Fitch Affirms JPMorgan Chase Ratings at 'A+/F1' Despite Legal Reserve; Outlook Stable

  Fitch Affirms JPMorgan Chase Ratings at 'A+/F1' Despite Legal Reserve;
  Outlook Stable

Business Wire

NEW YORK -- October 11, 2013

Following the announced $9.15 billion addition to litigation reserves in the
quarter, Fitch Ratings has affirmed JPMorgan Chase & Co.'s (JPM) long-term
Issuer Default Rating (IDR) at 'A+' and short-term IDR at 'F1'. Fitch has also
affirmed JPM's Viability Rating (VR) at 'a+', its Support Rating at '1', and
its Support Rating Floor (SRF) at 'A'. The Rating Outlook is Stable. A full
list of ratings is provided at the end of this release.

KEY RATING DRIVERS - IDRs, VR AND SENIOR DEBT

JPM's ratings affirmation reflects the strong underlying earnings capacity of
the bank, given its dominant domestic franchise and growing international
franchise, and progress made toward achieving compliance with heightened
capital and liquidity requirements. While the litigation charge is
significant, and beyond Fitch's expectations, the agency had considered
possible ranges of mortgage-related costs in its analysis, and recognizes that
growing legal costs are not unique to JPM. While the scope of current
negotiations is unclear, Fitch believes the bank is striving to put the bulk
of mortgage-related matters behind them.

Legal costs are likely to remain elevated in coming quarters, but Fitch
expects the incremental impact to earnings will be manageable. Still, the
emergence of material and unexpected litigation losses could alter the
agency's view, particularly given where the firm's current capitalization
ratios compare to the broader peer group.

Excluding the litigation charge, core operating performance was relatively
solid during the quarter, with the exception of mortgage banking, which was
hurt by rising interest rates and expected declines in origination volume.
Consumer asset quality trends continued on a positive trajectory, and JPM
recognized $1.6 billion of reserve releases, largely in real estate and credit
card. Non-interest expenses improved modestly, with headcount reductions and
efficiency improvements.

The corporate and investment bank's results reflected a seasonally slower
quarter, but results outperformed Fitch's expectations. Income was up year
over year due to stronger debt and equity underwriting fees and strides made
in improving the firm's market position in equities. Average Value-at-Risk
(VaR) was down meaningfully from the third quarter of 2012 (3Q'12), at $45
million. Debt valuation adjustment (DVA) losses increased to $397 million from
losses of $211 million a year ago.

Mortgage production had a relatively weak quarter given a decline in
origination volumes, while mortgage servicing posted a loss due to lower
servicing revenue and a negative MSR valuation adjustment. Still, progress has
been made in reducing core servicing expenses. Fitch expects mortgage revenue
will remain challenged in coming quarters, as new originations fail to offset
reductions in refinancing volume. Real estate portfolios had a solid quarter,
due largely to improvements in credit and a $1.25 billion reduction in
reserves.

The commercial banking and asset management segments remained very steady
performers within JPM, with commercial loan growth of 9% and asset under
management growth of 12% year over year.

The company reported a Basel III Tier I Common ratio of 9.3%, which is
slightly below the 9.5% requirement, inclusive of the globally systemically
important financial institution capital buffer. Additionally, JPM disclosed a
firm supplementary leverage ratio (SLR) of 4.7% and a bank SLR of 4.3%, which
compare to requirements of 5.5% and 6%, respectively. Fitch considers
compliance with leverage ratios to be manageable, and will largely be achieved
through management actions. Furthermore, JPM disclosed that its liquidity
coverage ratio remains in excess of 100%, based on its interpretation of the
standard.

The Stable Outlook reflects expectations for continued operating consistency,
although Fitch believes earnings could decline from current levels as the
interest rate environment remains challenging, regulatory costs grow, and
credit metrics, particularly in card and the commercial bank, normalize from
unsustainable lows. Still, offsets could be achieved from improved performance
in mortgage banking and stronger operating efficiencies.

RATING DRIVERS AND SENSITIVITIES - IDRs, VR AND SENIOR DEBT

Going forward, Fitch believes JPM is going to be challenged to continue to
deliver consistent earnings growth, particularly in light of the current
regulatory environment. Higher capital charges and what remains difficult
market conditions present a challenge for all GTUBs, which may be encouraged
to seek more aggressive ways to generate profits that take advantage of
regulatory loopholes. However, Fitch expects that JPM's strong global
franchise, liquidity risk management, and product diversity mitigate some of
these concerns.

Fitch considers JPM's ratings to be particularly sensitive to the degree and
scope of litigation risk going forward. Fitch recognizes that the large
litigation charge taken during the quarter reflects JPM's desire to address
outstanding legal issues. To the extent JPM enters into any litigation
settlements, Fitch will consider whether these effectively diminish ongoing
legal risks.

Negative rating actions could result from material asset quality weakening
which would pressure JPM's earnings and its ability to build capital,
deterioration in liquidity levels, material and unexpected litigation losses,
and/or failure to sufficiently address weaknesses noted in regulatory consent
orders and the CCAR submission process in a timely fashion. Further,
significant risk management or operational failures that result in material
losses to the firm could also result in a negative rating action.

Upward rating momentum for JPM is believed to be limited for the foreseeable
future given the risk and governance issues the firm is still addressing.
Further, its current rating level is among the highest of its peer group and
relative to the global bank universe.

KEY RATING DRIVERS - SUPPORT RATING AND SRF

The affirmations of JPM's Support Rating and SRF are based on Fitch's view
that the probability of support from the U.S. authorities for JPM, if
required, remains extremely high in the near term due to the bank's systemic
importance. However, JPM's ratings do not currently receive any uplift from
support.

RATING SENSITIVITIES - SUPPORT RATING AND SRF

The Support Rating and SRF are sensitive to a change in Fitch's view of the
ability or propensity of the U.S. sovereign to extend full support to the
bank's senior creditors. There is a clear political intention to ultimately
reduce the implicit state support for systemically important banks in Europe
and the U.S., as demonstrated by a series of policy and regulatory initiatives
aimed at curbing systemic risk posed by the banking industry. This might
result in Fitch revising SRFs downward in the medium term, although the timing
and degree of any change would depend on developments with respect to specific
jurisdictions. Until now, senior creditors in major global banks have been
supported in full, but resolution legislation is developing quickly and the
implementation of creditor 'bail-in' is starting to make it look more feasible
for taxpayers and creditors to share the burden of supporting large, complex
banks.

KEY RATING DRIVERS & SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID
SECURITIES

Subordinated debt and other hybrid capital issued by JPM and by various
issuing vehicles are all notched down from JPM's or its bank subsidiaries' VRs
in accordance with Fitch's assessment of each instrument's respective
nonperformance and relative Loss Severity risk profiles. Their ratings are
primarily sensitive to any change in the VRs of JPM or its bank subsidiaries.

KEY RATING DRIVERS & SENSITIVITIES - HOLDING COMPANY

JPM's IDR and VR are equalized with those of its operating companies and
banks, reflecting its role as the bank holding company, which is mandated in
the U.S. to act as a source of strength for its bank subsidiaries. It has
modest double leverage of 105.6% at year-end 2012.

KEY RATING DRIVERS & SENSITIVITIES - SUBSIDIARY AND AFFILIATED COMPANY

The IDRs and VRs of JPM's bank subsidiaries benefit from the cross-guarantee
mechanism in the U.S. under FIRREA and therefore IDRs and VRs are equalized
across the group. JPMorgan Securities LLC (JPMS) is a wholly owned subsidiary
that is the firm's U.S. broker dealer and is considered core to JPM's
business. As a result, its IDR is equalized with that of its parent JPM. Bear
Stearns Companies, LLC and JPMorgan Clearing Corp. benefit from a parent
guarantee and therefore their IDRs are equalized with JPM's. Collateralized
Commercial Paper Co., LLC's short-term IDR benefits from JPMS's guarantee of
the amounts payable by the repo seller, JPMCC, and as result its short-term
IDR is equalized with that of JPMS. Collateralized Commercial Paper II Co.,
LLC's short-term IDR is based on the repo seller, JPMS's short-term IDR.

JPM is a leading global trading and universal bank with $2.5 trillion in total
assets and $12.6 billion of net income for the nine months ended Sept. 30,
2013.

Fitch has affirmed the following ratings:

JPMorgan Chase & Co

--Long-term IDR at 'A+';

--Long-term senior debt at 'A+;

--Long-term subordinated debt at 'A';

--Preferred stock at 'BBB-';

--Short-term IDR at 'F1';

--Commercial paper at 'F1';

--Viability at 'a+';

--Market linked securities at 'A+emr';

--Support at '1';

--Support Floor at 'A'.

JPMorgan Chase Bank N.A.

--Long-term deposits at 'AA-';

--Long-term IDR at 'A+';

--Long-term senior debt at 'A+';

--Long-term subordinated debt at 'A';

--Short-term IDR at 'F1';

--Short-term debt at 'F1';

--Short-term deposits at 'F1+';

--Viability at 'a+';

--Market linked deposits at 'AAemr';

--Market linked securities at 'A+emr';

--Support at '1';

--Support Floor at 'A'.

Chase Bank USA, N.A.

--Long-term deposits at 'AA-';

--Long-term IDR at 'A+';

--Long-term senior debt at 'A+';

--Long-term subordinated debt at 'A';

--Short-term IDR at 'F1';

--Short-term debt at 'F1';

--Short-term deposits at `F1+';

--Viability at 'a+';

--Support at '1';

--Support Floor at 'A'.

JPMorgan Bank & Trust Company, National Association

--Long-term deposits at 'AA-';

--Long-term IDR at 'A+';

--Short-term IDR at 'F1';

--Short-term deposits at `F1+';

--Viability at 'a+';

--Support at '1';

--Support Floor at 'A'.

JPMorgan Chase Bank, Dearborn

--Long-term deposits at 'AA-';

--Long-term IDR at 'A+';

--Short-term IDR at 'F1';

--Short-term deposits at 'F1+';

--Viability at 'a+';

--Support at '1';

--Support Floor at 'A'.

Bear Stearns Companies LLC

--Long-term IDR at 'A+';

--Long-term senior debt at 'A+';

--Long-term subordinated debt at 'A';

--Short-term IDR at 'F1';

--Market linked securities at 'A+emr'.

J.P. Morgan Securities LLC

--Long-term IDR at 'A+';

--Short-term IDR at 'F1'.

JPMorgan Clearing Corp (formerly Bear Stearns Securities Corp)

--Long-term IDR at 'A+';

--Short-term IDR at 'F1'.

Bank One Capital Trust III

Chase Capital II

Chase Capital III

Chase Capital VI

First Chicago NBD Capital I

JPMorgan Chase Capital XIII, XXI, and XXIII

--Preferred stock at 'BBB'.

Bank One Corp

--Long-term subordinated debt at 'A'.

JP Morgan & Co., Inc.

--Long-term senior debt at 'A+';

--Long-term subordinated debt at 'A'.

Morgan Guaranty Trust Co. of New York

--Long-term senior debt at 'A+'.

NBD Bank, N.A. (MI)

--Long-term subordinated at to 'A'.

Providian National Bank

--Long-term deposits at 'AA-'.

Washington Mutual Bank

--Long-term deposits at 'AA-'.

Collateralized Commercial Paper Co., LLC

--Short-term debt at 'F1'.

Collateralized Commercial Paper II Co., LLC

--Short-term debt at 'F1'.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' Aug. 15, 2012;

--'Securities Firms Criteria' Aug. 15, 2012;

--'Assessing and Rating Bank Subordinated and Hybrid Securities' Dec. 5, 2012;

--'Rating FI Subsidiaries and Holdings Companies' Aug. 10, 2012.

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Securities Firms Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686137

Assessing and Rating Bank Subordinated and Hybrid Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695542

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=804832

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Contact:

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