Credit Risk Concentrations

12 Months Ended

Dec. 31, 2012

Credit Risk Concentrations [Abstract]

Credit Risk Concentrations

Credit risk concentrations

Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities in the same geographic region, or when they have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions.

JPMorgan Chase regularly monitors various segments of its credit portfolio to assess potential concentration risks and to obtain collateral when deemed necessary. Senior management is significantly involved in the credit approval and review process, and risk levels are adjusted as needed to reflect the Firm’s risk appetite.

In the Firm’s consumer portfolio, concentrations are evaluated primarily by product and by U.S. geographic region, with a key focus on trends and concentrations at the portfolio level, where potential risk concentrations can be remedied through changes in underwriting policies and portfolio guidelines. In the wholesale portfolio, risk concentrations are evaluated primarily by industry and monitored regularly on both an aggregate portfolio level and on an individual customer basis. Management of the Firm’s wholesale exposure is accomplished through loan syndications and participations, loan sales, securitizations, credit derivatives, use of master netting agreements, and collateral and other risk-reduction techniques.

The Firm does not believe that its exposure to any particular loan product (e.g., option adjustable rate mortgages (“ARMs”)), industry segment (e.g., commercial real estate) or its exposure to residential real estate loans with high loan-to-value ratios results in a significant concentration of credit risk. Terms of loan products and collateral coverage are included in the Firm’s assessment when extending credit and establishing its allowance for loan losses.

Customer receivables representing primarily margin loans to prime and retail brokerage clients of $23.8 billion and $17.6 billion at December 31, 2012 and 2011, respectively, are included in the table below. These margin loans are generally over-collateralized through a pledge of assets maintained in clients’ brokerage accounts and are subject to daily minimum collateral requirements. In the event that the collateral value decreases, a maintenance margin call is made to the client to provide additional collateral into the account. If additional collateral is not provided by the client, the client’s positions may be liquidated by the Firm to meet the minimum collateral requirements. As a result of the Firm’s credit risk mitigation practices, the Firm does not hold any reserves for credit impairment on these receivables as of December 31, 2012 and 2011.

The table below presents both on–balance sheet and off–balance sheet consumer and wholesale-related credit exposure by the Firm’s three credit portfolio segments as of December 31, 2012 and 2011.

	2012								2011
	Credit exposure		On-balance sheet				Off-balance sheet(c)		Credit exposure		On-balance sheet				Off-balance sheet(c)
December 31, (in millions)			Loans		Derivatives						Loans		Derivatives
Total consumer, excluding credit card(a)	$	352,889	$	292,620	$	—	$	60,156	$	370,834	$	308,427	$	—	$	62,307
Total credit card	661,011		127,993		—		533,018		662,893		132,277		—		530,616
Total consumer	1,013,900		420,613		—		593,174		1,033,727		440,704		—		592,923
Wholesale-related
Real estate	76,198		60,740		1,084		14,374		67,594		54,684		1,155		11,755
Banks and finance companies	73,318		26,651		19,846		26,821		71,440		29,392		20,372		21,676
Healthcare	48,487		11,638		3,359		33,490		42,247		8,908		3,021		30,318
Oil and gas	42,563		14,704		2,345		25,514		35,437		10,780		3,521		21,136
State and municipal governments	41,821		7,998		5,138		28,685		41,930		7,144		6,575		28,211
Consumer products	32,778		9,151		826		22,801		29,637		9,187		1,079		19,371
Asset managers	31,474		6,220		8,390		16,864		33,465		6,182		9,458		17,825
Utilities	29,533		6,814		2,649		20,070		28,650		5,191		3,602		19,857
Retail and consumer services	25,597		7,901		429		17,267		22,891		6,353		565		15,973
Central government	21,223		1,333		11,232		8,658		17,138		623		10,813		5,702
Metals/mining	20,958		6,059		624		14,275		15,254		6,073		690		8,491
Transportation	19,827		12,763		673		6,391		16,305		10,000		947		5,358
Machinery and equipment manufacturing	18,504		6,304		592		11,608		16,498		5,111		417		10,970
Technology	18,488		3,806		1,192		13,490		17,898		4,394		1,310		12,194
Media	16,007		3,967		973		11,067		11,909		3,655		202		8,052
All other(b)	299,243		120,173		15,631		163,439		285,318		110,718		28,750		145,850
Subtotal	816,019		306,222		74,983		434,814		753,611		278,395		92,477		382,739
Loans held-for-sale and loans at fair value	6,961		6,961		—		—		4,621		4,621		—		—
Receivables from customers and other	23,648		—		—		—		17,461		—		—		—
Total wholesale-related	846,628		313,183		74,983		434,814		$	775,693	$	283,016	92,477		382,739
Total exposure(d)	$	1,860,528	$	733,796	$	74,983	$	1,027,988	$	1,809,420	$	723,720	$	92,477	$	975,662

(a) As of December 31, 2012 and 2011, credit exposure for total consumer, excluding credit card, includes receivables from customers of $113 million and $100 million, respectively.

(b) For more information on exposures to SPEs included within All other see Note 16 on pages 280–291 of this Annual Report.

(c) Represents lending-related financial instruments.

(d) For further information regarding on–balance sheet credit concentrations by major product and/or geography, see Notes 6, 14 and 15 on pages 218–227, 250–275 and 276–279, respectively, of this Annual Report. For information regarding concentrations of off–balance sheet lending-related financial instruments by major product, see Note 29 on pages 308–315 of this Annual Report.