How JPMorgan Chase Makes Money?

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JPMorgan Chase & Co. is a leading global financial services firm and one of the largest banking institutions in the USA. The Firm is a leader in financial services for consumers and small businesses, investment banking, commercial banking, financial transaction processing, and asset management. The Firm activities are organized into four major reportable business segments, as well as a Corporate segment. The Firm’s consumer business is the Consumer & Community Banking (CCB) segment. The Firm’s wholesale business segments are Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset Management (AM).

JPMorgan Chase Business Segments 2015

JPMorgan Chase Business Segments

Following is a brief description of JPMorgan Chase business segments.

Consumer & Community Banking (CCB)

CCB serves consumers and businesses through personal service at bank branches and through ATMs, online, mobile and telephone banking. CCB is organized into the following subsegments: Consumer & Business banking; Mortgage Banking; and Card, Commerce Solutions & Auto.

  • Consumer & Business Banking. Consumer banking offers deposit and investment products and services to consumers. Business banking offers lending, deposit, and cash management and payment solutions to small businesses.
  • Mortgage Banking includes mortgage origination and services activities, as well as portfolios consisting of residential mortgages and home equity loans.
  • Card, Commerce Solutions & Auto issues credit cards to consumers and small businesses, offers payment processing services to merchants, provides auto loans and leases, and student loan services.

Corporate & Investment Bank (CIB)

CIB 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, government and municipal entities. CIB is organized into the following subsegments: Banking; Markets & Investor Services.

  • Banking includes Investment Banking, Treasury Services, and Lending. 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 Treasury Services, which provides transaction services, consisting of cash management and liquidity solutions.
  • Markets & Investor Services includes the following: Fixed Income Markets; Equity Markets; Securities Services; Credit Adjustments & Other. It offers market-making in cash securities and derivative instruments, sophisticated risk management solutions, prime brokerage, and research. It also offers securities services, fund accounting and administration, and securities lending products principally for asset managers, insurance companies, and public and private investment funds.

Commercial Banking (CB)

CB serves corporations, municipalities, financial institutions, and nonprofit entities with annual revenue generally ranging from $20 million to $2 billion. Partnering with the Firm’s other businesses, CB provides comprehensive financial solutions, including lending, treasury services, investment banking, and asset management to meet its client’ domestic and international financial needs. In addition, CB provides financing to real estate investors and owners. CB is divided into four primary client segments: Middle Market Banking; Corporate Client Banking; Commercial Term Lending; and Real Estate Banking.

  • Middle Market Banking covers clients with annual revenue generally ranging between $20 million and $500 million.
  • Corporate Client Banking covers clients with annual revenue revenue generally ranging between $500 million and $2 billion and focuses on clients that have broader investment banking needs.
  • Commercial Term Lending provides term financing to real estate investors and owners for multifamily properties as well as office, retail, and industrial properties.
  • Real Estate Banking provides full-service banking to investors and developers of institutional-grade real estate investment properties.

Asset Management (AM)

AM offers investment management across most major asset classes including equities, fixed income, alternatives and money market funds. AM also offers multi-asset investment management, providing solutions for a broad range of client’ investment needs. AM’s lines of business consist of Global Investment Management and Global Wealth Management.

  • Global Investment Management provides comprehensive global investment services, including asset management, pension analytics, asset-liability management and active risk-budgeting strategies.
  • Global Wealth Management offers investment advice and wealth management, including investment management, capital markets and risk management, tax and estate planning, banking, lending and specialty-wealth advisory services.

Corporate

The Corporate segment consists of Treasury and Chief Investment Office (“CIO”) and Other Corporate, which includes corporate staff units and expense that is centrally managed.

  • Treasury and CIO are predominantly responsible for measuring, monitoring, reporting, and managing the Firm’s liquidity, funding and structural interest rate and foreign exchange risks, as well as executing the Firm’s capital plan.
  • Other Corporate units include Real Estate, Enterprise Technology, Legal, Compliance, Finance, Human Resources, Internal Audit, Risk Management, Oversight & Control, Corporate Responsibility and various Other Corporate groups.

How JPMorgan Chase Makes Money?

The following diagram shows how JPMorgan Chase makes money. It shows the different business segments of JPMorgan Chase and their offerings for the different customer segments. It also shows how different business segments generate revenues.

JPMorgan Chase Business Model 2015

JPMorgan Chase serves nearly 50% of U.S. households and more than 80% of Fortune 500 companies with its services. The Firm serves the following customer segments:

  • Individuals
    •   Consumer
    •   Affluent/High Net Worth
    •   Ultra High Net Worth
  • Wholesale
    •   Business Banking (<$20mm revenue)
    •   Middle Market ($20-$500mm revenue)
    •   Corporate Client Banking ($500mm-$2B revenue)
    •   Multinationals (>$2B revenue)
    •   Institutional Investors

The Firm also serves communities and non-profits and government and municipal entities.

JPMorgan Chase generates revenues primarily from the following revenue categories:

  • Net interest income. This revenue category includes the revenue generated from loans and other interest earning assets minus all interest expenses.
  • Asset management/administration fees and commissions. This revenue category includes fees from investment management and related services, custody, brokerage services, insurance premiums and commissions, and other products. Performance-based fees are earned based on exceeding certain benchmarks or other performance targets.
  • Principal transactions. This revenue category includes realized and unrealized gains and losses on derivatives and other instruments primarily used in client-driven market-making activities and on private equity investments. In connection with its client-driven market-making activities, the Firm transacts in debt and equity instruments, derivatives, and commodities. Principal transactions revenue also includes realized and unrealized gains and losses related to hedge accounting and risk-management activities.
  • Investment banking fees. This revenue category includes equity and debt underwriting and advisory fees.
  • Card income. This revenue category includes interchange income from credit and debit cards and net fees earned from processing credit card transactions for merchants.
  • Lending and deposit related fees. This revenue category includes fees from loan commitments, standby letters of credit, financial guarantees, deposit related fees in lieu of compensating balances, cash management related activities or transactions, deposit accounts and other loan servicing activities.
  • Mortgage fees and related income. This revenue category primarily reflects CCB’s Mortgage Banking production and servicing revenue.

JPMorgan Chase Business Segments Revenues And Revenue Share 2015

JPMorgan Chase generated a total revenue of $93,543 million on a GAAP basis and $96,633 million on a managed basis (non-GAAP) in 2015. The Firm business segment results are reported on a managed basis. The adjustments in managed results are eliminated in reconciling items to arrive at the Firm’s reported GAAP results. Of the total $96.6 billion revenues in 2015 on a managed basis, JPMorgan Chase generated

  • $43.8 billion revenues, 45.3% of the total, from the CCB segment.
  • $33.5 billion revenues, 34.7% of the total, from the CIB segment.
  • $12.1 billion revenues, 12.5% of the total, from the AM segment.
  • $6.9 billion revenues, 7.1% of the total, from the CB segment.
  • $0.3 billion revenues, 0.3% of the total, from the Corporate segment.

$3.1 billion were eliminated in reconciling items.

JPMorgan Chase Revenues by Business Segment 2015

JPMorgan Chase Revenues And Revenue Share By Revenue Category 2015

Of the total $93.5 billion revenues in 2015 on a GAAP basis, JPMorgan Chase generated

  • $43.5 billion revenues, 46.5% of the total, from the net interest income category.
  • $15.5 billion revenues, 16.6% of the total, from the asset management/administration fees and commissions category.
  • $10.4 billion revenues, 11.1% of the total, from the principal transactions category.
  • $6.8 billion revenues, 7.2% of the total, from the investment banking fees category.
  • $5.9 billion revenues, 6.3% of the total, from the card income category.
  • $5.7 billion revenues, 6.1% of the total, from the lending and deposit related fees category.
  • $3.0 billion revenues, 3.2% of the total, from the other income category.
  • $2.5 billion revenues, 2.7% of the total, from the mortgage fees and related income category.
  • $0.2 billion revenues, 0.2% of the total, from the securities gains category.

JPMorgan Chase Revenues by Revenue Category 2015

JPMorgan Chase Revenues, Profits, And Profit Margins 2015

Of the $93.5 billion of JPMorgan Chase total GAAP revenues in 2015, $50.0 billion were the non-interest revenues and $43.5 billion was the net interest income. The share of net interest income in the total revenues was 46.5%. JPMorgan Chase total operating expenses were $62.8 billion. These include provision for credit losses, compensation expenses, occupancy expenses, technology, communications and equipment expenses, professional and outside services expenses, marketing expenses, and other expenses. This resulted in $30.7 billion of operating profit and an operating margin of 32.8%. After income taxes and other, JPMorgan Chase had a net profit of $22.4 billion and a net margin of 24.0%.

JPMorgan Chase Revenues Profits and Profit Margins 2015

 

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