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    JPM
    Earnings call· Dec 2024(Q4 FY24)

    JPMORGAN CHASE & CO JPM

    Jan 15, 2025 Source

    Executive summary

    JPMorgan Chase Q4 FY24 — Strong Performance Driven by Markets and IB Fees, NII Normalization Expected

    JPMorgan Chase delivered strong Q4 FY24 results, marked by robust performance in Markets and Investment Banking fees, despite NII normalization and increased expenses. The firm anticipates NII to trough in mid-2025 before returning to growth, while maintaining a cautious stance on the macro environment. Management plans to arrest the growth of excess capital through increased buybacks, all else being equal, and is focusing on internal efficiencies and roughly flat headcount for 2025.

    Highlights

    5

    • The firm reported net income of $14 billion, EPS of $4.81, and an ROTCE of 21% for Q4 FY24.

    • Revenue increased by $3.8 billion or 10% year-on-year to $43.7 billion.

    • Investment Banking fees were up 49% year-on-year, securing a #1 wallet share of 9.3% for 2024.

    • Markets revenue grew by $1.2 billion or 21% year-on-year to $7 billion.

    • Asset & Wealth Management achieved record long-term net inflows of $234 billion for the full year.

    Concerns

    4

    • NII ex Markets decreased by $548 million or 2% year-on-year due to lower rates and deposit margin compression.

    • Expenses, excluding the prior year's FDIC special assessment, were up $1.2 billion or 5% year-on-year, driven by compensation and brokerage fees.

    • Credit costs totaled $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve build of $267 million.

    • The 2025 Card net charge-off rate is expected to be approximately 3.6%, in line with previous guidance.

    Guidance & targets

    8
    CategoryTargetConfidence
    NII ex Markets
    approximately $90 billion
    high materiality
    High
    Firm-wide NII
    approximately $94 billion
    high materiality
    High
    Card net charge-off rate
    approximately 3.6%
    medium materiality
    High
    Total expense
    about $95 billion
    high materiality
    High
    Card loan growth
    below the 12% pace we saw in 2024
    medium materiality
    Medium
    Firm-wide deposits growth trend
    more visible growth trend assert itself
    medium materiality
    Medium
    Deposit margin
    modest compression
    medium materiality
    Medium
    NII trough
    sometime in the middle of the year, followed by growth
    high materiality
    Medium

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Firm-wide
    Strong Q4 results with significant year-on-year revenue growth. Full-year performance also strong when excluding significant items.
    EPS: $4.81ROTCE: 21%Expenses: $22.8 billion (down 7% YoY)Expenses (ex-FDIC special assessment): up 5% YoYCredit costs: $2.6 billionFull-year Net Income (ex-significant items): $54 billionFull-year EPS (ex-significant items): $18.22Full-year Revenue (ex-significant items): $173 billionFull-year ROTCE (ex-significant items): 20%
    		$43.7 billion10%—Net income: $14 billion
    CCB (Consumer & Community Banking)
    Revenue growth driven by Card Services & Auto and Home Lending, offsetting declines in Banking & Wealth Management due to deposit margin compression. Strong card acquisition and revolver growth. Significant credit costs driven by Card.
    Banking & Wealth Management revenue: down 7% YoYCard Services & Auto revenue: up 14% YoYHome Lending revenue: up 12% YoYAverage deposits: down 4% YoY, flat sequentiallyClient investment assets: up 14% YoYCard outstandings: up 11%Auto originations: $10.6 billion (up 7%)Expenses: $9.7 billion (up 4% YoY)Credit costs: $2.6 billionNet charge-offs: $2.1 billion (up $428 million YoY)Net reserve build: $557 million
    		$18.4 billion1%—Net income: $4.5 billion
    CIB (Commercial & Investment Bank)
    Exceptional performance in Investment Banking fees and Markets revenue. Strong wallet share maintained. Lending revenue also grew. Client deposits showed strong growth.
    IB fees: up 49% YoYIB wallet share: 9.3% for 2024Advisory fees: up 41%Debt underwriting fees: up 56%Equity underwriting fees: up 54%Payments revenue: $4.7 billion (up 3% YoY ex-equity investments)Lending revenue: $1.9 billion (up 9% YoY)Markets revenue: $7 billion (up 21% YoY)Fixed Income Markets: up 20%Equities Markets: up 22%Securities Services revenue: $1.3 billion (up 10% YoY)Expenses: $8.7 billion (up 7% YoY)Average banking and payments loans: down 2% YoY, down 1% sequentiallyGlobal Corporate and Investment Banking loans: down 2% QoQCommercial Banking middle market loans: down 2%Commercial real estate loans: flatAverage client deposits: up 9% YoY, 5% sequentiallyCredit costs: $61 million
    		$17.6 billion——Net income: $6.6 billion
    AWM (Asset & Wealth Management)
    Revenue growth driven by higher management fees, market levels, and strong net inflows. Significant inflows across all asset classes and channels. AUM and client assets saw substantial year-on-year growth.
    Pretax margin: 35%Expenses: $3.8 billion (up 11% YoY)Long-term net inflows: $76 billion (Q4), $234 billion (FY24)Liquidity net inflows: $94 billion (Q4), $140 billion (FY24)Client asset net inflows: $468 billion (FY24)AUM: $4 trillion (up 18% YoY)Client assets: $5.9 trillion (up 18% YoY)Loans: up 2% QoQDeposits: up 5% QoQ
    		$5.8 billion13%—Net income: $1.5 billion
    Corporate
    Net income improved significantly due to lower net investment securities losses and the absence of the prior year's FDIC special assessment. NII was impacted by lower rates.
    NII: $2 billion (down $415 million YoY)NIR: net loss of $30 million (vs net loss of $668 million prior year)Expenses: $550 million (down $3 billion YoY)
    		$2 billionup $223 million—Net income: $1.3 billion

    Operational metrics

    18
    NII ex Markets
    $548 milliondown 2% YoY
    Q4 FY24

    Driven by lower rates, deposit margin compression, and lower CCB deposit balances, largely offset by securities reinvestment, higher Card revolving balances, and higher wholesale deposit balances.

    NII ex Markets (ex-prior year net investment securities losses)
    21%up
    Q4 FY24

    Largely on higher asset management fees and Investment Banking fees.

    Expenses (ex-FDIC special assessment)
    $1.2 billionup 5% YoY
    Q4 FY24

    Predominantly driven by compensation as well as higher brokerage and distribution fees.

    Net charge-offs
    $2.4 billion
    Q4 FY24

    Firm-wide.

    Net reserve build
    $267 million
    Q4 FY24

    Firm-wide.

    Full-year Net Income (ex-significant items)
    $54 billion
    FY24

    Excluding a number of significant items in 2024.

    Full-year EPS (ex-significant items)
    $18.22
    FY24

    Excluding a number of significant items in 2024.

    Full-year Revenue (ex-significant items)
    $173 billion
    FY24

    Excluding a number of significant items in 2024.

    Full-year ROTCE (ex-significant items)
    20%
    FY24

    Excluding a number of significant items in 2024.

    Net common share repurchases
    $4 billion
    Q4 FY24

    Included in capital distributions.

    Risk-Weighted Assets (RWA) decrease
    $24 billion
    Q4 FY24

    Reflects seasonal decline in Markets activity and lower wholesale lending, predominantly offset by a seasonal increase in Card.

    CCB Net charge-offs
    $2.1 billionup $428 million YoY
    Q4 FY24

    Driven by Card.

    CCB Net reserve build
    $557 million
    Q4 FY24

    Predominantly driven by higher Card revolving balances.

    Corporate NIR net loss
    $30 millioncompared with a net loss of $668 million in the prior year
    Q4 FY24

    Driven by lower net investment securities losses this quarter.

    Corporate expenses (ex-FDIC special assessment)
    $2.9 billion
    Prior year

    Absence of this assessment was a key driver for lower Corporate expenses in Q4 FY24.

    G-SIB surcharge score
    comfortably in the 5% bucket
    Q4 FY24

    Due to normal seasonality, despite a high trend in Q3.

    Numerator for capital
    $275 billion
    Q4 FY24

    Approximate quantum of the numerator for capital, indicating a 'ton of excess' at 15.7% CET1.

    Headcount trajectory
    roughly flat headcount
    2025

    Management asked teams to support growth while living within their means on headcount, with exceptions for high-certainty investments and critical risk/control areas.

    Industry KPIs

    13
    MetricValueDetails
    Loans—
    Deposits—
    Rotce ROE21%%
    Cet1 ratio15.7%%
    Capital returns$4 billionUSD
    Fee income lines$4.7 billionUSD
    Allowance reserves—
    Net interest income$90 billionUSD
    Net interest margin—
    Net charge offs npls$2.4 billionUSD
    Total operating expenses$22.8 billionUSD
    Provision for credit losses$2.6 billionUSD
    Efficiency ratio operating leverage—

    Risks & headwinds

    6
    NII normalization and deposit margin compressionQ4 FY24

    NII ex Markets down $548 million or 2% YoY

    Mitigation: Impact largely offset by securities reinvestment, higher revolving balances in Card, and higher wholesale deposit balances.

    Inflationary pressures2025

    inflation remains a source of some upward pressure

    Mitigation: Generating efficiencies to help offset it.

    Macroeconomic uncertainties and asset price optimism2025

    tension, the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations

    Mitigation: Focused on being prepared for a wide range of scenarios.

    Wholesale credit normalizationOngoing

    wholesale credit is pretty hard to predict... at some point, that has to normalize to a slightly more reasonable level

    Mitigation: Extensive stress tests on portfolio sensitivities to rate shock; underwriting designed to protect from rate shock.

    Stagflation (higher rates with higher unemployment)

    will drive higher credit losses literally across the board

    Mitigation: Not predicting it, but acknowledging it as a vulnerability.

    Policy uncertainty impacting loan growthNear term

    some aspects of the policy uncertainty that we might be facing are making them a little bit more cautious than they otherwise would be about what they're executing in the near term

    Mitigation: Waiting to see how new year brings clarity and tangible improvements.

    What to watch in Q1 FY25

    5

    CET1 ratio growth

    Next quarter
    Current15.7%
    TargetGrowth arrested

    Why it matters

    Management aims to arrest the growth of excess capital, implying increased buybacks if organic deployment opportunities don't materialize, impacting shareholder returns.

    we've concluded that we do have enough. We have enough excess. And given that, we would like to not have the excess grow from here... it means more capital return through buybacks, all else being equal, in order to arrest the growth of the excess.

    Q&A highlights

    7

    What is the framework for thinking about the opportunity cost of sitting on a growing capital base, and how high might it go versus waiting for deployment opportunities? What is the current plan for managing excess capital?

    Management is comfortable with the current level of excess capital and believes it makes sense to hold it for future deployment opportunities. However, they have concluded that the excess does not need to grow further. This implies that, absent organic deployment, more capital will be returned through buybacks to arrest the growth of excess capital.

    “we've concluded that we do have enough. We have enough excess. And given that, we would like to not have the excess grow from here. So when you think about the implications of that, given the amount of organic capital generation that we're producing, it means that -- unless we find, in the near term, opportunities for organic deployment or otherwise, it means more capital return through buybacks, all else being equal, in order to arrest the growth of the excess.”

    asked by John McDonald · answered by Jeremy Barnum

    2 min read6 chapters

    Detailed Narrative

    01

    Capital Management Strategy

    JPMorgan Chase feels comfortable with its current store of excess capital, believing it positions the firm for future deployment opportunities. Management has concluded that the excess capital does not need to grow further. This implies that, absent near-term organic deployment opportunities, the firm will increase capital return through buybacks to arrest the growth of this excess capital, while reserving the right to adjust this trajectory.

    02

    Efficiency Initiatives and Headcount Management

    The firm's efficiency efforts are organic and continuous, with top-down focus areas including improving software engineer productivity and hardware utilization. While modernization spend may have peaked, the firm continues to invest in technology. For 2025, management aims for roughly flat headcount growth, with exceptions for high-certainty investment areas like branches and bankers, and critical risk and control functions like cyber security, to drive internal efficiencies.

    03

    CEO Succession and Jamie Dimon's Tenure

    Jamie Dimon affirmed his commitment to staying for 'several more years' as CEO, emphasizing that the firm's leadership path involves a broader team and the Board. He highlighted the presence of several exceptional internal candidates for succession, noting that the process is dynamic and subject to various personal and professional factors over time⏳. He also praised Daniel Pinto's significant contributions to building the Investment Bank.

    04

    Regulatory Environment and Framework

    Management reiterated its desire for a coherent, rational, and holistically assessed regulatory framework that supports banks' role in the economy, rather than being reflexively anti-bank. They advocate for a data-driven approach that balances safety with growth, hoping for less bureaucratic and more substantive supervision. The complexity of capital requirements, influenced by Basel III Endgame, G-SIB, and other factors, necessitates a comprehensive and analytical approach.

    05

    Loan Growth and Business Sentiment

    Despite improved business sentiment and general optimism, the firm has not observed a significant pickup in loan growth. This is attributed to wide-open capital markets, allowing larger corporates to access funding elsewhere, healthy balance sheets in small businesses, and some residual caution potentially linked to policy uncertainty. Loan growth inflection is more likely in deal-driven areas like acquisition finance.

    06

    NII Outlook and Deposit Dynamics

    JPMorgan Chase expects NII ex Markets to normalize, with a projected trough in mid-2025, followed by sequential growth in the second half of the year, assuming the forward rate curve holds. Firm-wide deposits have stabilized, with a more visible growth trend anticipated in H2 2025, already evident in consumer checking deposits. Modest deposit margin compression is expected due to lower rates, but the difference between policy rates and consumer deposit rates remains elevated by historical standards.

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