JPMorgan Chase & Co. (NYSE:JPM):
THIRD-QUARTER RESULTS3
ROTCE1
Common equity Tier 11,4
Overhead ratio1
Net payout LTM5,6
15%
11.4%
65%
49%
FirmwideBalanceSheet
•
Period-end balance sheet down $156 billion YTD
•
Loans-to-deposits ratio of 64%, up 8% YTD
•
Core loans7 up 15% YoY and 4% QoQ
CCB
•
Consumer & Business Banking average deposits up 9%; Business
Banking average loans up 6%
ROE of 20%
•
Over 22 million active mobile customers, up 21%
OH of 57%
•
Credit card sales volume8 up 6% and
Merchant processing volume up 11%
CIB
•
Maintained #1 ranking for Global Investment Banking fees with 8.2%
wallet share for 3Q15
ROE of 8%
•
#1 wallet share in North America and EMEA in 3Q15
OH of 75%
CB
•
Loan balances up 13%
ROE of 14%
•
Eleventh consecutive quarter of single-digit NCO rate or net
recoveries
OH of 44% AM
•
Record average loan balances, up 7%
ROE of 20%
•
81% of mutual fund AUM ranked in the 1st or 2nd quartiles over 5
years
OH of 73%
Jamie Dimon, Chairman and CEO, commented on the financial
results:
“We had decent results this quarter. We saw the impact of a
challenging global environment and continued low rates reflected in
the wholesale businesses’ results, while the consumer businesses
benefited from favorable trends and credit quality. Overall, our
risk management discipline and diversified platforms across the
businesses are serving us well.”
Dimon added: “We continue to focus on our commitments, optimize
our balance sheet and manage our expenses. We are also building the
businesses for the future, dedicating resources to controls,
cybersecurity and technology.”
Dimon concluded: “Our position of strength allows us to make
significant investments to transform the businesses we operate,
deliver better experiences to our customers and clients, gain share
and be positioned to be a long-term winner.”
SIGNIFICANT ITEMS
- Third-quarter results included the
following significant items2:
- $2.2 billion of tax benefits ($0.57 per
share increase in earnings)
- $1.0 billion aftertax firmwide legal
expense ($0.26 per share aftertax decrease in earnings)
FORTRESS PRINCIPLES
- Tangible book value per share1,9 of
$47.36, up 8%
- Basel III common equity Tier 1
capital1,4 of $172 billion; ratio of 11.4%4
- Firm SLR1 of 6.3% and Bank SLR1 of
6.5%
- Compliant with U.S. LCR10 – HQLA11 of
$505 billion
OPERATING LEVERAGE
- Adjusted expense1 of $14.0 billion and
adjusted overhead ratio1 of 60%
CAPITAL RETURN
- $2.7 billion returned to shareholders6
in the third quarter
- $1.0 billion of net repurchases and
common dividend of $0.44 per share
SUPPORTED CONSUMERS, BUSINESSES & COMMUNITIES
- $1.5 trillion of credit and
capital12 raised in the first nine months of 2015
- $177 billion of credit for
consumers
- $16 billion of credit for U.S.
small businesses
- $462 billion of credit for
corporations
- $763 billion of capital raised
for clients
- $55 billion of credit and
capital raised for nonprofit and government entities, including
states, municipalities, hospitals and universities
1
For notes on non-GAAP financial measures,
including managed basis reporting, see page 6.
2
In addition, results included $281 million
net reduction in Firmwide credit reserves ($0.05 per share increase
in earnings)
For additional notes see page 7.
In the discussion below of JPMorgan Chase as a Firm and of its
business segments, information is presented on a managed basis. For
more information about managed basis, as well as other non-GAAP
financial measures used by management to evaluate the performance
of each line of business, see page 6. Percentage comparisons noted
in the sections below are calculated for the third quarter of 2015
versus the prior-year third quarter, unless otherwise
specified.
JPMORGAN CHASE (JPM)9
Results for JPM 2Q15 3Q14
($ millions, except per share data) 3Q15 2Q15
3Q14 $ O/(U) O/(U) % $ O/(U) O/(U) %
Net revenue $ 23,535 $ 24,531 $ 25,146 $ (996 ) (4 )% $
(1,611 ) (6 )% Noninterest expense 15,368 14,500 15,798 868
6 (430 ) (3 ) Provision for credit losses 682
935 757 (253 ) (27 ) (75
) (10 ) Net income $ 6,804 $ 6,290
$ 5,565 $ 514 8 %
$ 1,239 22 % Earnings per share 1.68
1.54 1.35 0.14 9
0.33 24 Return on tangible
common equity 15 % 14 % 13 %
Net revenue on a U.S. GAAP basis totaled $22.8 billion, $23.8
billion, and $24.5 billion for the third quarter of 2015, second
quarter of 2015, and third quarter of 2014, respectively.
Discussion of Results:
Net income was $6.8 billion, an increase of 22%.
Net revenue was $23.5 billion, down 6%, driven by lower CIB
Markets revenue including business simplification and lower
Mortgage Banking revenue.
Net interest income was $11.2 billion, down 1% compared to the
prior year, as lower investment securities balances and lower
trading net interest income were predominantly offset by loan
growth. Net interest income was up 2% quarter-over-quarter, driven
by higher loan yields and balances.
Noninterest expense was $15.4 billion, down 3%, driven by lower
CIB expense related to compensation and business simplification,
partially offset by higher legal expense.
The provision for credit losses was $682 million, down 10%, due
to lower net charge-offs, largely offset by lower reserve releases.
In the current quarter, consumer reserve releases of $591
million13, reflecting continued improvement in home prices and
delinquencies, were largely offset by an increase in reserves
across the wholesale businesses of $310 million driven by select
downgrades, including Oil & Gas.
The current quarter reflected tax benefits of $2.2 billion due
to the resolution of tax audits and the release of deferred
taxes.
CONSUMER & COMMUNITY BANKING
(CCB)
Results for CCB 2Q15 3Q14
($ millions) 3Q15 2Q15 3Q14 $ O/(U)
O/(U) % $ O/(U) O/(U) % Net revenue $ 10,879 $
11,015 $ 11,367 $ (136 ) (1 )% $ (488 ) (4 )%
Noninterest expense 6,237 6,210 6,305 27 — (68 ) (1 ) Provision for
credit losses 389 702 902
(313 ) (45 ) (513 ) (57 ) Net income
$ 2,630 $ 2,533 $ 2,529
$ 97 4 % $ 101 4 %
Discussion of Results:
Net income was $2.6 billion, an increase of 4%.
Net revenue was $10.9 billion, a decrease of 4%. Net interest
income was $7.2 billion, flat compared to the prior year,
reflecting spread compression offset by higher deposit and loan
balances and a reduction in the reserve for uncollectible interest
and fees. Noninterest revenue was $3.7 billion, down 12%, driven by
lower Mortgage Banking revenue.
Noninterest expense was $6.2 billion, a decrease of 1%, driven
by lower Mortgage Banking expense.
The provision for credit losses was $389 million, a decrease of
57%, driven by a larger reduction in the allowance for loan losses
and lower net charge-offs.
Consumer & Business Banking net income was $954
million, an increase of 3%.
Net revenue was $4.6 billion, down 2%. Net interest income was
$2.6 billion, down 7%, due to spread compression, largely offset by
higher deposit balances. Noninterest revenue was $2.0 billion, up
5%, driven by higher deposit-related fees, higher debit card
revenue and higher investment revenue.
Noninterest expense was $3.0 billion, a decrease of 3%, driven
by branch efficiencies.
Mortgage Banking net income was $602 million, an increase
of 29%.
Net revenue was $1.6 billion, a decrease of 23%, driven by lower
net servicing revenue and the absence of a non-recurring gain
reported in the prior year.
Noninterest expense was $1.1 billion, a decrease of 13%,
reflecting continuing mortgage efficiencies.
The provision for credit losses was a benefit of $534 million,
compared with a benefit of $19 million in the prior year, driven by
a larger reduction in the allowance for loan losses reflecting
continued improvement in home prices and delinquencies. The current
quarter provision reflected an allowance reduction of $575 million,
of which $375 million was related to the purchased credit-impaired
portfolio and $200 million was related to the non credit-impaired
portfolio.
Card, Commerce Solutions & Auto14 net income was $1.1
billion, a decrease of 6%.
Net revenue was $4.8 billion, an increase of 2%. Net interest
income was $3.4 billion, an increase of 4%, driven by a reduction
in the reserve for uncollectible interest and fees, and higher loan
balances. Noninterest revenue was $1.3 billion, down 4%, driven by
the impact of changes to co-brand partnerships and higher
amortization of new account origination costs, predominantly offset
by higher auto lease and card sales volumes.
Noninterest expense was $2.2 billion, up 8%, driven by higher
auto lease depreciation and higher marketing expense.
The provision for credit losses was $873 million, an increase of
3%, reflecting a smaller reduction in the allowance for loan losses
largely offset by lower net charge-offs.
CORPORATE & INVESTMENT BANK
(CIB)9
Results for CIB 2Q15 3Q14
($ millions) 3Q15 2Q15 3Q14 $ O/(U)
O/(U) % $ O/(U) O/(U) % Net revenue $ 8,168 $
8,723 $ 9,105 $ (555 ) (6 )% $ (937 ) (10 )%
Noninterest expense 6,131 5,137 6,035 994 19 96 2 Provision for
credit losses 232 50 (67 )
182 364 299 NM Net
income $ 1,464 $ 2,341 $ 1,680
$ (877 ) (37 )% $ (216 ) (13 )%
Discussion of Results:
Net income was $1.5 billion, a decrease of 13%. Net revenue was
$8.2 billion, a decrease of 10%.
Banking revenue15 was $2.8 billion, up 2%. Investment
Banking revenue was $1.5 billion, up 5%, on higher debt
underwriting fees and higher advisory fees, largely offset by lower
equity underwriting fees compared to a strong quarter in the prior
year, especially in EMEA. The business continued to rank #1 in
Global Investment Banking fees in third-quarter 2015. Treasury
Services revenue16 was $899 million, down 4%, reflecting lower net
interest income.
Markets & Investor Services revenue15 was $5.4 billion,
down 16%. Excluding the revenue decline related to business
simplification, total Markets revenue would have been down 6%1, and
Fixed Income Markets revenue would have been down 11%1. Fixed
Income Markets revenue reflected lower revenue in Commodities and
continued weakness in Credit, partially offset by strength in
Currencies & Emerging Markets; and also reflected higher
interest costs on higher long-term debt. Equity Markets revenue was
$1.4 billion, up 9%, with strong performance across derivatives and
cash driven by higher client volumes.
Noninterest expense was $6.1 billion, up 2%, as higher legal
expense was offset by lower compensation expense and the benefit
from business simplification.
The provision for credit losses was $232 million, up $299
million from the prior year, reflecting higher reserves driven by
Oil & Gas.
COMMERCIAL BANKING (CB)
Results for CB 2Q15 3Q14
($ millions) 3Q15 2Q15 3Q14 $ O/(U)
O/(U) % $ O/(U) O/(U) % Net revenue $ 1,644 $
1,739 $ 1,703 $ (95 ) (5 )% $ (59 ) (3 )%
Noninterest expense 719 703 668 16 2 51 8 Provision for credit
losses 82 182 (79 ) (100
) (55 ) 161 NM Net income $ 518
$ 525 $ 671 $ (7 )
(1 )% $ (153 ) (23 )%
Discussion of Results:
Net income was $518 million, a decrease of 23%.
Net revenue was $1.6 billion, down 3%, driven by yield
compression in both loans and deposits and lower investment banking
revenue, partially offset by higher lending balances. Net revenue
was down 5% quarter-over-quarter, driven by lower investment
banking revenue.
Noninterest expense was $719 million, up 8%, driven by higher
investment in controls, and was largely flat from the prior
quarter.
The provision for credit losses was $82 million, reflecting
higher reserves, including a modest build for Oil & Gas; the
prior year quarter was a benefit of $79 million.
ASSET MANAGEMENT (AM)
Results for AM 2Q15 3Q14
($ millions) 3Q15 2Q15 3Q14 $ O/(U)
O/(U) % $ O/(U) O/(U) % Net revenue $ 2,894 $
3,175 $ 3,046 $ (281 ) (9 )% $ (152 ) (5 )%
Noninterest expense 2,109 2,406 2,081 (297 ) (12 ) 28 1 Provision
for credit losses (17 ) — 9
(17 ) NM (26 ) NM Net income $
475 $ 451 $ 590 $ 24
5 % $ (115 ) (19 )%
Discussion of Results:
Net income was $475 million, a decrease of 19%.
Net revenue was $2.9 billion, a decrease of 5%. Net interest
income was $633 million, up 1%, driven by higher loan balances.
Noninterest revenue was $2.3 billion, down 7%, reflecting the sale
of the Retirement Planning Services business in 2014, lower
transactional revenue and lower valuations of seed capital
investments.
Noninterest expense was $2.1 billion, an increase of 1%, driven
by continued investment in both infrastructure and controls.
Assets under management were $1.7 trillion, flat compared to the
prior year, due to net inflows to long-term and liquidity products
offset by the effect of lower market levels.
CORPORATE17
Results for Corporate 2Q15
3Q14 ($ millions) 3Q15 2Q15 3Q14
$ O/(U) O/(U) % $ O/(U) O/(U) % Net revenue $
(50 ) $ (121 ) $ (75 ) $ 71 59 % $ 25 33 %
Noninterest expense 172 44 709 128 291 (537 ) (76 ) Provision for
credit losses (4 ) 1 (8 ) (5 )
NM 4 50 % Net income $ 1,717
$ 440 $ 95 $ 1,277
290 % $ 1,622 NM
Discussion of Results:
Net income was $1.7 billion, compared with net income of $95
million in the prior year.
Net revenue was a loss of $50 million, compared with a loss of
$75 million in the prior year. Noninterest expense was $172
million, a decrease of $537 million from the prior year, primarily
driven by lower legal expense.
The current quarter reflected tax benefits of $1.9 billion from the
resolution of various tax audits compared with tax benefits of
approximately $400 million in the prior year.
1. Notes on non-GAAP financial measures:
a) The Firm presents pretax income, net income (assumes a
tax rate of 38% for items that are tax deductible) and earnings per
share excluding certain notable items. These measures should be
viewed in addition to, and not as a substitute for, the Firm's
reported results. Management believes this information helps
investors understand the effect of these items on reported results
and provides an additional presentation of the Firm's performance.
The table below provides a reconciliation of reported results to
these non-GAAP financial measures:
Reconciliation of reported to
adjusted results Three months ended
September 30, 2015
Pretaxincome
Netincome
EPS (in millions, except per share) Reported
results $ 6,730 $ 6,804 $ 1.68 Adjustments: Firmwide legal
expense 1,347 973 0.26 Firmwide tax benefits — (2,164 ) (0.57 )
Consumer credit reserve releases (591 ) (366 ) (0.10 ) Wholesale
credit reserve builds 310 192
0.05 Total adjustments 1,066 (1,365 )
(0.36 )
Adjusted results $ 7,796
$ 5,439 $
1.32 b) In addition to analyzing the
Firm's results on a reported basis, management reviews the Firm's
results, including the overhead ratio, and the results of the lines
of business, on a “managed” basis, which is a non-GAAP financial
measure. The Firm's definition of managed basis starts with the
reported U.S. GAAP results and includes certain reclassifications
to present total net revenue for the Firm (and each of the business
segments) on a fully taxable-equivalent (“FTE”) basis. Accordingly,
revenue from investments that receive tax credits and tax-exempt
securities is presented in the managed results on a basis
comparable to taxable investments and securities. This non-GAAP
financial measure allows management to assess the comparability of
revenue arising from both taxable and tax-exempt sources. The
corresponding income tax impact related to tax-exempt items is
recorded within income tax expense. These adjustments have no
impact on consolidated net income as reported by the Firm as a
whole or by the lines of business. c) Tangible common equity
(“TCE”), return on tangible common equity (“ROTCE”) and tangible
book value per share (“TBVPS”) are each non-GAAP financial
measures. TCE represents the Firm’s common stockholders’ equity
(i.e., total stockholders’ equity less preferred stock) less
goodwill and identifiable intangible assets (other than MSRs), net
of related deferred tax liabilities. ROTCE measures the Firm’s
earnings as a percentage of average TCE. TBVPS represents the
Firm's TCE at period-end divided by common shares at period-end.
TCE, ROTCE and TBVPS are meaningful to the Firm, as well as
investors and analysts, in assessing the Firm’s use of equity.
d) Adjusted expense and adjusted overhead ratio are each
non-GAAP financial measures, and exclude Firmwide legal expense
($1.3 billion in the third quarter of 2015). Management believes
this information helps investors understand the effect of this item
on reported results and provides an alternate presentation of the
Firm’s performance. e) Estimated as of 3Q15. Common equity
Tier 1 (“CET1”) capital, the CET1 ratio and the supplementary
leverage ratio (“SLR”) under the Basel III Advanced Fully Phased-In
rules, are each non-GAAP financial measures. These measures are
used by management, bank regulators, investors and analysts to
assess and monitor the Firm’s capital position. For further
discussion of these measures, see Regulatory capital on pages
146–153 of JPMorgan Chase & Co.’s Annual Report on Form 10-K
for the year ended December 31, 2014 and pages 67-71 of the Firm's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.
f) The CIB provides the change in Total Markets and Fixed
Income Markets revenue excluding the revenue related to business
simplification, a non-GAAP financial measure, to provide a more
meaningful assessment of the underlying performance of the
business.
Additional notes:
3. Percentage comparisons noted in the bullet points are
calculated for the third quarter of 2015 versus the prior-year
third quarter, unless otherwise specified. 4. Represents
estimated CET1 capital and ratio under the Basel III Advanced Fully
Phased-In capital rules to which the Firm will be subject to as of
January 1, 2019. 5. Last twelve months (“LTM”). 6.
Net of employee issuance. 7. Core loans include loans
considered central to the Firm’s ongoing businesses; core loans
exclude loans classified as trading assets, runoff portfolios,
discontinued portfolios and portfolios the Firm has an intent to
exit. 8. Excludes Commercial Card. 9. Effective
January 1, 2015, the Firm adopted new accounting guidance for
investments in affordable housing projects that qualify for the
low-income housing tax credit. The guidance was required to be
applied retrospectively and accordingly, certain prior period
amounts have been revised to conform with the current period
presentation. For further discussion, see page 2 of the Earnings
Release Financial Supplement. 10.
Represents the estimated liquidity
coverage ratio (“LCR”) based on the U.S. LCR rules which became
effective January 1, 2015.
11.
High quality liquid assets (“HQLA”) is the
estimated amount of assets that qualify for inclusion in the U.S.
LCR, which became effective January 1, 2015.
12. The amount of credit provided to clients represents new
and renewed credit, including loans and commitments. The amount of
credit provided to small businesses reflects loans and increased
lines of credit provided by Consumer & Business Banking; Card,
Commerce Solutions & Auto; and Commercial Banking. The amount
of credit provided to nonprofit and government entities, including
states, municipalities, hospitals and universities, represents
credit provided by the Corporate & Investment Bank and
Commercial Banking. 13. Includes credit reserves related to
consumer loans reported in CCB, prime mortgage and home equity
loans reported in AM, and prime mortgage loans reported in
Corporate. 14. Chase Commerce Solutions, formerly known as
Chase Merchant Services, includes the Chase Paymentech, ChaseNet
and Chase Offers businesses. 15. Effective in the second
quarter of 2015, investment banking revenue (formerly investment
banking fees) incorporates all revenue associated with investment
banking activities, and is reported net of investment banking
revenue shared with other lines of business; previously such shared
revenue had been reported in Fixed Income Markets and Equity
Markets. Prior periods have been revised to conform with the
current period presentation. 16. Effective in the second
quarter of 2015, Trade Finance revenue was transferred from
Treasury Services to Lending. Prior periods have been revised to
conform with the current period presentation. 17. Effective
with the first quarter of 2015, the Firm began including the
results of Private Equity in the Other Corporate line within the
Corporate segment. Prior period amounts have been revised to
conform with the current period presentation. The Corporate
segment’s balance sheets and results of operations were not
impacted by this reporting change.
JPMorgan Chase & Co. (NYSE:JPM) is a leading global
financial services firm with assets of $2.4 trillion and operations
worldwide. The Firm is a leader in investment banking, financial
services for consumers and small businesses, commercial banking,
financial transaction processing, and asset management. A component
of the Dow Jones Industrial Average, JPMorgan Chase & Co.
serves millions of consumers in the United States and many of the
world's most prominent corporate, institutional and government
clients under its J.P. Morgan and Chase brands. Information about
JPMorgan Chase & Co. is available at www.jpmorganchase.com.
JPMorgan Chase & Co. will host a conference call today at
5:00 p.m. (Eastern) to present third quarter financial results. The
general public can access the call by dialing (866) 541-2724 or
(866) 786-8836 in the U.S. and Canada, or (706) 634-7246 for
international participants. Please dial in 10 minutes prior to the
start of the call. The live audio webcast and presentation slides
will be available on the Firm's website, www.jpmorganchase.com,
under Investor Relations, Investor Presentations.
A replay of the conference call will be available beginning at
approximately 9:00 p.m. on October 13, 2015, through midnight,
October 28, 2015, by telephone at (855) 859-2056 or (800) 585-8367
(U.S. and Canada) or (404) 537-3406 (international); use Conference
ID# 16741148. The replay will also be available via webcast on
www.jpmorganchase.com under Investor Relations, Investor
Presentations. Additional detailed financial, statistical and
business-related information is included in a financial supplement.
The earnings release and the financial supplement are available at
www.jpmorganchase.com.
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements are based on the current beliefs and
expectations of JPMorgan Chase & Co.’s management and are
subject to significant risks and uncertainties. Actual results may
differ from those set forth in the forward-looking statements.
Factors that could cause JPMorgan Chase & Co.’s actual results
to differ materially from those described in the forward-looking
statements can be found in JPMorgan Chase & Co.’s Annual Report
on Form 10-K for the year ended December 31, 2014, and Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2015 and June
30, 2015 which have been filed with the Securities and Exchange
Commission and are available on JPMorgan Chase & Co.’s website
(http://investor.shareholder.com/jpmorganchase), and on the
Securities and Exchange Commission’s website (www.sec.gov).
JPMorgan Chase & Co. does not undertake to update the
forward-looking statements to reflect the impact of circumstances
or events that may arise after the date of the forward-looking
statements.
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JPMorgan Chase & Co.Investors:Sarah Youngwood,
212-270-7325orMedia:Joe Evangelisti, 212-270-7438
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