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Noninterest Revenue and Noninterest Expense
 12 Months Ended
Dec. 31, 2018
Noninterest Income (Expense) [Abstract]  
Noninterest Revenue and Noninterest Expense Noninterest revenue and noninterest expense
The Firm records noninterest revenue from certain contracts with customers under ASC 606, the Firm has no remaining obligation to deliver future services. For arrangements with a fixed term, the Firm may commit to deliver services in the future. Revenue associated with these remaining performance obligations typically depends on the occurrence of future events or underlying asset values, and is not recognized until the outcome of those events or values are known. Revenue from Contracts with Customers the Firm has no remaining obligation to deliver future services. For arrangements with a fixed term, the Firm may commit to deliver services in the future. Revenue associated with these remaining performance obligations typically depends on the occurrence of future events or underlying asset values, and is not recognized until the outcome of those events or values are known. , in investment banking fees, deposit-related fees, asset management, administration, and commissions, and components of card income. Contracts in the scope of ASC 606 are often terminable on demand and the Firm has no remaining obligation to deliver future services. For arrangements with a fixed term, the Firm may commit to deliver services in the future. Revenue associated with these remaining performance obligations typically depends on the occurrence of future events or underlying asset values, and is not recognized until the outcome of those events or values are known.
The adoption of the revenue recognition guidance in the first quarter of 2018, required gross presentation of certain costs previously offset against revenue, predominantly associated with certain distribution costs (previously offset against asset management, administration and commissions), with the remainder associated with certain underwriting costs (previously offset against investment banking fees). Adoption of the guidance did not result in any material changes in the timing of revenue recognition. This guidance was adopted retrospectively and, accordingly, prior period amounts were revised, which resulted in an increase in both noninterest revenue and noninterest expense. The Firm did not apply any practical expedients. For additional information, refer to Note 1.
Investment banking fees
This revenue category includes debt and equity underwriting and advisory fees. As an underwriter, the Firm helps clients raise capital via public offering and private placement of various types of debt and equity instruments. Underwriting fees are primarily based on the issuance price and quantity of the underlying instruments, and are recognized as revenue typically upon execution of the client’s transaction. The Firm also manages and syndicates loan arrangements. Credit arrangement and syndication fees, included within debt underwriting fees, are recorded as revenue after satisfying certain retention, timing and yield criteria.
The Firm also provides advisory services, by assisting its clients with mergers and acquisitions, divestitures, restructuring and other complex transactions. Advisory fees are recognized as revenue typically upon execution of the client’s transaction.
Year ended December 31,
(in millions)
2018
 
2017
 
2016
Underwriting
 
 
 
 
 
Equity
$
1,684

 
$
1,466

 
$
1,200

Debt
3,347

 
3,802

 
3,277

Total underwriting
5,031

 
5,268

 
4,477

Advisory
2,519

 
2,144

 
2,095

Total investment banking fees
$
7,550

 
$
7,412

 
$
6,572


Investment banking fees are earned primarily by CIB. Refer to Note 31 for segment results.
Principal transactions
Principal transactions revenue is driven by many factors, including the bid-offer spread, which is the difference between the price at which the Firm is willing to buy a financial or other instrument and the price at which the Firm is willing to sell that instrument. It also consists of the realized (as a result of the sale of instruments, closing out or termination of transactions, or interim cash payments) and unrealized (as a result of changes in valuation) gains and losses on financial and other instruments (including those accounted for under the fair value option) 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 (including physical commodities inventories and financial instruments that reference commodities).
Principal transactions revenue also includes certain realized and unrealized gains and losses related to hedge accounting and specified risk-management activities, including: (a) certain derivatives designated in qualifying hedge accounting relationships (primarily fair value hedges of commodity and foreign exchange risk), (b) certain derivatives used for specific risk management purposes, primarily to mitigate credit risk and foreign exchange risk, and (c) other derivatives. For further information on the income statement classification of gains and losses from derivatives activities, refer to Note 5.
In the financial commodity markets, the Firm transacts in OTC derivatives (e.g., swaps, forwards, options) and ETD that reference a wide range of underlying commodities. In the physical commodity markets, the Firm primarily purchases and sells precious and base metals and may hold other commodities inventories under financing and other arrangements with clients.
The following table presents all realized and unrealized gains and losses recorded in principal transactions revenue. This table excludes interest income and interest expense on trading assets and liabilities, which are an integral part of the overall performance of the Firm’s client-driven market-making activities. Refer to Note 7 for further information on interest income and interest expense. Trading revenue is presented primarily by instrument type. The Firm’s client-driven market-making businesses generally utilize a variety of instrument types in connection with their market-making and related risk-management activities; accordingly, the trading revenue presented in the table below is not representative of the total revenue of any individual line of business.
Year ended December 31,
(in millions)
2018
 
2017
 
2016
Trading revenue by instrument type
 
 
 
 
 
Interest rate
$
1,961

 
$
2,479

 
$
2,325

Credit
1,395

 
1,329

 
2,096

Foreign exchange
3,222

 
2,746

 
2,827

Equity
4,924

 
3,873

 
2,994

Commodity
906

 
661

 
1,067

Total trading revenue
12,408

 
11,088

 
11,309

Private equity gains
(349
)
 
259

 
257

Principal transactions
$
12,059

 
$
11,347

 
$
11,566


Principal transactions revenue is earned primarily by CIB. Refer to Note 31 for segment results.
Lending- and deposit-related fees
Lending-related fees include fees earned from loan commitments, standby letters of credit, financial guarantees, and other loan-servicing activities. Deposit-related fees include fees earned in lieu of compensating balances, and fees earned from performing cash management activities and other deposit account services. Lending- and deposit-related fees in this revenue category are recognized over the period in which the related service is provided.
Year ended December 31, (in millions)
2018
 
2017
 
2016
Lending-related fees
$
1,117

 
$
1,110

 
$
1,114

Deposit-related fees
4,935

 
4,823

 
4,660

Total lending- and deposit-related fees
$
6,052

 
$
5,933

 
$
5,774


Lending- and deposit-related fees are earned by CCB, CIB, CB, and AWM. Refer to Note 31 for segment results.
Asset management, administration and commissions
This revenue category includes fees from investment management and related services, custody, brokerage services and other products. The Firm manages assets on behalf of its clients, including investors in Firm-sponsored funds and owners of separately managed investment accounts. Management fees are typically based on the value of assets under management and are collected and recognized at the end of each period over which the management services are provided and the value of the managed assets is known. The Firm also receives performance-based management fees, which are earned based on exceeding certain benchmarks or other performance targets and are accrued and recognized when the probability of reversal is remote, typically at the end of the related billing period. The Firm has contractual arrangements with third parties to provide distribution and other services in connection with its asset management activities. Amounts paid to third-party service providers are recorded in professional and outside services expense.
Year ended December 31,
(in millions)
2018
 
2017
 
2016
Asset management fees
 
 
 
 
 
Investment management fees(a)
$
10,768

 
$
10,434

 
$
9,636

All other asset management fees(b)
270

 
296

 
338

Total asset management fees
11,038

 
10,730

 
9,974

 
 
 
 
 
 
Total administration fees(c)
2,179

 
2,029

 
1,915

 
 
 
 
 
 
Commissions and other fees
 
 
 
 
 
Brokerage commissions(d)
2,505

 
2,239

 
2,151

All other commissions and fees
1,396

 
1,289

 
1,324

Total commissions and fees
3,901

 
3,528

 
3,475

Total asset management, administration and commissions
$
17,118

 
$
16,287

 
$
15,364

(a)
Represents fees earned from managing assets on behalf of the Firm’s clients, including investors in Firm-sponsored funds and owners of separately managed investment accounts.
(b)
The Firm receives other asset management fees for services that are ancillary to investment management services, including commissions earned on sales or distribution of mutual funds to clients. These fees are recorded as revenue at the time the service is rendered or, in the case of certain distribution fees based on the underlying fund’s asset value and/or investor redemption, recorded over time as the investor remains in the fund or upon investor redemption.
(c)
The Firm receives administrative fees predominantly from custody, securities lending, fund services and securities clearance services it provides. These fees are recorded as revenue over the period in which the related service is provided.
(d)
The Firm acts as a broker, by facilitating its clients’ purchases and sales of securities and other financial instruments. Brokerage commissions are collected and recognized as revenue upon occurrence of the client transaction. The Firm reports certain costs paid to third-party clearing houses and exchanges net against commission revenue.
Asset management, administration and commissions are earned primarily by AWM, CIB, CCB, and CB. Refer to Note 31 for segment results.
Mortgage fees and related income
This revenue category primarily reflects CCB’s Home Lending net production and net mortgage servicing revenue.
Net production revenue includes fees and income recognized as earned on mortgage loans originated with the intent to sell; the impact of risk management activities associated with the mortgage pipeline and warehouse loans; and changes in the fair value of any residual interests held from mortgage securitizations. Net production revenue also includes gains and losses on sales of mortgage loans, lower of cost or fair value adjustments on mortgage loans held-for-sale, changes in fair value on mortgage loans originated with the intent to sell and measured at fair value under the fair value option, as well as losses recognized as incurred related to the repurchase of previously sold loans.
Net mortgage servicing revenue includes operating revenue earned from servicing third-party mortgage loans which is recognized over the period in which the service is provided, changes in the fair value of MSRs and the impact of risk management activities associated with MSRs.
For further discussion of risk management activities and MSRs, refer to Note 15.
Net interest income from mortgage loans is recorded in interest income.
Card income
This revenue category includes interchange income from credit and debit cards and fees earned from processing card transactions for merchants, both of which are recognized when purchases are made by a cardholder. Card income also includes account origination costs and annual fees, which are deferred and recognized on a straight-line basis over a 12-month period.
Certain Chase credit card products offer the cardholder the ability to earn points based on account activity, which the cardholder can choose to redeem for cash and non-cash rewards. The cost to the Firm related to these proprietary rewards programs varies based on multiple factors including the terms and conditions of the rewards programs, cardholder activity, cardholder reward redemption rates and cardholder reward selections. The Firm maintains a liability for its obligations under its rewards programs and reports the current-period cost as a reduction of card income.
Credit card revenue sharing agreements
The Firm has contractual agreements with numerous co-brand partners that grant the Firm exclusive rights to issue co-branded credit card products and market them to the customers of such partners. These partners endorse the co-brand credit card programs and provide their customer or member lists to the Firm. The partners may also conduct marketing activities and provide rewards redeemable under their own loyalty programs that the Firm will grant to co-brand credit cardholders based on account activity. The terms of these agreements generally range from five to ten years.
The Firm typically makes payments to the co-brand credit card partners based on the cost of partners’ marketing activities and loyalty program rewards provided to credit cardholders, new account originations and sales volumes. Payments to partners based on marketing efforts undertaken by the partners are expensed by the Firm as incurred and reported as marketing expense. Payments for partner loyalty program rewards are reported as a reduction of card income when incurred. Payments to partners based on new credit card account originations are accounted for as direct loan origination costs and are deferred and recognized as a reduction of card income on a straight-line basis over a 12-month period. Payments to partners based on sales volumes are reported as a reduction of card income when the related interchange income is earned.
The following table presents the components of card income:
Year ended December 31,
(in millions)
2018
 
2017
 
2016
Interchange and merchant processing income
$
18,808

 
$
17,080

 
$
15,367

Reward costs and partner payments
(13,074
)
(b) 
(10,820
)
 
(9,480
)
Other card income(a)
(745
)
 
(1,827
)
 
(1,108
)
Total card income
$
4,989

 
$
4,433

 
$
4,779

(a)
Predominantly represents annual fees and new account origination costs, which are deferred and recognized on a straight-line basis over a 12-month period and are outside the scope of the revenue recognition guidance, ASC 606, Revenue from Contracts with Customers.
(b)
Includes an adjustment to the credit card rewards liability of approximately $330 million, recorded in the second quarter of 2018.
Card income is earned primarily by CCB and CB. Refer to Note 31 for segment results.
Other income
Other income on the Firm’s Consolidated statements of income included the following:
Year ended December 31, (in millions)
2018
 
2017
 
2016
Operating lease income
$
4,540

 
$
3,613

 
$
2,724


Operating lease income is recognized on a straight–line basis over the lease term.
Noninterest expense
Other expense
Other expense on the Firm’s Consolidated statements of income included the following:
Year ended December 31,
(in millions)
2018

 
2017

 
2016

Legal expense/(benefit)
$
72

 
$
(35
)
 
$
(317
)
FDIC-related expense
1,239

 
1,492

 
1,296