in 1st or 2nd quartile:(b)
   
1 year69
72
 
3 years74
78
 
5 years78
86
 
    
Selected balance sheet data (period-end)(c)
   
Total assets$186,102
$165,865
12 %
Loans166,058
143,750
16
Deposits168,561
143,348
18
Equity10,500
10,500

    
Selected balance sheet data (average)(c)
   
Total assets$183,316
$167,358
10
Loans161,823
145,406
11
Deposits150,631
138,235
9
Equity10,500
10,500

    
Headcount23,830
24,347
(2)
    
Number of Wealth Management client advisors2,878
2,877

    
Credit data and quality statistics(c)
   
Net charge-offs$2
$4
(50)
Nonaccrual loans304
285
7
Allowance for credit losses:   
Allowance for loan losses$438
$325
35
Allowance for lending-related commitments14
18
(22)
Total allowance for credit losses$452
$343
32 %
Net charge-off rate
0.01% 
Allowance for loan losses to period-end loans0.26
0.23
 
Allowance for loan losses to nonaccrual loans144
114
 
Nonaccrual loans to period-end loans0.18
0.20
 
(a)Represents the Nomura “star rating” for Japan domiciled funds and Morningstar for all other domiciled funds. Includes only Asset Management retail open-ended mutual funds that have a rating. Excludes money market funds, Undiscovered Managers Fund, and Brazil domiciled funds.
(b)Quartile ranking sourced from Lipper, Morningstar, Nomura and Fund Doctor 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.
(c)Loans, deposits and related credit data and quality statistics relate to the Wealth Management business.
 
Client assets
Client assets of $3.0 trillion and assets under management of $2.2 trillion were up 4% and 7% respectively, driven by cumulative net inflows, partially offset by the impact of lower market levels at the end of the quarter.
Client assets   
 As of March 31,
(in billions)2020
2019
Change
Assets by asset class   
Liquidity$618
$476
30 %
Fixed income586
495
18
Equity369
427
(14)
Multi-asset and alternatives666
698
(5)
Total assets under management2,239
2,096
7
Custody/brokerage/administration/deposits763
801
(5)
Total client assets$3,002
$2,897
4
    
Memo:   
Alternatives client assets (a)
$188
$172
9
    
Assets by client segment   
Private Banking$617
$597
3
Institutional1,097
943
16
Retail525
556
(6)
Total assets under management$2,239
$2,096
7
    
Private Banking$1,355
$1,371
(1)
Institutional1,118
965
16
Retail529
561
(6)
Total client assets$3,002
$2,897
4 %
(a)Represents assets under management, as well as client balances in brokerage accounts
Client assets (continued)  


Three months ended
March 31,
(in billions)2020
2019
Assets under management rollforward  
Beginning balance$2,364
$1,987
Net asset flows:  
Liquidity75
(5)
Fixed income1
19
Equity(1)(6)
Multi-asset and alternatives(2)(3)
Market/performance/other impacts(198)104
Ending balance, March 31$2,239
$2,096
   
Client assets rollforward  
Beginning balance$3,226
$2,733
Net asset flows85
9
Market/performance/other impacts(309)155
Ending balance, March 31$3,002
$2,897

35


International metrics   
 Three months ended
March 31,
(in millions)2020
2019
Change
Total net revenue (a)
   
Europe/Middle East/Africa$623
$695
(10)%
Asia-Pacific400
364
10
Latin America/Caribbean188
182
3
Total international net revenue1,211
1,241
(2)
North America2,395
2,248
7
Total net revenue(a)
$3,606
$3,489
3 %
(a)Regional revenue is based on the domicile of the client.
 As of March 31,
(in billions)2020
2019
Change
Assets under management   
Europe/Middle East/Africa$395
$378
4 %
Asia-Pacific174
178
(2)
Latin America/Caribbean56
54
4
Total international assets under management625
610
2
North America1,614
1,486
9
Total assets under management$2,239
$2,096
7
    
Client assets   
Europe/Middle East/Africa$479
$461
4
Asia-Pacific248
247

Latin America/Caribbean134
132
2
Total international client assets861
840
2
North America2,141
2,057
4
Total client assets$3,002
$2,897
4 %

36


CORPORATE
Refer to pages 77–78 of JPMorgan Chase’s 2019 Form 10-K for a discussion of Corporate.
Selected income statement and balance sheet data
 As of or for the three months
ended March 31,
(in millions, except headcount)2020
2019
 Change
Revenue    
Principal transactions$(113)$(62) (82)%
Investment securities gains233
13
 NM
All other income211
57
 270 %
Noninterest revenue331
8
 NM
Net interest income(165)417
 NM
Total net revenue(a)
166
425
 (61)%
     
Provision for credit losses8
2
 300 %
     
Noninterest expense(b)
146
211
 (31)%
Income before income tax expense/(benefit)12
212
 (94)%
Income tax expense/(benefit)137
(39) NM
Net income/(loss)$(125)$251
 NM
Total net revenue    
Treasury and CIO$169
$511
 (67)
Other Corporate(3)(86) 97
Total net revenue$166
$425
 (61)
Net income/(loss)    
Treasury and CIO$83
$334
 (75)
Other Corporate(208)(83) (151)
Total net income/(loss)$(125)$251
 NM
Total assets (period-end)$981,937
$796,615
 23
Loans (period-end)1,650
1,885
 (12)
Headcount38,785
37,502
 3 %
(a)Included tax-equivalent adjustments, driven by tax-exempt income from municipal bonds, of $61 million and $86 million for the three months ended March 31, 2020 and 2019, respectively.
(b)Included a net legal benefit of $(20) million and $(90) million for the three months ended March 31, 2020 and 2019, respectively.
Quarterly results
Net loss was $125 million compared with net income of $251 million in the prior year.
Net revenue was $166 million, compared with $425 million in the prior year. The decrease was driven by lower net interest income on lower rates, largely offset by higher noninterest revenue primarily due to higher net investment securities gains reflecting the impact of repositioning the investment securities portfolio, and market-driven impacts on certain Corporate investments.
Noninterest expense of $146 million was down $65 million due to lower structural expense, largely offset by a lower net legal benefit compared to the prior year.
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 and more specifically, the impact of the Firm’s estimated full-year expected tax rate relative to the level of pretax income for the quarter.
 
Treasury and CIO overview
At March 31, 2020, 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 10 for further information on the Firm’s investment securities portfolio and internal risk ratings.
Refer to Liquidity Risk Management on pages 45–49 for further information on liquidity and funding risk. Refer to Market Risk Management on pages 67–71 for information on interest rate, foreign exchange and other risks.
Selected income statement and balance sheet data
 As of or for the three months
ended March 31,
(in millions)2020
 2019
 Change
Investment securities gains$233
 $13
 NM
Available-for-sale securities (average)$372,954
 $226,605
 65
Held-to-maturity securities (average)46,673
 31,082
 50
Investment securities portfolio (average)$419,627
 $257,687
 63
Available-for-sale securities (period-end)$397,891
 $234,832
 69
Held-to-maturity securities, net of allowance for credit losses (period-end)(a)(b)
71,200
 30,849
 131
Investment securities portfolio, net of allowance for credit losses (period-end)(a)
$469,091
 $265,681
 77
(a)At March 31, 2020, the allowance for credit losses on HTM securities was $19 million.
(b)During the first quarter of 2020, the Firm transferred $26.1 billion of U.S. GSE and government agency MBS from AFS to HTM for capital management purposes.
Refer to Note 10 for further information.


37


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 risk issues, 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 strives for continual improvement in its efforts to enhance controls, ongoing employee training and development, talent retention, and other measures. 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.
jpmcgovernancea06.jpg
Refer to pages 79-83 of JPMorgan Chase’s 2019 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 2019 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 functionsForm 10-Q page referenceForm 10-K page reference
Strategic risk 84
Capital risk39–4485–92
Liquidity risk45–4993–98
Reputation risk 99
Consumer credit risk52–55103–107
Wholesale credit risk56–63108–115
Investment portfolio risk66118
Market risk67–71119–126
Country risk72127–128
Operational risk45129–135
Compliance risk 132
Conduct risk 133
Legal risk 134
Estimations and Model risk74135

38


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 85–92 of JPMorgan Chase’s 2019 Form
10-K, Note 22 of this Form 10-Q and the Firm’s Pillar 3 Regulatory Capital Disclosures reports, which are available on the Firm’s website, for further discussion of the Firm’s Capital Risk Management, including capital planning and stress testing.
COVID-19 Pandemic
The Firm remains well-capitalized, but has been impacted by recent market events as a result of the COVID-19 pandemic. The continuation or further deterioration of the current macroeconomic environment could result in additional impacts to the Firms capital and leverage position.
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 (“BHC”) 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.
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 Approach banking organizations, including the Firm, to calculate the SLR. Refer to SLR on page 90 of JPMorgan Chase’s 2019 Form 10-K for additional information.
 
Key Regulatory Developments
Current Expected Credit Losses. As disclosed in the Firm’s 2019 Form 10-K, the Firm initially elected to phase-in the January 1, 2020 (“day 1”) CECL adoption impact to retained earnings of $2.7 billion to CET1 capital, at 25% per year in each of 2020 to 2023. As part of their response to the impact of the COVID-19 pandemic, on March 31, 2020, the federal banking agencies issued an interim final rule that provided the option to temporarily delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period (“CECL capital transition provisions”).
The interim final rule provides a uniform approach for estimating the effects of CECL compared to the legacy incurred loss model during the first two years of the transition period (the “day 2” transition amount), whereby the Firm may exclude from CET1 capital 25% of the change in the allowance for credit losses (excluding allowances on PCD loans). The cumulative day 2 transition amount as at December 31, 2021 that is not recognized in CET1 capital as well as the $2.7 billion day 1 impact, will be phased into CET1 capital at 25% per year beginning January 1, 2022. The Firm has elected to apply the CECL capital transition provisions, and accordingly, for the period ended March 31, 2020, the capital measures of the Firm exclude $4.3 billion, which is the $2.7 billion day 1 impact to retained earnings and 25% of the $6.8 billion increase in the allowance for credit losses (excluding allowances on PCD loans).
The impacts of the CECL capital transition provisions on Tier 2 capital, adjusted average assets, and total leverage exposure have also been incorporated into the Firm’s capital measures. Refer to Note 1 for further information on the CECL accounting guidance.

39


Money Market Mutual Fund Liquidity Facility. On March 18, 2020, the Federal Reserve established a facility, authorized through September 30, 2020, to enhance the liquidity and functioning of money markets. Under the MMLF, the FRBB makes nonrecourse advances to participating financial institutions to purchase certain types of assets from eligible money market mutual fund clients. These assets, which are reflected in other assets on the Firm’s Consolidated balance sheets, are pledged to the FRBB as collateral. On March 23, 2020, the federal banking agencies issued an interim final rule to neutralize the effects of purchasing assets through the program on risk-based and leverage-based capital ratios. As of March 31, 2020 the Firm excluded assets purchased from money market mutual fund clients pursuant to nonrecourse advances provided under the MMLF in the amount of $12.0 billion from its RWA and $1.2 billion from adjusted average assets and total leverage exposure.
Refer to Regulatory Developments Relating to the COVID-19 pandemic on pages 10-11 for additional information on regulatory actions and significant financing programs that the U.S. government and regulators have introduced to address the effects of the COVID-19 pandemic.
 
Stress Capital Buffer. On March 4, 2020, the Federal Reserve issued the final rule introducing a stress capital buffer (“SCB”) framework for the Basel III Standardized approach that is designed to more closely integrate the results of the quantitative assessment in CCAR with the ongoing minimum capital requirements for BHCs under the U.S. Basel III rules. The final rule replaces the static 2.5% CET1 capital conservation buffer in the Standardized approach with a dynamic institution-specific SCB. The final rule does not apply to the Advanced approach capital requirements. The SCB requirement for BHCs will be effective on October 1 of each year and is expected to remain in effect until September 30 of the following year. The Firm anticipates that the Federal Reserve will disclose the Firm’s SCB requirement and summary information regarding the Firm’s stress test results by June 30, 2020. Starting on October 1, 2020, the SCB will take effect based on the 2020 CCAR submission and will be integrated into the Firm’s ongoing minimum capital requirements.
The following tables present the Firm’s risk-based and leverage-based capital measures under both the Basel III Standardized and Advanced Approaches. Refer to Capital Risk Management on pages 85–92 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of these capital metrics.
 
March 31, 2020(b)(c)
 December 31, 2019  
(in millions, except ratios)StandardizedAdvanced StandardizedAdvanced 
Minimum capital ratios(d)
Risk-based capital metrics:       
CET1 capital$183,591
$183,591
 $187,753
$187,753
  
Tier 1 capital213,406
213,406
 214,432
214,432
  
Total capital247,541
234,434
 242,589
232,112
  
Risk-weighted assets1,598,828
1,489,134
 1,515,869
1,397,878
  
CET1 capital ratio11.5%12.3% 12.4%13.4% 10.5%
Tier 1 capital ratio13.3
14.3
 14.1
15.3
 12.0
Total capital ratio15.5
15.7
 16.0
16.6
 14.0
Leverage-based capital metrics:       
Adjusted average assets(a)
$2,842,244
$2,842,244
 $2,730,239
$2,730,239
  
Tier 1 leverage ratio7.5%7.5% 7.9%7.9% 4.0%
Total leverage exposureNA
$3,535,822
 NA
$3,423,431
  
SLRNA
6.0% NA
6.3% 5.0%
(a)Adjusted average assets, for purposes of calculating the leverage ratios, includes total quarterly average assets adjusted for on-balance sheet assets that are subject to deduction from Tier 1 capital, predominantly goodwill and other intangible assets.
(b)As of March 31, 2020, the capital measures reflect the CECL capital transition provisions.
(c)As of March 31, 2020, the capital measures reflect the exclusion of assets purchased from money market mutual fund clients pursuant to nonrecourse advances provided under the MMLF.
(d)Represents minimum requirements and regulatory buffers applicable to the Firm. Refer to Note 22 for additional information.

40


Capital components
The following table presents reconciliations of total stockholders’ equity to Basel III CET1 capital, Tier 1 capital and Total capital as of March 31, 2020 and December 31, 2019.
(in millions)March 31, 2020
December 31, 2019
Total stockholders’ equity$261,262
$261,330
Less: Preferred stock30,063
26,993
Common stockholders’ equity231,199
234,337
Add:  
Certain deferred tax liabilities(a)
2,389
2,381
Less:  
Goodwill47,800
47,823
Other intangible assets800
819
Other CET1 capital adjustments(b)
1,397
323
Standardized/Advanced CET1 capital183,591
187,753
Preferred stock30,063
26,993
Less: Other Tier 1 adjustments248
314
Standardized/Advanced Tier 1 capital$213,406
$214,432
Long-term debt and other instruments qualifying as Tier 2 capital$15,264
$13,733
Qualifying allowance for credit losses(c)
18,748
14,314
Other123
110
Standardized Tier 2 capital$34,135
$28,157
Standardized Total capital$247,541
$242,589
Adjustment in qualifying allowance for credit losses for Advanced Tier 2 capital(d)
(13,107)(10,477)
Advanced Tier 2 capital$21,028
$17,680
Advanced Total capital$234,434
$232,112
(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 March 31, 2020, the impact of the CECL capital transition provision was an increase in CET1 capital of $4.3 billion.
(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.
 
Capital rollforward
The following table presents the changes in Basel III CET1 capital, Tier 1 capital and Tier 2 capital for the three months ended March 31, 2020.
Three months ended March 31,
(in millions)
2020
Standardized/Advanced CET1 capital at December 31, 2019$187,753
Net income applicable to common equity2,444
Dividends declared on common stock(2,779)
Net purchase of treasury stock(5,337)
Changes in additional paid-in capital(665)
Changes related to AOCI5,849
Adjustment related to AOCI(a)
(4,939)
Changes related to other CET1 capital adjustments(b)
1,265
Change in Standardized/Advanced CET1 capital(4,162)
Standardized/Advanced CET1 capital at March 31, 2020$183,591
  
Standardized/Advanced Tier 1 capital at December 31, 2019$214,432
Change in CET1 capital(b)
(4,162)
Net issuance of noncumulative perpetual preferred stock3,070
Other66
Change in Standardized/Advanced Tier 1 capital(1,026)
Standardized/Advanced Tier 1 capital at March 31, 2020$213,406
  
Standardized Tier 2 capital at December 31, 2019$28,157
Change in long-term debt and other instruments qualifying as Tier 21,531
Change in qualifying allowance for credit losses(b)
4,434
Other13
Change in Standardized Tier 2 capital5,978
Standardized Tier 2 capital at March 31, 2020$34,135
Standardized Total capital at March 31, 2020$247,541
  
Advanced Tier 2 capital at December 31, 2019$17,680
Change in long-term debt and other instruments qualifying as Tier 21,531
Change in qualifying allowance for credit losses(b)
1,804
Other13
Change in Advanced Tier 2 capital3,348
Advanced Tier 2 capital at March 31, 2020$21,028
Advanced Total capital at March 31, 2020$234,434
(a)Includes cash flow hedges and DVA related to structured notes recorded in AOCI.
(b)Includes the impact of the CECL capital transition provisions.

41


RWA rollforward
The following table presents changes in the components of RWA under Basel III Standardized and Advanced approaches for the three months ended March 31, 2020. The amounts in the rollforward categories are estimates, based on the predominant driver of the change.
 Standardized Advanced 
Three months ended March 31, 2020
(in millions)
Credit risk RWAMarket risk RWATotal RWA Credit risk RWAMarket risk RWA
Operational risk
RWA
Total RWA
December 31, 2019$1,440,220
$75,649
$1,515,869
 $932,948
$75,652
$389,278
$1,397,878
Model & data changes(a)
1,800
(8,200)(6,400) 1,600
(8,200)
(6,600)
Portfolio runoff(b)
(1,300)
(1,300) (1,300)

(1,300)
Movement in portfolio levels(c)
58,238
32,421
90,659
 65,535
32,424
1,197
99,156
Changes in RWA58,738
24,221
82,959
 65,835
24,224
1,197
91,256
March 31, 2020$1,498,958
$99,870
$1,598,828
 $998,783
$99,876
$390,475
$1,489,134
(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)Portfolio runoff for credit risk RWA primarily reflects reduced risk from position rolloffs in legacy portfolios in Home Lending.
(c)Movement in portfolio levels (inclusive of rule changes) refers to: changes in book size, composition, credit quality, and market movements for credit risk RWA; changes in position and market movements for market risk RWA; updates to cumulative losses for operational risk RWA; and deductions to credit risk RWA for excess eligible credit reserves not eligible for inclusion in Tier 2 capital.
Supplementary leverage ratio
Refer to Supplementary Leverage Ratio on pages 87-88 of JPMorgan Chase’s 2019 Form 10-K for additional information.
The following table presents the components of the Firm’s SLR.
(in millions, except ratio)March 31,
2020

December 31,
2019

Tier 1 capital$213,406
$214,432
Total average assets2,890,232
2,777,270
Less: Regulatory capital adjustments(a)
47,988
47,031
Total adjusted average assets2,842,244
2,730,239
Add: Off-balance sheet exposures(b)
693,578
693,192
Total leverage exposure$3,535,822
$3,423,431
SLR6.0%6.3%
(a)
For purposes of calculating the SLR, includes total quarterly average assets adjusted for on-balance sheet assets that are subject to deduction from Tier 1 capital, predominantly goodwill and other intangible assets. As of March 31, 2020, includes adjustments for the CECL capital transition provisions and the exclusion of assets purchased from money market mutual fund clients pursuant to nonrecourse advances provided under the MMLF.
(b)Off-balance sheet exposures are calculated as the average of the three month-end spot balances during the reporting quarter.
Refer to Note 22 for JPMorgan Chase Bank, N.A.’s SLR ratios.
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 90 of JPMorgan Chase’s 2019 Form 10-K for additional information on capital allocation.
 
The following table presents the capital allocated to each business segment:

(in billions)
March 31,
2020

 December 31,
2019

Consumer & Community Banking$52.0
 $52.0
Corporate & Investment Bank80.0
 80.0
Commercial Banking22.0
 22.0
Asset & Wealth Management10.5
 10.5
Corporate66.7
(a) 
69.8
Total common stockholders’ equity$231.2
 $234.3
(a)Includes the $2.7 billion (after-tax) impact to retained earnings upon the adoption of CECL on January 1, 2020.
Planning and stress testing
Comprehensive Capital Analysis and Review (“CCAR”)
On April 6, 2020, the Firm submitted its 2020 Capital Plan to the Federal Reserve under the Federal Reserve’s 2020 CCAR process. The Firm anticipates that the Federal Reserve will disclose the Firm’s SCB requirement and summary information regarding the Firm’s stress test results by June 30, 2020.
Refer to Stress Capital Buffer regulatory developments on page 40 of this Form 10-Q and capital planning and stress testing on pages 85-86 of JPMorgan Chase’s 2019 Form 10-K for additional information.
Capital actions
Preferred stock
Preferred stock dividends declared were $421 million for the three months ended March 31, 2020.
During the three months ended March 31, 2020, the Firm redeemed and issued several series of non-cumulative preferred stock. Refer to Note 18 of this Form 10-Q and Note 21 of JPMorgan Chase’s 2019 Form 10-K for additional information on the Firm’s preferred stock, including issuances and redemptions.

42


Common stock dividends
The Firm’s quarterly common stock dividend is currently $0.90 per share. The Firm’s dividends are subject to the Board of Directors’ approval on a quarterly basis.
Common equity
The Firm’s Board of Directors has authorized the repurchase of up to $29.4 billion of gross common equity between July 1, 2019 and June 30, 2020 as part of the Firm’s annual capital plan.
On March 15, 2020, in response to the COVID-19 pandemic, the Firm temporarily suspended through the second quarter of 2020 repurchases of its common equity. The decision to suspend these repurchases is consistent with the Firm’s objective to use its capital and liquidity to provide support to individuals, small businesses, and the broader economy through lending and other services.
The following table sets forth the Firm’s repurchases of common equity for the three months ended March 31, 2020 and 2019.

Three months ended
March 31,
(in millions)2020
2019
Total number of shares of common stock repurchased50.0
49.5
Aggregate purchase price of common stock repurchases$6,397
$5,091
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 181-182 of this Form 10-Q and page 30 of JPMorgan Chase’s 2019 Form 10-K, respectively, for additional information regarding repurchases of the Firm’s equity securities.

 
Other capital requirements
Total Loss-Absorbing Capacity (“TLAC”)
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 91 of JPMorgan Chase’s 2019 Form 10-K for additional information on TLAC.
The following table presents the TLAC and external long-term debt minimum requirements including applicable regulatory buffers, as of March 31, 2020 and December 31, 2019.
 Minimum Requirements
TLAC to RWA23.0%
TLAC to leverage exposure9.5
External long-term debt to RWA9.5
External long-term debt to leverage4.5
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 March 31, 2020.
 March 31, 2020December 31, 2019
(in billions, except ratio)Eligible external TLACEligible LTDEligible external TLACEligible LTD
Total eligible TLAC & LTD$387.4
$165.0
$386.4
$161.8
% of RWA24.2%10.3%25.5%10.7%
Surplus/(shortfall)$19.6
$13.1
$37.7
$17.8
     
% of total leverage exposure11.0%4.7%11.3%4.7%
Surplus/(shortfall)$51.5
$5.9
$61.2
$7.8
Refer to Part I, Item 1A: Risk Factors on pages 6–28 of JPMorgan Chase’s 2019 Form 10-K for information on the financial consequences to holders of the Firm’s debt and equity securities in a resolution scenario.

43


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 subject to the Rules of the Commodity Futures Trading Commission (“CFTC”).
Refer to Capital risk management on pages 85–92 of JPMorgan Chase’s 2019 Form 10-K for a discussion on J.P. Morgan Securities’ capital requirements.
The following table presents J.P. Morgan Securities’ net capital:
March 31, 2020 
(in millions)
Actual(a)

Minimum
Net Capital$17,288
$5,945
(a)Net capital reflects the exclusion of assets purchased from money market mutual fund clients pursuant to nonrecourse advances provided under the MMLF.

 

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”).
Refer to Capital risk management on pages 85–92 of JPMorgan Chase’s 2019 Form 10-K for a further discussion on J.P. Morgan Securities plc.
The Bank of England requires, on a transitional basis, that U.K. banks, including U.K. regulated subsidiaries of overseas groups, maintain a minimum requirement for own funds and eligible liabilities (“MREL”). As of March 31, 2020, J.P. Morgan Securities plc was compliant with the requirements of the MREL rule. Refer to Supervision and Regulation on pages 1–6 of JPMorgan Chase’s 2019 Form 10-K for additional information on MREL.
The following table presents J.P. Morgan Securities plc’s capital metrics:
March 31, 2020  
(in millions, except ratios)Estimated
Minimum ratios
Total capital$53,654
 
CET1 ratio16.6%4.5%
Total capital ratio21.3%8.0%




44


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 93–98 of JPMorgan Chase’s 2019 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 Management.
LCR and HQLA
The LCR rule requires that the Firm maintain an amount of unencumbered High Quality Liquid Assets (“HQLA”) that is sufficient to meet its estimated total net cash outflows over a prospective 30 calendar-day period of significant stress. Under the LCR rule, the amount of 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 HQLA. The LCR is required to be a minimum of 100%. For additional information on HQLA and net cash outflows, refer to page 94 of JPMorgan Chase’s 2019 Form 10-K and the Firm’s U.S. LCR Disclosure reports.
The following table summarizes the Firm’s average LCR for the three months ended March 31, 2020, December 31, 2019 and March 31, 2019 based on the Firm’s interpretation of the finalized LCR framework.
 Three months ended
Average amount
(in millions)
March 31,
2020
December 31, 2019March 31,
2019
HQLA   
Eligible cash(a)
$205,027
$203,296
$216,787
Eligible securities(b)(c)
343,124
341,990
303,249
Total HQLA(d)
$548,151
$545,286
$520,036
Net cash outflows$482,372
$469,402
$467,329
LCR114%116%111%
Net excess HQLA(d)
$65,779
$75,884
$52,707
(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)HQLA eligible 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 HQLA at JPMorgan Chase Bank, N.A. that are not transferable to non-bank affiliates.
The Firm’s average LCR decreased during the three months ended March 31, 2020, compared with the three-month period ended December 31, 2019, primarily due to an increase in CIB market activities and long-term debt maturities. Liquidity in JPMorgan Chase Bank, N.A. increased during the quarter primarily due to deposits net of loan growth. Deposits increased in March as a result of market conditions driven by the COVID-19 pandemic. Additionally, effective March 26, 2020, the Federal Reserve, in response to the COVID-19 pandemic, reduced reserve requirements to zero percent, which increased JPMorgan
 
Chase Bank, N.A.’s HQLA by approximately $25 billion. However, these increases in excess liquidity in JPMorgan Chase Bank, N.A. are excluded from the Firm’s reported LCR under the LCR rule. Refer to Note 21 for additional information.
The Firm's average LCR increased during the three months ended March 31, 2020, compared with the prior year period, primarily from an increase in the average amount of reportable HQLA as a result of increased cash from unsecured long-term debt issuances.
The Firm’s average LCR fluctuates from period to period, due to changes in its 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 HQLA above, the Firm had unencumbered marketable securities, such as equity securities and fixed income debt securities, that the Firm believes would be available to raise liquidity. This includes securities included as part of the excess HQLA at JPMorgan Chase Bank, N.A. that are not transferable to non-bank affiliates, as described above. The fair value of these securities was approximately $432 billion and $315 billion as of March 31, 2020 and December 31, 2019, respectively, however, the amount of liquidity that could be raised would be dependent on prevailing market conditions. The fair value increased compared to December 31, 2019, due to an increase in excess HQLA at JPMorgan Chase Bank, N.A. and an increase in CIB trading assets during the quarter.
The Firm also had available borrowing capacity at FHLBs and the discount window at the Federal Reserve Bank as a result of collateral pledged by the Firm to such banks of approximately $317 billion and $322 billion as of March 31, 2020 and December 31, 2019, respectively. This borrowing capacity excludes the benefit of cash and securities reported in the Firm’s 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.

45


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.
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 also access funding through short- or long-term secured borrowings, through the issuance of
 
unsecured long-term debt, or from borrowings from the Parent company or 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.
Deposits
The table below summarizes, by LOB, the deposit balances as of March 31, 2020, and December 31, 2019, and the average deposit balances for the three months ended March 31, 2020 and 2019, respectively.
 March 31, 2020
December 31, 2019
  Three months ended March 31,
Deposits  Average
(in millions)  2020
2019
Consumer & Community Banking$775,068
$718,354
(a) 
 $733,648
$681,013
Corporate & Investment Bank667,622
511,905
(a) 
 562,226
492,354
Commercial Banking224,198
184,115
  188,683
167,177
Asset & Wealth Management168,561
147,804
  150,631
138,235
Corporate560
253
  998
963
Total Firm$1,836,009
$1,562,431
  $1,636,186
$1,479,742
(a)In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The prior- period amounts were revised to conform with the current presentation.
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 ratios, and deposits as a percentage of total liabilities, as of March 31, 2020 and December 31, 2019.
(in billions except ratios)March 31, 2020
 December 31, 2019
Deposits$1,836.0
 $1,562.4
Deposits as a % of total liabilities64% 64%
Loans$1,015.4
 $959.8
Loans-to-deposits ratio55% 61%
 
The Firm believes that average deposit balances are generally more representative of deposit trends than period-end deposit balances, over time. However, during periods of market disruption those trends could be affected.
Average deposits across the Firm increased for the three months ended March 31, 2020. CIB deposits increased largely driven by continued growth in client activity. CB deposits increased predominantly driven by growth in interest-bearing deposits. AWM deposits increased largely driven by growth in time deposits. Average balances for CIB, CB and AWM were also impacted by net inflows in the month of March as a result of market conditions driven by COVID-19 pandemic concerns. CCB deposits increased driven by continued growth in new accounts.
Refer to the discussion of the Firm’s Business Segment Results and the Consolidated Balance Sheets Analysis on pages 21–37 and pages 15-16, respectively, for further information on deposit and liability balance trends.

46


The following table summarizes short-term and long-term funding, excluding deposits, as of March 31, 2020, and December 31, 2019, and average balances for the three months ended March 31, 2020 and 2019, respectively. Refer to the Consolidated Balance Sheets Analysis on pages 15-16 and Note 11 for additional information.
 March 31, 2020December 31, 2019 Three months ended March 31,
Sources of funds (excluding deposits)Average
(in millions)2020
2019
Commercial paper$13,770
$14,754
 $13,974
$28,731
Other borrowed funds8,774
7,544
 9,093
10,247
Total short-term unsecured funding$22,544
$22,298
 $23,067
$38,978
Securities sold under agreements to repurchase(a)
$223,913
$175,709
 $234,394
$197,454
Securities loaned(a)
6,677
5,983
 7,349
10,781
Other borrowed funds(b)
29,365
18,622
 19,761
35,583
Obligations of Firm-administered multi-seller conduits(c)
$12,174
$9,223
 $9,898
$7,386
Total short-term secured funding$272,129
$209,537
 $271,402
$251,204
      
Senior notes$171,939
$166,185
 $165,741
$162,952
Trust preferred securities

 

Subordinated debt19,267
17,591
 18,155
16,722
Structured notes(d)
67,689
74,724
 72,848
57,395
Total long-term unsecured funding$258,895
$258,500
 $256,744
$237,069
      
Credit card securitization(c)
$6,562
$6,461
 $6,171
$13,409
FHLB advances36,131
28,635
 27,128
43,965
Other long-term secured funding(e)
4,318
4,363
 4,408
4,891
Total long-term secured funding$47,011
$39,459
 $37,707
$62,265
      
Preferred stock(f)
$30,063
$26,993
 $29,406
$27,126
Common stockholders’ equity(f)
$231,199
$234,337
 $234,530
$230,051
(a)Primarily consists of short-term securities loaned or sold under agreements to repurchase.
(b)At March 31, 2020 includes nonrecourse advances provided under the MMLF.
(c)Included in beneficial interests issued by consolidated variable interest entities on the Firm’s Consolidated balance sheets.
(d)Includes certain TLAC-eligible long-term unsecured debt issued by the Parent Company.
(e)Includes long-term structured notes which are secured.
(f)Refer to Capital Risk Management on pages 39–44 and Consolidated statements of changes in stockholders’ equity on page 83 of this Form 10-Q, and Note 21 and Note 22 of JPMorgan Chase’s 2019 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 loaned or sold under agreements to repurchase increased at March 31, 2020, compared with December 31, 2019, from client-driven market-making activities as a result of changes in market conditions in March and higher financing of trading assets-debt instruments when compared with lower levels at year-end in CIB.
The balances associated with securities loaned or sold under agreements to repurchase fluctuate over time due to customers’ investment and financing activities, 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.
As of March 31, 2020, the Firm has participated in several of the U.S. government facilities, including the MMLF. The secured nonrecourse advances under the MMLF are included
 
in other borrowed funds. Refer to Capital Risk Management on pages 39-44 for additional information on the MMLF.
In addition, the Firm is participating in the PDCF established by the Federal Reserve on March 20, 2020, which allows primary dealers to support smooth market functioning by facilitating the availability of credit to businesses and households. Under the PDCF, the Federal Reserve Bank of New York (“FRBNY”) provides collateralized financing on a term basis to primary dealers. At March 31, 2020, these financing transactions were reported as securities sold under agreements to repurchase. The PDCF will remain available to primary dealers for at least six months, or longer if conditions warrant.
The Firm also continues to participate in the Federal Reserve’s open market operations.
The Firm’s sources of short-term unsecured funding primarily consist of issuance of wholesale commercial paper. The decrease in commercial paper at March 31, 2020, from December 31, 2019, was due to lower net issuance primarily for short-term liquidity management.

47


Long-term funding and issuance
Long-term funding provides additional sources 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 months ended March 31, 2020 and 2019. Refer to Liquidity Risk Management on pages 93–98 and Note 20 of JPMorgan Chase’s 2019 Form 10-K for additional information on the IHC and long-term debt.
Long-term unsecured funding   
 Three months ended March 31,Three months ended March 31,
 2020
2019
2020
2019
(Notional in millions)Parent CompanySubsidiaries
Issuance    
Senior notes issued in the U.S. market$5,250
$4,250
$
$1,750
Senior notes issued in non-U.S. markets1,355
2,248


Total senior notes6,605
6,498

1,750
Structured notes(a)
2,782
1,185
9,252
6,116
Total long-term unsecured funding – issuance$9,387
$7,683
$9,252
$7,866
     
Maturities/redemptions    
Senior notes$5,466
$3,750
$4,065
$1,815
Subordinated debt
146


Structured notes1,525
628
9,382
3,833
Total long-term unsecured funding – maturities/redemptions$6,991
$4,524
$13,447
$5,648
(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 months ended March 31, 2020 and 2019, respectively.
Long-term secured funding   
 Three months ended March 31,
 Issuance Maturities/Redemptions
(in millions)20202019 20202019
Credit card securitization$1,000
$
 $900
$
FHLB advances15,000

 7,503
2,001
Other long-term secured funding(a)
234
35
 205
246
Total long-term secured funding$16,234
$35
 $8,608
$2,247
(a)Includes long-term structured notes which 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 2019 Form 10-K for further description of the client-driven loan securitizations.

48


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 SPEs on page 18, and liquidity risk and credit-related contingent features in Note 5 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 March 31, 2020, except as noted below, were as follows:
 JPMorgan Chase & Co. JPMorgan Chase Bank, N.A. 
J.P. Morgan Securities LLC
J.P. Morgan Securities plc
March 31, 2020Long-term issuerShort-term issuerOutlook Long-term issuerShort-term issuerOutlook Long-term issuerShort-term issuerOutlook
Moody’s Investors ServiceA2P-1Stable Aa2P-1Stable Aa3P-1Stable
Standard & Poor’sA-A-2Stable A+A-1Stable A+A-1Stable
Fitch Ratings (a)
AA-F1+Negative AAF1+Negative AAF1+Negative
(a) On April 18, 2020, Fitch affirmed the credit ratings of the Parent Company and the Firm’s principal bank and non-bank subsidiaries but revised the outlook on the credit ratings from stable to negative given expectations that credit fundamentals will deteriorate as a result of the COVID-19 pandemic.
Refer to page 98 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the factors that could affect credit ratings of the Parent Company and the Firm’s principal bank and non-bank subsidiaries.


49


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 pages 50–65 for a further discussion of Credit Risk.
 
Refer to page 66 for a further discussion of Investment Portfolio Risk. Refer to Credit and Investment Risk Management on pages 100–118 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of the Firm’s Credit and Investment Risk Management framework.

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 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 12, 23, and 5 for additional information on the Firm’s loans, lending-related commitments and derivative receivables, including the Firm’s accounting policies.
Refer to Note 10 for information regarding the credit risk inherent in the Firm’s investment securities portfolio; and refer to Note 11 for information regarding the credit risk inherent in the securities financing portfolio. Refer to Consumer Credit Portfolio on pages 52-55 and Note 12 for further discussions of the consumer credit environment and consumer loans. Refer to Wholesale Credit Portfolio on pages 56-63 and Note 12 as well as the wholesale credit environment and wholesale loans.
Effective January 1, 2020, the Firm adopted the CECL accounting guidance. The adoption resulted in a change in the accounting for PCI loans, which are considered PCD loans under CECL. In conjunction with the adoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied in determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 1 for further information.
On April 7, 2020, the federal banking agencies along with the National Credit Union Administration and the Consumer Financial Protection Bureau, in consultation with the state
 
financial regulators, issued an interagency statement revising a March 22, 2020 interagency statement on loan modifications and the reporting for financial institutions working with customers affected by the COVID-19 pandemic (the “IA Statement”). The IA Statement reconfirmed that supervised institutions will not be directed to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings (“TDRs”), including short-term and other insignificant modifications such as payment delays, fee waivers and extensions of repayment terms, and modifications or other programs mandated by the federal or state governments. The IA Statement also provides that loans that were current prior to these modifications should generally not be reported as past due or nonaccrual. Additionally, the IA Statement outlines accounting and reporting considerations for eligible loan modifications for which a financial institution elects to apply the CARES Act and forgo TDR accounting.
The Firm’s initial response to many borrowers impacted by the COVID-19 pandemic included offering loan modifications, such as 90-day payment delays and waiving or refunding certain fees. These modifications are intended to mitigate adverse affects on borrowers due to the COVID-19 pandemic. Instances of these modifications will likely rise over the course of the second quarter of 2020. The effectiveness of the Firm’s actions in helping borrowers recover and mitigating credit losses remains uncertain in light of the unpredictable nature and duration of the COVID-19 pandemic. The impact of the Firm’s initial short-term payment delays and other insignificant modifications was not material to the performance of and credit-related information for the consumer and wholesale credit portfolios during the quarter ended March 31, 2020.


50


Total credit portfolio    
 Credit exposure 
Nonperforming(d)(e)
(in millions)Mar 31,
2020

Dec 31,
2019

 Mar 31,
2020

Dec 31,
2019

Loans retained$1,003,089
$945,601
 $5,834
$3,983
Loans held-for-sale6,072
7,064
 48
7
Loans at fair value6,214
7,104
 90
90
Total loans–reported1,015,375
959,769
 5,972
4,080
Derivative receivables81,648
49,766
 85
30
Receivables from customers and other(a)
33,376
33,706
 

Total credit-related assets1,130,399
1,043,241
 6,057
4,110
Assets acquired in loan satisfactions     
Real estate ownedNA
NA
 342
344
OtherNA
NA
 22
43
Total assets acquired in loan satisfactions
NA
NA
 364
387
Lending-related commitments1,081,462
1,104,199
 619
474
Total credit portfolio$2,211,861
$2,147,440
 $7,040
$4,971
Credit derivatives used
in credit portfolio management activities(b)
$(20,773)$(18,030) $
$
Liquid securities and other cash collateral held against derivatives(c)
(26,178)(16,009) NA
NA
(in millions,
except ratios)
Three months ended March 31,
2020
2019
Net charge-offs$1,469
$1,361
Average retained loans948,635
956,557
Net charge-off rates0.62%0.58%
(a)Receivables from customers and other primarily represents brokerage-related held-for-investment customer receivables.
(b)Represents the net notional amount of protection purchased and sold through credit derivatives 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 63 and Note 5 for additional information.
(c)Includes collateral related to derivative instruments where appropriate legal opinions have not been either sought or obtained with respect to master netting agreements.
(d)At March 31, 2020, and December 31, 2019, nonperforming assets excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $616 million and $961 million, respectively, and real estate owned (“REO”) insured by U.S. government agencies of $29 million and $41 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 issued by the Federal Financial Institutions Examination Council (“FFIEC”).
(e)At March 31, 2020, nonperforming loans included $970 million of PCD loans on nonaccrual status. Prior to the adoption of CECL, nonaccrual loans excluded PCI loans as the Firm recognized interest income on each pool of PCI loans as each of the pools was performing.

51


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 12 for further information on consumer loans, as well as the Firm’s nonaccrual and charge-off accounting policies. Refer to Note 23 for further information on lending-related commitments.
Recent deterioration in the macroeconomic environment driven by the impacts of the COVID-19 pandemic, resulted in an increase in the allowance for credit losses. As of March 31, 2020, the impacts of the macroeconomic environment have had only a limited impact to consumer credit performance. The continuation or worsening of the effects of the COVID-19 pandemic on the macroeconomic environment could result in further impacts to credit quality metrics, including delinquencies, nonaccrual loans and charge-offs.
The following table presents consumer credit-related information with respect to the scored credit portfolios held in CCB, AWM and Corporate.
Consumer credit portfolio           
      Three months ended March 31, 

(in millions, except ratios)
Credit exposure 
Nonaccrual loans(g)(h)
 Net charge-offs/(recoveries) 
Net charge-off/(recovery) rate(i)
 
Mar 31,
2020

Dec 31,
2019

 Mar 31,
2020

Dec 31,
2019

 2020
2019
 2020
2019
 
Consumer, excluding credit card            
Residential real estate(a)
$242,349
$243,317
 $3,730
$2,780
 (120)(2) (0.20)
 
Auto and other(b)(c)
51,430
51,682
 147
146
 114
109
 0.89
0.85
 
Total loans – retained293,779
294,999
 3,877
2,926
 (6)107
 (0.01)0.13
 
Loans held-for-sale1,848
3,002
 
2
 NA
NA
 NA
NA
 
Total consumer, excluding credit card loans295,627
298,001
 3,877
2,928
 (6)107
 (0.01)0.13
 
Lending-related commitments(d)
41,535
40,169
          
Total consumer exposure, excluding credit card337,162
338,170
          
Credit card            
Loans retained(e)
154,021
168,924
 

 1,313
1,202
 3.25
3.23
 
Loans held-for-sale

 

 NA
NA
 NA
NA
 
Total credit card loans154,021
168,924
 

 1,313
1,202
 3.25
3.23
 
Lending-related commitments(d)(f)
681,442
650,720
          
Total credit card exposure(f)
835,463
819,644
          
Total consumer credit portfolio(f)
$1,172,625
$1,157,814
 $3,877
$2,928
 $1,307
$1,309
 1.15 %1.10% 
(a)Includes scored mortgage and home equity loans held in CCB and AWM, and scored mortgage loans held in Corporate.
(b)At March 31, 2020, and December 31, 2019, excluded operating lease assets of $23.1 billion and $22.8 billion, respectively. These operating lease assets are included in other assets on the Firm’s Consolidated balance sheets. Refer to Note 17 for further information.
(c)Includes scored auto and business banking loans and overdrafts.
(d)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 23 for further information.
(e)Includes billed interest and fees.
(f)Also includes commercial card lending-related commitments primarily in CB and CIB.
(g)At March 31, 2020 and December 31, 2019, nonaccrual loans excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $616 million and $961 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 issued by the FFIEC.
(h)At March 31, 2020, nonaccrual loans included $970 million of PCD loans. Prior to the adoption of CECL, nonaccrual loans excluded PCI loans as the Firm recognized interest income on each pool of PCI loans as each of the pools was performing.
(i)Average consumer loans held-for-sale were $2.5 billion and $1.2 billion for the three months ended March 31, 2020 and 2019, respectively. These amounts were excluded when calculating net charge-off/(recovery) rates.

52


Consumer, excluding credit card
Portfolio analysis
Loan balances decreased from December 31, 2019 due to lower residential real estate loans, predominantly driven by loan sales.
Residential real estate: The residential real estate portfolio, including loans held-for-sale, predominantly consists of prime mortgage loans and home equity lines of credit. The portfolio decreased from December 31, 2019 driven by paydowns and loan sales in Home Lending, largely offset by originations of prime mortgage loans that have been retained on the balance sheet. Net recoveries for the three months ended March 31, 2020 were higher when compared with the same period in the prior year as the current quarter benefited from a recovery on a loan sale.
The carrying value of home equity lines of credit outstanding was $27.9 billion at March 31, 2020. This amount included $10.6 billion of HELOCs that have recast from interest-only to fully amortizing payments or have been modified and $9.0 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 March 31, 2020, and December 31, 2019, the carrying value of interest-only residential mortgage loans was $22.8 billion and $22.5 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. Performance of this portfolio for the three months ended March 31, 2020 was in line with the performance of the broader residential mortgage portfolio for the same period.
The following table provides a summary of the Firm’s residential mortgage portfolio insured and/or guaranteed by U.S. government agencies, including loans held-for-sale. 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)March 31,
2020

December 31,
2019

Current$883
$1,280
30-89 days past due402
695
90 or more days past due616
961
Total government guaranteed loans$1,901
$2,936
 
Auto and other: The auto and other loan portfolio predominantly consists of prime-quality scored auto and business banking loans, as well as overdrafts. The portfolio was relatively flat when compared with December 31, 2019, as paydowns and charge-offs or liquidation of delinquent loans were predominantly offset by new originations. The scored auto portfolio net charge-off rates were 0.41% and 0.50% for the three months ended March 31, 2020 and 2019, respectively.
Geographic composition and current estimated loan-to-value ratio of residential real estate loans
Refer to Note 12 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 loans accounted for as PCI loans prior to the adoption of CECL. 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 12 for further information on modifications for the three months ended March 31, 2020 and 2019.
(in millions)March 31, 2020
 December 31, 2019
 
Retained loans(a)
16,717
 5,926
 
PCI loansNA
 12,372
(d) 
Nonaccrual retained loans(b)(c)
3,040
 2,332
 
(a)At March 31, 2020, and December 31, 2019, $11 million and $14 million, respectively, of loans modified subsequent to repurchase from Ginnie Mae in accordance with the standards of the appropriate government agency (i.e., Federal Housing Administration (“FHA”), U.S. Department of Veterans Affairs (“VA”), Rural Housing Service of the U.S. Department of Agriculture (“RHS”)) are not included in the table above. When such loans perform subsequent to modification in accordance with Ginnie Mae guidelines, they are generally sold back into Ginnie Mae loan pools. Modified loans that do not re-perform become subject to foreclosure. Refer to Note 14 for additional information about sales of loans in securitization transactions with Ginnie Mae.
(b)At March 31, 2020, and December 31, 2019, nonaccrual loans included $2.0 billion and $1.9 billion, respectively, of troubled debt restructurings (“TDRs”) for which the borrowers were less than 90 days past due. Refer to Note 12 for additional information about loans modified in a TDR that are on nonaccrual status.
(c)At March 31, 2020, nonaccrual loans included $725 million of PCD loans. Prior to the adoption of CECL, nonaccrual loans excluded PCI loans as the Firm recognized interest income on each pool of PCI loans as each of the pools was performing.
(d)Amount represents the unpaid principal balance of modified PCI loans at December 31, 2019.



53


Nonperforming assets
The following table presents information as of March 31, 2020, and December 31, 2019, about consumer, excluding credit card, nonperforming assets.
Nonperforming assets(a)
    
(in millions)March 31,
2020

 December 31,
2019

 
Nonaccrual loans    
Residential real estate(b)
$3,730
 $2,782
 
Auto and other147
 146
 
Total nonaccrual loans3,877
 2,928
 
Assets acquired in loan satisfactions    
Real estate owned231
 208
 
Other22
 24
 
Total assets acquired in loan satisfactions253
 232
 
Total nonperforming assets$4,130
 $3,160
 
(a)At March 31, 2020, and December 31, 2019, nonperforming assets excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $616 million and $961 million, respectively, and REO insured by U.S. government agencies of $29 million and $41 million, respectively. These amounts have been excluded based upon the government guarantee.
(b)
At March 31, 2020, nonaccrual loans included $970 million of PCD loans. Prior to the adoption of CECL, nonaccrual loans excluded PCI loans as the Firm recognized interest income on each pool of PCI loans as each of the pools was performing.
Nonaccrual loans
The following table presents changes in consumer, excluding credit card, nonaccrual loans for the three months ended March 31, 2020 and 2019.
Nonaccrual loan activity 
Three months ended March 31,
(in millions)
2020
2019
Beginning balance$2,928
$3,244
   
Additions:  
PCD loans, upon adoption of CECL708
NA
Other additions784
513
Total additions1,492
513
   
Reductions:  
Principal payments and other(a)
206
203
Charge-offs97
97
Returned to performing status147
207
Foreclosures and other liquidations93
70
Total reductions543
577
   
Net changes949
(64)
Ending balance$3,877
$3,180
(a)Other reductions includes loan sales.
Active and suspended foreclosure: Refer to Note 12 for information on loans that were in the process of active or suspended foreclosure.
 
Refer to Note 12 for further information about the consumer credit portfolio, including information about delinquencies, loan modifications and other credit quality indicators.
Purchased credit deteriorated (“PCD”) loans
The following tables provide credit-related information for PCD loans, which were accounted for as PCI loans prior to the adoption of CECL. PCI loans are considered PCD loans under CECL and are subject to the Firm’s nonaccrual and charge-off policies. PCD loans are now reported in the consumer, excluding credit card portfolio’s residential real estate class. Refer to Note 1 for further information.
(in millions, except ratios)March 31,
2020

December 31,
2019

Loan delinquency  
Current$17,983
$18,571
30-149 days past due942
970
150 or more days past due593
822
Total retained PCD loans19,518
20,363
Held-for-sale PCD loans
NA
Total PCD loans$19,518
$20,363
   
% of 30+ days past due to total retained PCD loans7.86%8.80%
Nonaccrual loans970
NA
(in millions, except ratios)Three months ended March 31, 2020
Net charge-offs$6
Net charge-off rate0.12%


54


Credit card
Total credit card loans decreased from December 31, 2019 due to seasonality and a decline in sales volume in March as a result of the COVID-19 pandemic. The March 31, 2020 30+ and 90+ day delinquency rates of 1.96% and 1.02%, respectively, increased compared to the December 31, 2019 30+ and 90+ day delinquency rates of 1.87% and 0.95%, respectively due to the decline in credit card loans noted above. Net charge-offs increased for the three months ended March 31, 2020 when compared with the same period in the prior year due to loan growth, in line with prior expectations.
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 12 for further information about this portfolio, including information about delinquencies.
Geographic and FICO composition of credit card loans
Refer to Note 12 for information on the geographic and FICO composition of the Firm’s credit card loans.
Modifications of credit card loans
At both March 31, 2020 and December 31, 2019, the Firm had $1.5 billion 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. Refer to Note 12 for additional information about loan modification programs to borrowers.

55


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 58–61 for further information.
The Firm’s wholesale credit portfolio includes exposure held in CIB, CB, AWM and Corporate as well as risk-rated business banking and auto dealer exposures held in CCB for which the wholesale methodology is applied for determining the allowance for credit losses.
Recent deterioration in the macroeconomic environment driven by the impacts of the COVID-19 pandemic and pressure on oil prices resulted in an increase in the allowance for credit losses with the largest impacts in the Oil & Gas, Real Estate and Consumer and Retail industries. As of March 31, 2020, the impacts of the macroeconomic environment have had only a limited impact to the overall credit profile, with the investment-grade percentage at 73% versus 74% at December 31, 2019. However, criticized exposure increased $6.6 billion from December 31, 2019 to $21.7 billion at March 31, 2020, but remains at relatively low levels compared to the overall size of the portfolio. The increase was largely driven by downgrades in Oil & Gas resulting from lower oil prices and impacts from the COVID-19 pandemic, and in Consumer & Retail primarily due to impacts from the COVID-19 pandemic. The continuation or worsening of the effects of the COVID-19 pandemic on the macroeconomic environment could result in further impacts to credit quality metrics, including investment-grade percentages, as well as to criticized and nonperforming exposures and charge-offs.
Retained loans increased by $73.6 billion in the three months ended March 31, 2020, predominantly driven by the CIB and CB, largely to commercial and industrial clients, and predominantly driven by drawdowns on committed revolving credit facilities, which resulted in a corresponding decrease in unfunded lending-related commitments. These drawdowns, which were driven by increased activity in March that returned to more normalized levels in April, were largely made by investment-grade clients, and can be broadly attributed to:
companies in industries directly and immediately impacted by the COVID-19 pandemic;
stress in the commercial paper funding markets, and
 
preemptive drawdowns by companies concerned about the potential longer term impact of the COVID-19 pandemic on their cash flows and access to liquidity.
Wholesale credit portfolio
 Credit exposure Nonperforming
(in millions)Mar 31,
2020

Dec 31,
2019

 Mar 31,
2020

Dec 31,
2019

Loans retained$555,289
$481,678
 $1,957
$1,057
Loans held-for-sale4,224
4,062
 48
5
Loans at fair value6,214
7,104
 90
90
Loans – reported565,727
492,844
 2,095
1,152
Derivative receivables81,648
49,766
 85
30
Receivables from customers and other(a)
33,376
33,706
 

Total wholesale credit-related assets680,751
576,316
 2,180
1,182
Assets acquired in loan satisfactions     
Real estate ownedNA
NA
 111
136
OtherNA
NA
 
19
Total assets acquired in loan satisfactionsNA
NA
 111
155
Lending-related commitments358,485
413,310
 619
474
Total wholesale credit portfolio$1,039,236
$989,626
 $2,910
$1,811
Credit derivatives used
in credit portfolio management activities(b)
$(20,773)$(18,030) $
$
Liquid securities and other cash collateral held against derivatives(26,178)(16,009) NA
NA
(a)Receivables from customers and other include $33.4 billion and $33.7 billion of brokerage-related held-for-investment customer receivables at March 31, 2020, and December 31, 2019, respectively, to clients in CIB and AWM; these are classified in accrued interest and accounts receivable on the Consolidated balance sheets.
(b)Represents the net notional amount of protection purchased and sold through credit derivatives 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 63 and Note 5 for additional information.

56


The following tables present the maturity and internal risk ratings profiles of the wholesale credit portfolio as of March 31, 2020, and December 31, 2019. The Firm considers internal ratings equivalent to BBB-/Baa3 or higher as investment grade. Refer to Note 12 for further information on internal risk ratings.
Wholesale credit exposure – maturity and ratings profile      
 
Maturity profile(d)
 Ratings profile
 Due in 1 year or lessDue after 1 year through 5 yearsDue after 5 yearsTotal Investment-grade Noninvestment-gradeTotalTotal % of IG
March 31, 2020
(in millions, except ratios)
Loans retained$164,300
$267,388
$123,601
$555,289
 $407,323
 $147,966
$555,289
73%
Derivative receivables   81,648
    81,648
 
Less: Liquid securities and other cash collateral held against derivatives   (26,178)    (26,178) 
Total derivative receivables, net of all collateral17,069
11,637
26,764
55,470
 43,263
 12,207
55,470
78
Lending-related commitments92,209
254,173
12,103
358,485
 260,218
 98,267
358,485
73
Subtotal273,578
533,198
162,468
969,244
 710,804
 258,440
969,244
73
Loans held-for-sale and loans at fair value(a)
   10,438
    10,438
 
Receivables from customers and other   33,376
    33,376
 
Total exposure – net of liquid securities and other cash collateral held against derivatives   $1,013,058
    $1,013,058
 
Credit derivatives used in credit portfolio management activities(b)(c)
$(4,011)$(9,078)$(7,684)$(20,773) $(17,477) $(3,296)$(20,773)84%
 
Maturity profile(d)
 Ratings profile
 Due in 1 year or lessDue after 1 year through 5 yearsDue after 5 yearsTotal Investment-grade Noninvestment-gradeTotalTotal % of IG
December 31, 2019
(in millions, except ratios)
Loans retained$141,620
$218,323
$121,735
$481,678
 $363,444
 $118,234
$481,678
75%
Derivative receivables   49,766
    49,766
 
Less: Liquid securities and other cash collateral held against derivatives   (16,009)    (16,009) 
Total derivative receivables, net of all collateral6,561
6,960
20,236
33,757
 26,966
 6,791
33,757
80
Lending-related commitments83,821
316,328
13,161
413,310
 294,317
 118,993
413,310
71
Subtotal232,002
541,611
155,132
928,745
 684,727
 244,018
928,745
74
Loans held-for-sale and loans at fair value(a)
   11,166
    11,166
 
Receivables from customers and other   33,706
    33,706
 
Total exposure – net of liquid securities and other cash collateral held against derivatives   $973,617
    $973,617
 
Credit derivatives used in credit portfolio management activities(b)(c)
$(4,912)$(10,031)$(3,087)$(18,030) $(16,276) $(1,754)$(18,030)90%
(a)Represents loans held-for-sale, primarily related to syndicated loans and loans transferred from the retained portfolio, and loans at fair value.
(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.
(d)The maturity profile of retained loans, lending-related commitments and derivative receivables is based on the remaining contractual maturity. Derivative contracts that are in a receivable position at March 31, 2020, may become payable prior to maturity based on their cash flow profile or changes in market conditions.
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.
 
The total criticized component of the portfolio, excluding loans held-for-sale and loans at fair value, was $21.7 billion at March 31, 2020, compared with $15.1 billion at December 31, 2019. The increase was largely driven by downgrades in Oil & Gas resulting from lower oil prices and impacts from the COVID-19 pandemic, and downgrades in Consumer & Retail primarily due to impacts from the COVID-19 pandemic.

57


Below are summaries of the Firm’s exposures as of March 31, 2020, and December 31, 2019. The industry of risk category is generally based on the client or counterparty’s primary business activity.
Wholesale credit exposure – industries(a)
         
      Selected metrics
        30 days or more past due and accruing
loans
Net
charge-offs/
(recoveries)
Credit derivative hedges(g)
Liquid securities
and other cash collateral held against derivative
receivables
    Noninvestment-grade
As of or for the three months ended
Credit exposure(f)
Investment- grade Noncriticized Criticized performingCriticized nonperforming
March 31, 2020
(in millions)
Real Estate$148,246
$122,686
 $24,036
 $1,464
$60
$204
$
$(136)$(2)
Consumer & Retail110,669
57,486
 49,240
 3,657
286
56
15
(325)(17)
Individuals and Individual Entities(b)
108,180
94,220
 12,808
 970
182
532
1

(1,630)
Industrials68,864
44,260
 22,998
 1,412
194
168
20
(691)(69)
Asset Managers65,880
57,006
 8,814
 37
23
14


(9,731)
Technology, Media &
Telecommunications
60,184
32,917
 24,144
 2,967
156
13

(651)(14)
Banks & Finance Cos55,786
38,250
 16,826
 704
6
7

(1,137)(3,290)
Healthcare53,250
39,639
 12,155
 1,261
195
49
51
(392)(183)
Oil & Gas42,754
22,273
 16,252
 3,274
955

59
(527)
Automotive36,060
24,614
 10,287
 1,156
3
29

(348)
Utilities33,112
24,057
 8,645
 407
3
1
4
(437)(84)
State & Municipal Govt(c)
30,529
30,026
 500
 
3
55


(201)
Transportation18,624
9,247
 8,690
 535
152
30
10
(239)(48)
Chemicals & Plastics17,430
11,742
 5,364
 322
2
2

(12)
Central Govt16,519
16,169
 350
 



(8,380)(2,883)
Metals & Mining15,797
6,999
 8,045
 673
80
3
10
(136)(12)
Insurance14,522
10,806
 3,693
 18
5


(76)(3,209)
Financial Markets Infrastructure9,767
9,607
 160
 




(46)
Securities Firms8,045
5,905
 2,114
 1
25


(49)(3,281)
All other(d)
81,204
75,365
 5,365
 143
331
45
(8)(7,237)(1,478)
Subtotal$995,422
$733,274
 $240,486
 $19,001
$2,661
$1,208
$162
$(20,773)$(26,178)
Loans held-for-sale and loans at fair value10,438
          
Receivables from customers and other33,376
          
Total(e)
$1,039,236
          




















58




(continued from previous page)          








Selected metrics








30 days or more past due and accruing
loans
Net
charge-offs/
(recoveries)
Credit derivative hedges(g)
Liquid securities
and other cash collateral held against derivative
receivables




Noninvestment-grade
As of or for the year ended
Credit exposure(f)
Investment- grade
Noncriticized
Criticized performingCriticized nonperforming
December 31, 2019
(in millions)
Real Estate$150,805
$121,607

$27,683

$1,457
$58
$104
$13
$(100)$
Consumer & Retail106,986
58,704
 45,806
 2,261
215
118
124
(235)(11)
Individuals and Individual Entities(b)
105,018
93,172

11,617

192
37
388
33

(641)
Industrials62,483
39,434
 21,673
 1,157
219
172
48
(746)(9)
Asset Managers51,856
45,249

6,588

6
13
18


(4,785)
Technology, Media &
Telecommunications
60,033
35,878
 21,066
 2,953
136
27
27
(658)(17)
Banks & Finance Cos50,786
34,941

15,031

808
6


(834)(2,112)
Healthcare50,824
36,988

12,544

1,141
151
108
14
(405)(145)
Oil & Gas41,641
22,244

17,823

995
579

98
(429)(10)
Automotive35,118
24,255

10,246

615
2
8
1
(194)
Utilities34,843
22,213

12,316

301
13
2
39
(414)(50)
State & Municipal Govt(c)
30,095
29,586

509



33
7

(46)
Transportation14,497
8,734
 5,336
 353
74
30
8
(37)(37)
Chemicals & Plastics17,499
12,033

5,243

221
2
5

(10)(13)
Central Govt14,865
14,524

341





(9,018)(1,963)
Metals & Mining15,586
7,095

7,789

661
41
2
(1)(33)(6)
Insurance12,348
9,458

2,867

19
4
3

(36)(1,998)
Financial Markets Infrastructure4,121
3,969

152






(6)
Securities Firms7,344
5,973

1,344

27



(48)(3,201)
All other(d)
78,006
73,453

4,130

412
11
4
4
(4,833)(959)
Subtotal$944,754
$699,510

$230,104

$13,579
$1,561
$1,022
$415
$(18,030)$(16,009)
Loans held-for-sale and loans at fair value11,166

















Receivables from customers and other33,706


















Total(e)
$989,626
          
(a)The industry rankings presented in the table as of December 31, 2019, are based on the industry rankings of the corresponding exposures at March 31, 2020, not actual rankings of such exposures at December 31, 2019.
(b)
Individuals and Individual Entities predominantly consists of Wealth Management 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.) at March 31, 2020, and December 31, 2019, noted above, the Firm held: $6.5 billion at both periods of trading assets; $30.5 billion and $29.8 billion, respectively, of AFS securities; and $4.8 billion at both periods of HTM securities, issued by U.S. state and municipal governments. Refer to Note 2 and Note 10 for further information.
(d)All other includes: SPEs and Private education and civic organizations, representing approximately 90% and 10%, respectively, at both March 31, 2020 and December 31, 2019.
(e)
Excludes cash placed with banks of $354.4 billion and $254.0 billion, at March 31, 2020 and December 31, 2019, 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 used in credit portfolio management activities held against derivative receivables or loans and liquid securities and other cash collateral held against derivative receivables.
(g)Represents the net notional amounts of protection purchased and sold through credit derivatives 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.

59


Presented below is additional detail on certain of the Firm’s largest industry exposures and/or certain industries which present potential heightened credit concerns.
Real Estate
Real Estate exposure was $148.2 billion as of March 31, 2020, largely driven by multifamily lending as shown in the table below. During the three months ended March 31, 2020 the investment-grade portion of the portfolio increased from 81% to 83%, while the drawn percentage increased from 78% to 83%. Retail-related Real Estate and Lodging exposure within Other in the table below was $15.1 billion as of March 31, 2020 of which 74% was investment-grade; noninvestment-grade Retail and Lodging exposure is largely secured.
 March 31, 2020 
(in millions, except ratios)Loans and Lending-related Commitments Derivative Receivables Credit exposure % Investment-grade
% Drawn(c)
Multifamily(a)
$86,630
 $125
 $86,755
 90% 92% 
Other60,322
 1,169
 61,491
 73
 71
 
Total Real Estate Exposure(b)
146,952
 1,294
 148,246
 83
 83
 
           
 December 31, 2019 
(in millions, except ratios)Loans and Lending-related Commitments 
Derivative
Receivables
 Credit exposure 
% Investment-
grade
% Drawn(c)
Multifamily(a)
$86,381
 $58
 $86,439
 91% 92% 
Other63,805
 561
 64,366
 67
 59
 
Total Real Estate Exposure(b)
150,186
 619
 150,805
 81
 78
 
(a)Multifamily exposure is largely in California.
(b)Real Estate exposure is predominantly secured; unsecured exposure as of March 31, 2020 is predominantly investment-grade.
(c)Represents drawn exposure as a percentage of credit exposure.
Consumer & Retail
Consumer & Retail exposure was $110.7 billion as of March 31, 2020, and predominantly includes Retail, Food and Beverage, and Business and Consumer Services as shown in the table below. During the three months ended March 31, 2020, the investment-grade portion of the Consumer & Retail portfolio decreased from 55% to 52% and the drawn percentage of this portfolio increased from 35% to 49%, both driven primarily by impacts from the COVID-19 pandemic. Additionally, criticized exposure increased by approximately $1.4 billion from $2.5 billion at December 31, 2019 to $3.9 billion at March 31, 2020, also primarily driven by impacts from the COVID-19 pandemic.
 March 31, 2020 
(in millions, except ratios)Loans and Lending-related Commitments Derivative Receivables Credit exposure % Investment-grade
% Drawn(d)
Retail(a)
$31,487
 $333
 $31,820
 52% 51% 
Food and Beverage28,401
 1,192
 29,593
 63
 46
 
Business and Consumer Services23,423
 722
 24,145
 52
 51
 
Consumer Hard Goods12,667
 183
 12,850
 60
 55
 
Leisure(b)
11,867
 394
 12,261
 16
 41
 
Total Consumer & Retail(c)
107,845
 2,824
 110,669
 52
 49
 
           
 December 31, 2019 
(in millions, except ratios)Loans and Lending-related Commitments 
Derivative
Receivables
 Credit exposure 
% Investment-
grade
% Drawn(d)
Retail(a)
$29,290
 $294
 $29,584
 54% 37% 
Food and Beverage27,956
 625
 28,581
 67
 36
 
Business and Consumer Services24,242
 249
 24,491
 51
 37
 
Consumer Hard Goods13,144
 109
 13,253
 65
 35
 
Leisure(b)
10,930
 147
 11,077
 21
 19
 
Total Consumer & Retail(c)
105,562
 1,424
 106,986
 55
 35
 
(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. Approximately 90% of the noninvestment-grade Leisure portfolio is secured.
(c)Approximately 75% of the noninvestment-grade portfolio is secured.
(d)Represents drawn exposure as a percent of credit exposure.

60


Oil & Gas
Oil & Gas exposure was $42.8 billion as of March 31, 2020, including $21.5 billion of Exploration & Production and Oilfield Services as shown in the table below. During the three months ended March 31, 2020, the investment-grade portion of the Oil & Gas portfolio decreased from 53% to 52%, and the drawn percentage of this portfolio increased from 31% to 37%, both driven by lower oil prices and impacts from the COVID-19 pandemic. Additionally, criticized exposure increased by $2.6 billion from $1.6 billion at December 31, 2019 to $4.2 billion at March 31, 2020, also driven by lower oil prices and impacts from the COVID-19 pandemic.
 March 31, 2020 
(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$21,280
 $213
 $21,493
 33% 44% 
Other Oil & Gas(a)
20,637
 624
 21,261
 72
 30
 
Total Oil & Gas(b)
41,917
 837
 42,754
 52
 37
 
           
 December 31, 2019 
(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$22,543
 $646
 $23,189
 38% 38% 
Other Oil & Gas(a)
18,246
 206
 18,452
 73
 23
 
Total Oil & Gas(b)
40,789
 852
 41,641
 53
 31
 
(a)Other Oil & Gas includes Integrated Oil & Gas companies, Midstream/Oil Pipeline companies and refineries.
(b)Secured lending was $15.5 billion and $15.7 billion at March 31, 2020 and December 31, 2019, respectively, approximately half of which is reserve-based lending to the Exploration & Production sub-sector; unsecured exposure is largely investment-grade.
(c)Represents drawn exposure as a percent of credit exposure.
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 12 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 three months ended March 31, 2020 and 2019. The increase in nonaccrual loans in the first quarter of 2020 reflects select downgrades across a number of sectors, including Oil & Gas.
Wholesale nonaccrual loan activity
Three months ended March 31,
(in millions)
 20202019
Beginning balance $1,152
$1,587
Additions 1,333
841
Reductions:   
Paydowns and other 171
213
Gross charge-offs 181
60
Returned to performing status 24
58
Sales 14
5
Total reductions 390
336
Net changes 943
505
Ending balance $2,095
$2,092
 
The following table presents net charge-offs/recoveries, which are defined as gross charge-offs less recoveries, for the three months ended March 31, 2020 and 2019. The amounts in the table below do not include gains or losses from sales of nonaccrual loans.
Wholesale net charge-offs/(recoveries)
(in millions, except ratios)Three months ended
March 31,
2020
2019
Loans – reported  
Average loans retained$491,819
$471,957
Gross charge-offs181
64
Gross recoveries collected(19)(12)
Net charge-offs/(recoveries)162
52
Net charge-off/(recovery) rate0.13%0.04%

61


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 23 for further information on wholesale lending-related commitments.
Receivables from Customers
Receivables from customers primarily represent held-for-investment margin loans to brokerage clients in CIB and AWM that are collateralized by assets maintained in the clients’ brokerage accounts (e.g., cash on deposit, liquid and readily marketable debt or equity securities), as such no allowance for credit losses is 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 risks including credit risk and risks arising from fluctuations in interest rates, foreign exchange, equities, and commodities. 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 and other market risk exposure. Refer to Note 5 for a further discussion of derivative contracts.
The following table summarizes the net derivative receivables for the periods presented.
Derivative receivables  
(in millions)March 31,
2020

December 31,
2019

Total, net of cash collateral81,648
49,766
Liquid securities and other cash collateral held against derivative receivables(a)
(26,178)(16,009)
Total, net of collateral$55,470
$33,757
(a)Includes collateral related to derivative instruments where appropriate legal opinions have not been either sought or obtained with respect to master netting agreements.
 
The fair value of derivative receivables reported on the Consolidated balance sheets were $81.6 billion and $49.8 billion at March 31, 2020, and December 31, 2019, respectively, with increases in CIB resulting from market movements, including the impact of the COVID-19 pandemic. Derivative receivables represent the fair value of the derivative contracts after giving effect to legally enforceable master netting agreements and cash collateral held by the Firm. However, in management’s view, the appropriate measure of current credit risk should also take into consideration additional liquid securities (primarily U.S. government and agency securities and other group of seven nations (“G7”) government securities) and other cash collateral held by the Firm aggregating $26.2 billion and $16.0 billion at March 31, 2020, and December 31, 2019, respectively, that may be used as security when the fair value of the client’s exposure is in the Firm’s favor.
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 table above, 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. The derivative receivables fair value, net of all collateral, also does not include other credit enhancements, such as letters of credit. Refer to Note 5 for additional information on the Firm’s use of collateral agreements.

62


The following table summarizes the ratings profile of the Firm’s derivative receivables, including credit derivatives, net of all collateral, at the dates indicated. The Firm considers internal ratings equivalent to BBB-/Baa3 or higher as investment grade. Refer to Note 12 for further information on internal risk ratings.
Ratings profile of derivative receivables     
Internal rating equivalent
March 31, 2020 December 31, 2019

(in millions, except ratios)
Exposure net of all collateral% of exposure net of all collateral Exposure net of all collateral% of exposure net of all collateral
AAA/Aaa to AA-/Aa3$16,318
29% $8,347
25%
A+/A1 to A-/A38,297
15
 5,471
16
BBB+/Baa1 to BBB-/Baa318,648
34
 13,148
39
BB+/Ba1 to B-/B310,904
20
 6,225
18
CCC+/Caa1 and below1,303
2
 566
2
Total$55,470
100% $33,757
100%
As previously noted, the Firm uses collateral agreements to mitigate counterparty credit risk. The percentage of the Firm’s over-the-counter derivative contracts 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 86% and 90% at March 31, 2020, and December 31, 2019, respectively.
Credit derivatives
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 various exposures.
 
Credit portfolio management activities
Included in the Firm’s end-user activities are credit derivatives used to mitigate the credit risk associated with traditional lending activities (loans and unfunded commitments) and derivatives counterparty exposure in the Firm’s wholesale businesses (collectively, “credit portfolio management” activities). Information on credit portfolio management activities is provided in the table below.
Credit derivatives used in credit portfolio management activities
 
Notional amount of protection
purchased and sold(a)
(in millions)March 31,
2020

 December 31,
2019

Credit derivatives used to manage:   
Loans and lending-related commitments$3,511
 $2,047
Derivative receivables17,262
 15,983
Credit derivatives used in credit portfolio management activities$20,773
 $18,030
(a)Amounts are presented net, considering the Firm’s net protection purchased or sold with respect to each underlying reference entity or index.
Refer to Credit derivatives in Note 5 of this Form 10-Q and Note 5 of JPMorgan Chase’s 2019 Form 10-K for further information on credit derivatives and derivatives used in credit portfolio management activities.

63


ALLOWANCE FOR CREDIT LOSSES
Effective January 1, 2020, the Firm adopted the CECL accounting guidance. The adoption of this guidance established a single allowance framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. This framework requires that management’s estimate reflects credit losses over the instrument’s remaining expected life and considers expected future changes in macroeconomic conditions. Refer to Note 1 for further information.
The Firm’s 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 balance sheet,
the allowance for lending-related commitments, which is presented on the balance sheet in accounts payable and other liabilities, and
the allowance for credit losses on investment securities, which covers the Firm’s HTM and AFS securities and is recognized within Investment Securities on the balance sheet.
Refer to Note 13 and Note 10 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.
 
The allowance for credit losses increased compared with December 31, 2019, reflecting:
additions of $6.8 billion associated with the deterioration in the macroeconomic environment as a result of the impact of the COVID-19 pandemic and continued pressure on oil prices including:
$4.4 billion in consumer, predominantly in Credit Card, reflecting the deterioration in the macroeconomic environment as a result of the impact of the COVID-19 pandemic, and
a net $2.4 billion in wholesale, primarily reflecting the deterioration in the macroeconomic environment as a result of the impact of the COVID-19 pandemic across multiple sectors, and continued pressure on oil prices, with the largest impacts in the Oil & Gas, Real Estate, and Consumer & Retail industries, and
a net $4.3 billion addition as a result of the adoption of CECL.
In light of the rapidly evolving economic conditions and forecasts during March 2020, management updated its macroeconomic forecast near the end of its credit loss estimation process in early April. This macroeconomic forecast included a decline in the U.S. real GDP of approximately 25% and an increase in the U.S. unemployment rate to above 10%, both in the second quarter, followed by a solid recovery in the second half of 2020. In addition, the allowances for loan losses and lending-related commitments reflect the estimated impact of the Firm’s payment relief actions as well as the federal government’s stimulus programs related to the COVID-19 pandemic. Subsequent changes to this forecast and related estimates will be reflected in the provision for credit losses in future periods.
Refer to Critical Accounting Estimates Used by the Firm on pages 75–77 for further information on the allowance for credit losses and related management judgments.
Refer to Consumer Credit Portfolio on pages 52–55, Wholesale Credit Portfolio on pages 56–63 and Note 12 for additional information on the consumer and wholesale credit portfolios.

64


The adoption of the CECL accounting guidance resulted in a change in the accounting for PCI loans, which are considered PCD loans. In conjunction with the adoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied in determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 1 for further information.
Allowance for credit losses and related information     
 
2020(d)
 2019
Three months ended March 31,
Consumer, excluding
credit card
Credit cardWholesaleTotal 
Consumer, excluding
credit card
Credit cardWholesaleTotal
(in millions, except ratios) 
Allowance for loan losses         
Beginning balance at January 1,$2,538
$5,683
$4,902
$13,123
 $3,434
$5,184
$4,827
$13,445
Cumulative effect of a change in accounting principle297
5,517
(1,642)4,172
 NA
NA
NA
NA
Gross charge-offs233
1,488
181
1,902
 234
1,344
64
1,642
Gross recoveries collected(239)(175)(19)(433) (127)(142)(12)(281)
Net charge-offs(6)1,313
162
1,469
 107
1,202
52
1,361
Write-offs of PCI loans(a)
NA
NA
NA
NA
 50


50
Provision for loan losses613
5,063
1,742
7,418
 120
1,202
170
1,492
Other



 2
(1)6
7
Ending balance at March 31,$3,454
$14,950
$4,840
$23,244
 $3,399
$5,183
$4,951
$13,533
          
Allowance for lending-related commitments         
Beginning balance at January 1,$12
$
$1,179
$1,191
 $12
$
$1,043
$1,055
Cumulative effect of a change in accounting principle133

(35)98
 NA
NA
NA
NA
Provision for lending-related commitments6

852
858
 

3
3
Other



 



Ending balance at March 31,$151
$
$1,996
$2,147
 $12
$
$1,046
$1,058
          
Impairment methodology         
Asset-specific(b)
$223
$530
$556
$1,309
 $89
$461
$479
$1,029
Portfolio-based3,231
14,420
4,284
21,935
 1,572
4,722
4,472
10,766
PCINA
NA
NA
NA
 1,738


1,738
Total allowance for loan losses$3,454
$14,950
$4,840
$23,244
 $3,399
$5,183
$4,951
$13,533
          
Impairment methodology         
Asset-specific$
$
$187
$187
 $
$
$114
$114
Portfolio-based151

1,809
1,960
 12

932
944
Total allowance for lending-related commitments$151
$
$1,996
$2,147
 $12
$
$1,046
$1,058
          
Total allowance for credit losses$3,605
$14,950
$6,836
$25,391
 $3,411
$5,183
$5,997
$14,591
          
Memo:         
Retained loans, end of period$293,779
$154,021
$555,289
$1,003,089
 $322,208
$150,515
$471,118
$943,841
Retained loans, average294,156
162,660
491,819
948,635
 333,480
151,120
471,957
956,557
Credit ratios         
Allowance for loan losses to retained loans1.18 %9.71%0.87%2.32% 1.05%3.44%1.05%1.43%
Allowance for loan losses to retained nonaccrual loans(c)
89
NM
247
398
 107
NM
278
273
Allowance for loan losses to retained nonaccrual loans excluding credit card89
NM
247
142
 107
NM
278
168
Net charge-off rates(0.01)3.25
0.13
0.62
 0.13
3.23
0.04
0.58
(a)Prior to the adoption of CECL, write-offs of PCI loans were recorded against the allowance for loan losses when actual losses for a pool exceeded estimated losses that were recorded as purchase accounting adjustments at the time of acquisition. A write-off of a PCI loan was recognized when the underlying loan was removed from a pool.
(b)Includes modified PCD loans and 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 credit card allowance for loan losses 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.
(c)The Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance.
(d)Excludes HTM securities, which had an allowance for credit losses of $19 million and a provision for credit losses of $9 million as of and for the three months ended March 31, 2020.


65


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 or 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 is predominantly invested in high-quality securities. At March 31, 2020, the Treasury and CIO investment securities portfolio, net of allowance for credit losses, was $469.1 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 page 37 and Note 10 for further information on the investment securities portfolio and internal risk ratings. Refer to Market Risk Management on pages 67–71 for further information on the market risk inherent in the portfolio. Refer to Liquidity Risk Management on pages 45–49 for further information on related liquidity risk.

 
Principal investment risk
Principal investments are typically private non-traded financial instruments representing ownership or other forms of junior capital. Principal investments span multiple asset classes and are made either in stand-alone investing businesses or as part of a broader business platform. In general, new principal investments include tax-oriented investments, as well as investments made to enhance or accelerate LOB and Corporate strategic business initiatives. The Firm’s principal investments are managed by the LOBs and Corporate and are reflected within their respective financial results. The carrying values of the principal investment portfolios have not been significantly affected by recent market events as a result of the COVID-19 pandemic. However, in the event that deterioration of the macroeconomic environment accelerates and/or economic recovery becomes delayed, certain principal investments could be subject to impairments, write-downs, or other negative impacts.
As of March 31, 2020 and December 31, 2019, the aggregate carrying values of the principal investment portfolios were $23.8 billion and $24.2 billion, respectively, which included tax-oriented investments (e.g., affordable housing and alternative energy investments) of $18.2 billion at the end of both periods, and private equity, various debt and equity instruments, and real assets of $5.6 billion and $6.0 billion, respectively.
Refer to page 118 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the Firm’s Investment Portfolio Risk Management governance and oversight.


66


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 119–126 of JPMorgan Chase’s 2019 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.
COVID-19 Pandemic
Market Risk Management is actively monitoring the impact of the COVID-19 pandemic on market risk exposures by leveraging existing risk measures and controls.
Models used to measure market risk are inherently imprecise and may be 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, such as those observed during the COVID-19 pandemic. For additional discussion on model uncertainty refer to Estimations and Model Risk Management on page 74.
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. This is increasingly important in periods of sustained, heightened market volatility.



 
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 135 of JPMorgan Chase’s 2019 Form 10-K for information regarding model reviews and approvals.
Refer to page 121 of JPMorgan Chase’s 2019 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 at:
(http://investor.shareholder.com/jpmorganchase/basel.cfm) 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 124-126 of JPMorgan Chase’s 2019 Form 10-K for further information regarding nonstatistical market risk measures used by the Firm.


67


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

March 31, 2020
December 31, 2019
March 31, 2019
(in millions) Avg.MinMax
 Avg.MinMax
 Avg.MinMax

CIB trading VaR by risk type



















Fixed income$60

$30

$156


$39

$33

$48


$44

$38

$50

Foreign exchange7

4

11


5

4

8


9

4

15

Equities20

13

41


18

13

27


16

13

22

Commodities and other10

7

24


7

6

9


10

9

12

Diversification benefit to CIB trading VaR(40)
(a) 
 NM
(b) 
 NM
(b) 

(32)
(a) 
NM
(b) 
NM
(b) 

(32)
(a) 
NM
(b) 
NM
(b) 
CIB trading VaR57

27
(b) 
160
(b) 

37

29
(b) 
55
(b) 

47

36
(b) 
61
(b) 
Credit portfolio VaR9

3

25


5

3

7


5

4

6

Diversification benefit to CIB VaR(8)
(a) 
 NM
(b) 
 NM
(b) 

(5)
(a) 
NM
(b) 
NM
(b) 

(4)
(a) 
NM
(b) 
NM
(b) 
CIB VaR58

27
(b) 
162
(b) 

37

29
(b) 
52
(b) 

48

37
(b) 
63
(b) 






























CCB VaR7

3

11


8

3

11


2

1

3

Corporate and other LOB VaR11

9

14


11

9

13


10

9

12

Diversification benefit to other VaR(5)
(a) 
 NM
(b) 
 NM
(b) 

(6)
(a) 
NM
(b) 
NM
(b) 

(2)
(a) 
NM
(b) 
NM
(b) 
Other VaR13

10
(b) 
16
(b) 

13

10
(b) 
17
(b) 

10

9
(b) 
11
(b) 
Diversification benefit to CIB and other VaR(12)
(a) 
 NM
(b) 
 NM
(b) 

(13)
(a) 
NM
(b) 
NM
(b) 

(6)
(a) 
NM
(b) 
NM
(b) 
Total VaR$59

$27
(b) 
$164
(b) 

$37

$30
(b) 
$52
(b) 

$52

$40
(b) 
$65
(b) 
(a)Average portfolio VaR is less than the sum of the VaR of the components described above, which is due to portfolio diversification. The diversification effect reflects that the risks are not perfectly correlated.
(b)Diversification benefit represents the difference between the total VaR and each reported level and the sum of its individual components. Diversification benefit reflects the non-additive nature of VaR due to imperfect correlation across LOBs, Corporate, and risk types. 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.
Average VaR across the risk types and LOBs were generally higher due to increased volatility as a result of the COVID-19 pandemic.
Quarter over quarter results
Average total VaR increased by $22 million for the three months ended March 31, 2020 as compared with the prior quarter. This reflects substantial increases in volatility which occurred towards the end of the quarter, affecting the fixed income risk type. Maximum VaR for the quarter was $164 million, also driven by the increased volatility.
Year over year results
Average total VaR increased by $7 million for the three months ended March 31, 2020, compared with the same period in the prior year. This reflects an increase in the fixed income risk type driven by substantial increases in volatility, and increased exposure in the equities risk type due to the inclusion of Tradeweb following its IPO in the second quarter of 2019, partially offset by the exit of certain CIB investments. The fixed income and equities risk type increases were partially offset by reduced exposure in the foreign exchange risk type.
In addition, average CCB VaR has increased by $5 million, driven by MSR risk management activities.
 
Effective January 1, 2020, the Firm refined the scope of VaR to exclude positions related to the risk management of interest rate exposure from changes in the Firm’s own credit spread on fair value option elected liabilities, and included these positions in other sensitivity-based measures. This change was made to more appropriately align the risk from changes in the Firm’s own credit spread on fair value option elected liabilities in a single market risk measure. In the absence of this refinement, the average Total VaR for the three months ended March 31, 2020 would have been higher by $6 million and each of the components would have been higher by the amounts reported in the following table:
(in millions)
Amount by which reported VaR would have been higher for the three months
ended March 31, 2020
CIB fixed income VaR $4
 
CIB trading VaR 5
 
CIB VaR 6
 

68


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 in the chart below do not reflect the Firm’s revenue results as they exclude select components of total net revenue, such as those associated with the execution of new transactions (i.e., i