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    JPM
    Earnings call· Mar 2025(Q1 FY25)

    JPMORGAN CHASE & CO JPM

    Apr 11, 2025 Source

    Executive summary

    JPMorgan Chase Q1 FY25 — Strong Performance Amidst Macro Uncertainty

    JPMorgan Chase delivered strong Q1 FY25 results, showcasing robust revenue growth and profitability, particularly in Markets and Investment Banking. Despite this, management highlighted significant macroeconomic uncertainty, including geopolitical tensions and tariff impacts, leading to a cautious outlook for certain business lines. The firm emphasized its financial strength and commitment to supporting clients through potential turbulence, while also advocating for comprehensive regulatory reforms to enhance market functioning.

    Highlights

    5

    • Reported net income of $14.6 billion, with EPS of $5.07 and an ROTCE of 21%.

    • Firm-wide revenue reached $46 billion, an increase of 8% year-on-year.

    • Markets revenue was up 21% year-on-year, driven by a record 48% increase in Equities.

    • Investment Banking fees grew 12% year-on-year, with Advisory fees up 16% and Debt underwriting up 16%.

    • Asset & Wealth Management saw long-term net inflows of $54 billion and AUM/client assets both up 15% year-on-year.

    Concerns

    5

    • NII ex Markets was down $430 million or 2% year-on-year, primarily due to lower rates and deposit margin compression.

    • A net reserve build of $973 million was recorded, driven by increased probability weightings for downside economic scenarios.

    • The Investment Banking outlook is cautious, requiring a reduction in current levels of uncertainty for pipeline conversion and new activity.

    • The firm's weighted average unemployment rate embedded in its allowance for credit losses increased to 5.8% from 5.5% last quarter.

    • Card net charge-off rate is expected to be approximately 3.6% for the full year, reflecting seasoning of recent vintages.

    Guidance & targets

    4
    CategoryTargetConfidence
    NII ex Markets
    approximately $90 billion
    high materiality
    Medium
    Firm-wide NII
    about $94.5 billion
    high materiality
    Medium
    Adjusted expense
    about $95 billion
    high materiality
    Medium
    Card net charge-off rate
    approximately 3.6%
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Consumer & Community Banking (CCB)
    Consumers and small businesses remain financially healthy. Lower deposit NII in Banking & Wealth Management was predominantly offset by growth in Wealth Management revenue. Card NII on higher revolving balances and higher operating lease income in Auto drove Card Services and Auto revenue growth. Expense increase driven by marketing, technology, field compensation, and auto lease depreciation.
    Banking & Wealth Management Revenue: down 1% YoYAverage Deposits: down 2% YoYEnd-of-Period Deposits: up 2% QoQClient Investment Assets: up 7% YoYHome Lending Revenue: up 2% YoYHome Lending Originations: up 42% YoYCard Services and Auto Revenue: up 12% YoYCard Outstandings: up 10% YoYAuto Originations: $10.7 billion (up 20% YoY)Expenses: $9.9 billion (up 6% YoY)Credit Costs: $2.6 billionNet Charge-offs: $2.2 billion (up $275 million YoY)Net Reserve Build: $475 million (of which $400 million in Card)
    		$18.3 billion4%—$4.4 billion (Net Income)
    Commercial & Investment Bank (CIB)
    Strong performance driven by Markets and Investment Banking. IB fees benefited from deal closings and elevated refinancing activity. Equities saw record performance during elevated volatility. Expenses increased due to higher compensation, legal, and brokerage costs. Loans saw payoff activity and limited demand, while deposits increased.
    IB Fees: up 12% YoYIB Wallet Share: 9%Advisory Fees: up 16%Debt Underwriting Fees: up 16%Equity Underwriting Fees: down 9%Payments Revenue: up 3% YoY (excluding equity investments)Lending Revenue: up 11% YoYMarkets Revenue: up 21% YoYEquities Markets Revenue: up 48%Fixed Income Markets Revenue: up 8%Securities Services Revenue: up 7% YoYExpenses: $9.8 billion (up 13% YoY)Average Banking and Payments Loans: down 3% YoY, down 1% sequentiallyAverage Client Deposits: up 11% YoY, up 2% sequentiallyCredit Costs: $705 million
    		$19.7 billion12%—$6.9 billion (Net Income)
    Asset & Wealth Management (AWM)
    Revenue growth driven by management fees on strong net inflows and higher market levels, as well as higher brokerage activity and deposit balances. Expenses increased due to higher compensation and growth in private banking adviser teams. AUM and client assets benefited from continued net inflows and market appreciation.
    Expenses: $3.7 billion (up 7% YoY)Long-term Net Inflows: $54 billionLiquidity Net Inflows: $36 billionAssets Under Management (AUM): $4.1 trillion (up 15% YoY)Client Assets: $6 trillion (up 15% YoY)Loans: up 5% YoY, flat QoQDeposits: up 7% YoY, down 2% sequentially
    		$5.7 billion12%—$1.6 billion (Net Income), 35% (Pretax Margin)
    Corporate
    Revenue increase driven by a net gain in NIR, which included a First Republic-related gain of $588 million, offsetting lower NII. Expenses decreased significantly due to the release of a $323 million FDIC special assessment accrual.
    NII: $1.7 billion (down $826 million YoY)NIR: net gain of $653 million (compared to net loss of $275 million in prior year)Expenses: $185 million (down $1.1 billion YoY)
    		$2.3 billion$102 million—$1.7 billion (Net Income)

    Operational metrics

    25
    First Republic-related gain
    $588 million
    Q1 FY25

    Included in net income, previously disclosed in the 10-K.

    FDIC special assessment accrual release
    $323 millioncompared with a $725 million increase in the prior quarter
    Q1 FY25

    Contributed to lower expenses in the Corporate segment.

    Capital distributed to shareholders
    $11 billion
    Q1 FY25

    Reflects net common share repurchases and common dividend payment.

    Net common share repurchases
    $7.1 billion
    Q1 FY25

    Part of the $11 billion capital distributed to shareholders.

    Common dividend per share
    $1.40increased
    Q1 FY25

    Increased dividend payment.

    RWA increase driver
    —
    Q1 FY25

    Primarily driven by overall business growth in markets and some seasonal effects.

    IB wallet share
    9%
    Q1 FY25

    Firm ranked #1 in Investment Banking.

    Long-term net inflows
    $54 billion
    Q1 FY25

    Contributed to AUM growth.

    Liquidity net inflows
    $36 billion
    Q1 FY25

    Contributed to AUM growth.

    NII ex Markets change
    $430 milliondown 2% year-on-year
    Q1 FY25

    Driven by lower rates, deposit margin compression, and lower CCB deposit balances, partially offset by higher card revolving balances and securities activity.

    NIR ex Markets change
    $2.2 billionup 20% year-on-year
    Q1 FY25

    Largely on higher asset management fees, lower net investment securities losses, and higher investment banking fees.

    Expenses change
    $840 millionup 4% year-on-year
    Q1 FY25

    Largely driven by compensation, employee growth, brokerage and distribution fees, marketing, and legal expense.

    Consumer reserve build
    $441 million
    Q1 FY25

    Driven by changes in the weighted average macroeconomic outlook.

    Wholesale reserve build
    $549 million
    Q1 FY25

    Predominantly driven by credit quality changes on certain exposures and net lending activity, as well as changes in the outlook.

    Card NCO increase
    $275 millionyear-on-year
    Q1 FY25

    Predominantly driven by the seasoning of recent vintages in card with delinquencies and losses in line with expectations.

    Card reserve build
    $400 million
    Q1 FY25

    Part of the total CCB net reserve build.

    Average banking and payments loans change
    down 3%year-on-year
    Q1 FY25

    Reflects payoff activity and limited demand for new loans.

    Average client deposits change
    up 11%year-on-year
    Q1 FY25

    Reflects increased activity across payments and securities services.

    Home Lending originations growth
    42%year-on-year
    Q1 FY25

    Off a small base in a slowly growing market.

    Auto originations
    $10.7 billionup 20% year-on-year
    Q1 FY25

    Driven by higher lease volume.

    Card outstandings growth
    10%year-on-year
    Q1 FY25

    Due to strong account acquisition.

    Client investment assets growth
    7%year-on-year
    Q1 FY25

    Predominantly driven by market performance.

    Corporate NII change
    $826 milliondown year-on-year
    Q1 FY25

    Impacted by various factors in the Corporate segment.

    Corporate NIR change
    net gain of $653 millioncompared with a net loss of $275 million in the prior year
    Q1 FY25

    Current quarter included the First Republic-related gain, while prior year included net securities losses.

    Corporate Expenses change
    $1.1 billiondown year-on-year
    Q1 FY25

    Driven by changes to the FDIC special assessment accruals.

    Industry KPIs

    11
    MetricValueDetails
    Loansdown 3%%
    Depositsdown 2%%
    Rotce ROE21%%
    Cet1 ratio15.4%%
    Capital returns$11 billionUSD
    Fee income linesup 12%%
    Allowance reserves$27.6 billionUSD
    Net interest income$94.5 billionUSD
    Net charge offs npls$2.3 billionUSD
    Total operating expenses$23.6 billionUSD
    Provision for credit losses$3.3 billionUSD

    Risks & headwinds

    7
    Elevated macroeconomic uncertaintyNear-term

    Economists estimate a 50-50 chance for a recession.

    Mitigation: Maintaining strong capital and liquidity positions; prepared for a full range of outcomes; continued investment in the franchise.

    Cautious Investment Banking outlookNear-term

    Client engagement is elevated, but conversion of existing pipeline and origination of new activity require a reduction in current levels of uncertainty.

    Mitigation: Focus on managing risk well and serving clients; adapting to client focus on short-term supply chain optimization rather than strategic priorities.

    Impact of tariffs and trade warsNear-term to medium-term

    Tariffs could be inflationary by 0.5% (economists' view). Potential for distortions in consumer spending (front-loading).

    Mitigation: Monitoring client reactions and supply chain adjustments; advocating for the administration to negotiate trade deals quickly.

    Sticky inflationMedium-term

    Not quantified, but noted as a persistent issue.

    Mitigation: Acknowledging the issue and its potential impact on interest rates and economic conditions.

    Regulatory flaws in the systemOngoing

    SLR, G-SIB, CCAR, Basel III, and LCR have deep flaws, potentially crippling the system and making it harder for banks to serve a stabilizing function.

    Mitigation: Advocating for comprehensive regulatory reform to free up capital and liquidity, and to create a more rational and thoughtful system.

    Lower income segment relative weaknessCurrent

    Cash buffers are lower and spending is weaker than peak moments, but no evidence of distress.

    Mitigation: Monitoring spending data and cash buffers; noting some increases in spending from this segment in April.

    Airline travel headwindsCurrent

    Observed through card spend data.

    Mitigation: Noted as a narrow drop, not necessarily an indicator for broader patterns; potential for specific explanations.

    What to watch in Q2 FY25

    5

    Resolution of tariff agreements and trade deals

    Next 4 months
    CurrentUncertainty leading to 'wait-and-see' attitude among corporates.
    TargetClarity on agreements and reduced uncertainty.

    Why it matters

    The resolution of trade policies is critical for corporate strategic planning, M&A activity, and overall economic confidence, directly impacting the IB pipeline and client activity.

    I think some of those issues, you are going to see them resolve for better or for worse in the next 4 months. So maybe when we're doing this call next quarter, we will have to be guessing. We actually know what the effect of some of these things was with some predictability and stuff like that.

    Q&A highlights

    6

    How is the macro uncertainty impacting activity across customer segments, and how does the NII ex Markets guidance remain unchanged despite more expected rate cuts?

    Management noted a 'wait-and-see' attitude among corporate clients due to tariffs and uncertainty, with some consumer spending front-loading. The NII ex Markets guidance is maintained despite rate cut expectations due to favorable balance effects, outperforming deposit betas, and the removal of the card late fee rule placeholder.

    “I think latest curve has something like 3 cuts. And so we've talked a lot, obviously, about how we're asset sensitive. You now see our EAR disclosed in the supplement. And probably our empirical EAR is a little bit higher than our modeled EAR as a result of the relatively lower than modeled rates paid in consumer.”

    asked by Kenneth Usdin · answered by Jeremy Barnum

    2 min read6 chapters

    Detailed Narrative

    01

    Macroeconomic Outlook and Uncertainty

    Management highlighted a period of unusually elevated uncertainty, driven by recent geopolitical events and tariff policy changes. This has led to a 'wait-and-see' attitude among corporate clients, shifting their focus from strategic priorities to short-term supply chain optimization. While consumer spending data shows some front-loading due to expected price increases from tariffs, the overall impact on the economy remains uncertain, with economists estimating a 50-50 chance of recession.

    02

    Credit Reserves and Economic Scenarios

    The firm's total allowance for credit losses increased to $27.6 billion, reflecting a net reserve build of $973 million. This build was primarily driven by increasing the probability weightings associated with downside scenarios in the CECL framework, resulting in a weighted average unemployment rate of 5.8% embedded in the allowance. The consumer build was $441 million, and the wholesale build was $549 million, largely due to credit quality changes on certain exposures and net lending activity, rather than actual credit performance deterioration.

    03

    Capital Management and Regulatory Reform

    JPMorgan Chase distributed $11 billion of capital to shareholders, including $7.1 billion in net common share repurchases and a common dividend of $1.40 per share. The CET1 ratio stood at 15.4%, down 30 basis points due to capital distributions and higher RWA. Management emphasized the need for comprehensive regulatory reform across SLR, G-SIB, CCAR, Basel III, and LCR, arguing that current regulations are flawed and hinder banks' ability to intermediate markets and finance the system effectively.

    04

    NII Outlook and Rate Sensitivity

    Despite the latest interest rate curve suggesting three rate cuts, the NII ex Markets guidance for FY25 remains at approximately $90 billion. This stability is attributed to favorable balance effects, outperforming deposit betas in CDs and wholesale, and the removal of a placeholder for the potential impact of the card late fee rule. The firm-wide NII outlook increased to $94.5 billion, reflecting an increase in Markets NII, primarily offset in NIR.

    05

    Consumer Spending and Credit Quality

    Consumers and small businesses remain financially healthy, with spend, cash buffers, and credit utilization in line with expectations. While there are some headwinds in airline travel and relatively weaker conditions in lower-income segments, there are no signs of distress. Card Services net charge-offs increased due to the seasoning of recent vintages, but delinquencies and losses are in line with expectations, with the full-year card net charge-off rate still projected at approximately 3.6%.

    06

    Investment Banking and Markets Performance

    The CIB segment reported strong results, with IB fees up 12% year-on-year, driven by advisory and debt underwriting. Markets revenue surged 21%, with Equities up 48% due to elevated volatility and strong client activity. However, the investment banking outlook remains cautious, as client engagement is high but conversion of the pipeline and origination of new activity require a reduction in market uncertainty🌐.

    AI-generated summary of the company’s earnings call. Not investment advice.