• Net Income: $12.9 billion

• Earnings Per Share (EPS): $4.37

• Revenue: $43.3 billion, up 6% year on year

• Return on Tangible Common Equity (ROTCE): 19%

• Net Interest Income (NII) ex Markets: Up $274 million or 1%

• Expenses: $22.6 billion, up 4% year on year

• Credit Costs: $3.1 billion

• Common Equity Tier 1 (CET1) Ratio: 15.3%

• Net Common Share Repurchases: $6 billion

• Consumer & Community Banking (CCB) Revenue: $17.8 billion, down 3% year on year

• Commercial & Investment Bank (CIB) Revenue: $17 billion

• Asset & Wealth Management (AWM) Revenue: $5.4 billion, up 9% year on year

• Corporate Revenue: $3.1 billion, up $1.5 billion year on year

• Assets Under Management (AUM): $3.9 trillion, up 23%

• Client Assets: $5.7 trillion, up 23%

• Warning! GuruFocus has detected 5 Warning Signs with VOXX.

Release Date: October 11, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• JPMorgan Chase & Co (NYSE:JPM) reported a strong net income of $12.9 billion with an EPS of $4.37, reflecting robust financial performance.

• The company maintained its number one position in retail deposit share for the fourth consecutive year, showcasing its strong market presence.

• Investment Banking (IB) fees and markets revenue saw significant year-on-year growth, indicating strength across the franchise.

• Asset and Wealth Management (AWM) achieved record quarterly revenues and long-term flows, highlighting successful business operations.

• The firm ended the quarter with a CET1 ratio of 15.3%, demonstrating a solid capital position.

Negative Points

• Credit costs increased to $3.1 billion, with net charge-offs rising by $590 million year-on-year, primarily driven by card services.

• Average deposits in the Consumer & Community Banking (CCB) segment were down 8% year-on-year, indicating a decline in customer deposits.

• Expenses rose by $808 million or 4% year-on-year, driven by higher compensation and employee growth, which could impact profitability.

• The Commercial and Investment Bank (CIB) reported a 2% year-on-year decline in average banking and payments loans, reflecting softness in loan demand.

• The regulatory environment and geopolitical uncertainties pose ongoing challenges for the M&A pipeline, potentially affecting future growth.

Q & A Highlights

Q: Can you discuss the drivers behind the expected sequential decline in Q4 NII ex markets and your thoughts on deposit behavior and pricing? A: Jeremy Barnum, CFO, explained that the primary driver of the sequential decline is the yield curve. He noted that consumer deposit balances seem to be stabilizing, with checking account balances remaining steady, indicating that consumers are done spending their cash buffers. He also mentioned that the CD mix is expected to peak soon, and there is some growth in wholesale deposits. Looking ahead to 2025, Barnum anticipates sequential declines in NII ex markets, with a potential trough in the middle of the year, followed by growth driven by balances and card revolve growth.

Q: How are you thinking about expense growth and investment priorities for next year? A: Jeremy Barnum, CFO, acknowledged that consensus expense forecasts for next year seem light. He highlighted inflation, annualization of growth strategies, and expected growth in fee and volume-related businesses as factors contributing to higher expenses. Jamie Dimon, CEO, emphasized that many expenses are actually investments in growth areas like private banking, asset management, and technology, including AI, which are expected to yield good returns.

Q: What is your stance on extending duration in the current interest rate environment? A: Jeremy Barnum, CFO, stated that extending duration does not change expected NII if the policy rate follows the forwards. He noted that the curve remains inverted, which would be a headwind to short-term NII. The decision to manage duration is about balancing NII volatility against protecting the company from extreme scenarios. Currently, JPMorgan is comfortable with its duration position.

Q: How do you plan to deploy excess capital, and what are your thoughts on buybacks and acquisitions? A: Jamie Dimon, CEO, mentioned that JPMorgan has about $30 billion of excess capital and is not in a rush to deploy it. He emphasized the importance of being patient and waiting for better opportunities, especially given the potential for turbulent markets. Dimon also noted that buying back stock at high valuations is not necessarily the best option, and the company is focused on serving clients and building technology.

Q: What are your views on the potential impact of new competitors in the market-making space? A: Jeremy Barnum, CFO, acknowledged the competitive environment, including new entrants like fintech and alternative market makers. He emphasized that JPMorgan is innovating and adjusting to compete effectively. Barnum also highlighted the importance of maintaining a robust capital markets ecosystem and cautioned against regulatory changes that could push more activity outside of bank market makers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.