JPMorgan’s third largest business segment
JPMorgan Chase’s (JPM) Commercial Banking segment provides conventional banking services to corporate clients. It’s JPMorgan’s third largest business segment by profits. It’s the fourth largest segment by net revenue.
Fourth quarter results were mild
The Commercial Banking segment’s net revenue was $1.8 billion for 4Q14. This was a 6% fall—compared to the same quarter in 2013. Net interest income contributed $1.1 billion to the total net revenue. This was a decrease of 10% year-over-year, or YoY. Non-interest revenue rose 3% YoY to $643 million. This was primarily driven by advisory fee income revenue.
Revenue from corporate client lending and commercial term lending increased. However, revenue from middle market banking and real estate banking declined. This business segment shares investment banking functions with the Commercial & Investment Bank segment. When both segments’ investment banking income is combined, they show 11% growth—compared to the same quarter last year.
Overall, the net income from this business segment was $693 million. This was a fall of 3%—compared to 4Q13. This was largely due to lower net revenue and higher non-interest expense. To some extent, lower provisioning helped the final bottom line numbers.
Commercial Banking segment has high returns
The Commercial Banking segment had a healthy return. The Commercial Banking segment’s return on equity was 19% on an average capital of $14 billion. The segment faced tough competition from Wells Fargo (WFC), Bank of America (BAC), and Citibank (C). Many smaller banks are part of the Financial Select Sector SPDR (XLF). The smaller banks aren’t very strong in this business segment.