Attached files
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| 8-K - 8-K - JPMORGAN CHASE & CO | jpmc1q18form8k.htm |
1Q18 Financial Results
April 13, 2018
Pretax Net income EPS
New recognition and measurement accounting guidance – mark-to-market gains on
c rtain equity investments pr viously held at cost $505 $386 $0.11
1Q18 Financial highlights
ROTCE1
19%
Net payout LTM3
97%
Common equity Tier 12
11.8%
Note: Ef f ective January 1, 2018, the Firm adopted sev eral new accounting standards. Certain of the new accounting standards were applied retrospectiv ely and, accordingly , prior period amounts were rev ised. For additional
inf ormation, see pages 29-30 of the Earnings Release Financial Supplement
1 See note 2 on slide 11
2 Represents estimated common equity Tier 1 (“CET1”) capital and ratio under the Basel III Fully Phased-In capital rules to which the Firm will be subject as of January 1, 2019. See note 6 on slide 11
3 Last twelv e months (“LTM”). Net of stock issued to employ ees
4 See note 1 on slide 11
5 See note 3 on slide 11
6 See note 7 on slide 11
7 Net of stock issued to employ ees
1Q18 net income of $8.7B and EPS of $2.37
Managed revenue of $28.5B4
Adjusted expense of $16.0B5 and adjusted overhead ratio of 56%5
Fortress balance sheet
Average core loans6 ex-CIB up 8% YoY and 1% QoQ
Basel III Fully Phased-In CET1 capital of $184B2, Standardized CET1 ratio of 11.8%2 and Advanced CET1 ratio of 12.5%2
Delivered strong capital return
$6.7B7 distributed to shareholders in 1Q18, including $4.7B of net repurchases
Common dividend of $0.56 per share
Significant items ($mm, excluding EPS)
1
1Q18 Financial results1
Note: Ef f ective January 1, 2018, the Firm adopted sev eral new accounting standards. Certain of the new accounting standards were applied retrospectiv ely and, accordingly , prior period amounts were rev ised. For additional
inf ormation, see pages 29-30 of the Earnings Release Financial Supplement
Note: Totals may not sum due to rounding
1 See note 1 on slide 11
2 Actual numbers f or all periods, not ov er/(under)
3 See note 2 on slide 11
4 See note 3 on slide 11
5 Fully taxable-equiv alent adjustments (“TEA”) of $613mm in 1Q18, compared to $911mm in 1Q17
$B, excluding EPS
Firmwide total credit reserves of $14.5B
Consumer reserves of $9.5B
Wholesale reserves of $5.0B – net release of $170mm in 1Q18
$ O/(U)
1Q18 4Q17 1Q17
Net interest income $13.5 $0.1 $1.1
Noninterest revenue 15.1 2.6 1.6
Managed revenue1 28.5 2.8 2.7
Expense 16.1 1.2 0.8
Credit costs 1.2 (0.1) (0.2)
Reported net income $8.7 $4.5 $2.3
Net income applicable to common stockholders $8.2 $4.5 $2.3
Reported EPS $2.37 $1.30 $0.72
ROE2 15% 7% 11%
ROTCE2,3 19 8 13
Overhead ratio – managed1,2 56 58 59
Memo: Adjusted expense 4 $16.0 $0.9 $0.9
Memo: Adjusted overhead ratio 1,2,4 56% 59% 58%
1Q18 managed revenue
reflects a ~$0.3B YoY decline in
tax-equivalent adjustments5
1Q18 Tax rate
Effective rate: 18.3%
Managed rate: 22.7%1,5
$B 1Q18 4Q17 1Q17
Net charge-offs $1.3 $1.3 $1.7
Reserve build/(release) (0.2) – (0.3)
Credit costs $1.2 $1.3 $1.3
1Q18 ROE O/H ratio
CCB 25% 55%
CIB 22% 54%
CB 20% 39%
AWM 34% 74%
2
1Q18 4Q17 1Q17
Basel III Standardized Fully Phased-In1
CET1 capital $184 $183 $184
CET1 capital ratio 11.8% 12.1% 12.3%
Tier 1 capital $209 $209 $209
Tier 1 capital ratio 13.5% 13.8% 14.0%
Total capital $238 $238 $239
Total capital ratio 15.3% 15.8% 15.9%
Risk-weighted assets $1,554 $1,510 $1,499
Firm SLR
2 6.5% 6.5% 6.6%
Total assets (EOP) $2,610 $2,534 $2,546
Tangible common equity (EOP)
3
$184 $183 $185
Tangible book value per share
3
$54.05 $53.56 $52.04
Fortress balance sheet and capital
$B, except per share data
1 Estimated f or the current period. The prior y ear risk-weighted assets, as well as the ratios, hav e been rev ised to conf orm with the current period presentation. Ref lects the capital rules to which the Firm will be subject commencing
January 1, 2019. See note 6 on slide 11
2 Estimated f or the current period. Ref lects the supplementary lev erage ratio (“SLR”) which is ef f ective as of January 1, 2018. See note 6 on slide 11
3 See note 2 on slide 11
1Q18 Basel III
Advanced Fully
Phased-In of 12.5%1
3
Regulatory capital updates –
Stress Capital Buffer (“SCB”) and Enhanced Supplementary Leverage Ratio (“eSLR”)
Estimated JPM CET1 requirement
including SCB1
Initial reaction
Proposed changes to minimum regulatory capital requirements
We look forward to participating in the comment process and finalization of these new rules
Note: Percentages based on Basel III Standardized RWA
¹ Estimated SCB is deriv ed f rom prior FRB results, inclusiv e of 4 quarters of div idends, f loored at 2.5%; minimums on a f ully phased-in basis
SCB
eSLR
SCB
eSLR
4.5% 4.5% 4.5%
3.5% 3.5% 3.5%
4.0%
3.0% 2.5%
2015 2016 2017
Regulatory minimum GSIB surcharge SCB
~12.0%
~11.0% ~10.5%
~~
~
Not including a management buffer
4
Proposal incorporates CCAR stress testing into minimum Standardized capital requirements
SCB replaces the 2.5% capital conservation buffer
Corresponding changes to Tier 1 Leverage while Advanced and eSLR are unchanged
The proposed SCB is equal to the peak-to-trough CET1 ratio in the CCAR FRB Severely Adverse scenario inclusive of 4
quarters of planned dividends – floored at 2.5% for CET1
Proposal changes the minimum eSLR requirements from the current uniform 5% for a Bank Holding Company (“BHC”) and
6% for an Insured Depository Institution to 3% plus half of the BHC’s GSIB capital surcharge
Generally support convergence of stress testing and minimum capital
requirements
Firms should carry adequate capital to withstand firm-specific severe stress
Scenario and results volatility, FRB model and process opacity – may have
implications for size of management buffers
Material double counting between U.S. gold-plated GSIB surcharge and GSIB
CCAR instructions – reassess overall capital framework
Capital position and earnings power will enable compliance with appropriate
timeline
Consistency with international standards is positive – but further propagation of
the GSIB surcharge without addressing known issues is of concern
Equity $51.0 $51.0 $51.0
ROE 25% 19% 15%
Overhead ratio 55 55 58
Average loans $475.1 $475.0 $466.8
Average deposits 659.6 652.0 622.9
Active mobile customers (mm) 30.9 30.1 27.3
Debit & credit card sales volume3 $232.4 $245.1 $209.4
$ O/(U)
1Q18 4Q17 1Q17
Revenue $12,597 $527 $1,627
Consumer & Business Banking 5,722 165 816
Home Lending 1,509 67 (20)
Card, Merchant Services & Auto 5,366 295 831
Expense 6,909 237 514
Credit costs 1,317 86 (113)
Net charge-offs 1,317 101 (362)
Change in allowance – (15) 249
Net income $3,3 6 $695 $1,338
Consumer & Community Banking1
$mm
Net income of $3.3B
Revenue of $12.6B, up 15% YoY, driven by higher NII on deposit
and card margin expansion and balance growth, lower Card net
acquisition costs and higher auto lease volumes
Expense of $6.9B, up 8% YoY, driven by investments in
technology and marketing, higher auto lease depreciation and
business growth
Credit costs of $1.3B, down $113mm YoY
1Q17 included a $218mm write-down of the student loan
portfolio
Financial performance
1 See note 1 on slide 11
For additional f ootnotes see slide 12
Average loans up 2% and core loans up 8% YoY
Average deposits up 6% YoY
Active mobile customers up 13% YoY
Client investment assets up 13% YoY
Credit card sales up 12% YoY; merchant processing volume up
15% YoY
Key drivers/statistics ($B)2 Key drivers/statistics ($B) – detail by business
1Q18 4Q17 1Q17
Consumer & Business Banking
Average Business Banking loans $23.7 $23.3 $22.5
Business Banking loan originations 1.7 1.8 1.7
Client investment assets (EOP) 276.2 273.3 245.1
Deposit margin 2.20% 2.06% 1.88%
Home Lending
Average loans $240.4 $240.7 $233.0
Loan originations4 18.2 24.4 22.4
EOP total loans serviced 804.9 816.1 836.3
Net charge-off/(recovery) rate5 0.03% (0.03)% 0.10%
Card, Merchant Services & Auto
C rd verage loans $142.9 $143.5 $137.2
Auto v r ge loans and leased assets 83.4 82.2 79.1
Auto loan and lease originations 8.4 8.2 8.0
Card net charge-off rate 3.32% .97% 2.94%
Card Services net revenue rate 11.61 1 .64 10.15
Credit Card sales volume6 $157.1 $168.0 $139.7
Merchant processing volume 316.3 321.4 274.3
5
Equity $70.0 $70.0 $70.0
ROE 22% 12% 18%
Overhead ratio 54 61 54
Comp/revenue 29 27 29
IB fees ($mm) $1,696 $1,798 $1,875
Average loans 114.8 111.5 113.7
Average client deposits3 423.3 417.0 391.7
Assets under custody ($T) 24.0 23.5 21.4
ALL/EOP loans ex-conduits and trade4 1.46% 1.92% 1.91%
Net charge-off/(recovery) rate4 0.07 0.08 (0.07)
Average VaR ($mm) $40 $32 $25
$ O/(U)
1Q18 4Q17 1Q17
Revenue $10,483 $2,965 $884
Investment banking revenue 1,587 (90) (127)
Treasury Services 1,116 38 135
Lending 302 (34) (87)
Total Banking 3,005 (86) (79)
Fixed Income Markets 4,553 2,336 338
Equity Markets 2,017 869 411
Securities Services 1,059 47 143
Credit Adjustments & Other (151) (201) 71
Total Markets & Investor Services 7,478 3,05 963
Expense 5,659 1,106 475
Cr dit costs (15 ) (288) (62)
Net income $3,974 $1,658 $733
Corporate & Investment Bank1
$mm Financial performance
Key drivers/statistics ($B)2
Net income of $4.0B on revenue of $10.5B
Banking revenue
IB revenue of $1.6B, down 7% YoY, driven by lower equity and
debt underwriting fees partially offset by higher advisory fees
Ranked #1 in Global IB fees for 1Q18
Treasury Services revenue of $1.1B, up 14% YoY, driven by the
impact of higher interest rates and growth in operating deposits
Lending revenue of $302mm
Markets & Investor Services revenue
Markets revenue of $6.6B includes ~$500mm mark-to-market
gains on certain equity investments previously held at cost and
~$150mm reduction of TEA driven by the enactment of the Tax
Cuts and Jobs Act (“TCJA”)
– Excluding MTM gains and TEA impact, YoY Markets revenue
was up 7%, Fixed Income Markets revenue was flat, and
Equity Markets revenue was up 25% driven by strength
across products
Securities Services revenue of $1.1B, up 16% YoY
Credit Adjustments & Other, a loss of $151mm
Expense of $5.7B, up 9% YoY, driven by higher compensation and
volume-related transaction costs
Credit costs benefit of $158mm
Note: Ef f ective January 1, 2018, the Firm adopted sev eral new accounting standards. Certain of the new accounting standards were applied retrospectiv ely and, accordingly , prior period amounts were rev ised. For additional
inf ormation, see pages 29-30 of the Earnings Release Financial Supplement
1 See note 1 on slide 11
For additional f ootnotes see slide 12
6
Equity $20.0 $20.0 $20.0
ROE 20% 18% 15%
Overhead ratio 39 39 41
Gross IB Revenue ($mm) $569 $608 $666
Average loans 202.4 202.8 191.5
Average client deposits 175.6 181.8 176.8
Allowance for loan losses 2.6 2.6 2.9
Nonaccrual loans 0.7 0.6 0.9
Net charge-off/(recovery) rate3 – % 0.04% (0.02)%
ALL/loans3 1.28 1.26 1.49
1Q18 4Q17 1Q17
Revenue $2,166 ($187) $148
Middle Market Banking 895 25 111
Corporate Client Banking 687 (24) 21
Commercial Term Lending 352 (4) (15)
Real Estate Banking 164 (2) 30
Other 68 (182)
Expense 844 (6 ) 19
Cr dit costs (5) 57 32
Net income $ ,025 $6 $226
$ O/(U)
$mm Financial performance
Key drivers/statistics ($B)2
Net income of $1.0B
Revenue of $2.2B, up 7% YoY
Net interest income of $1.6B, up 14% YoY
Gross IB revenue of $569mm, down 15% YoY on lower industry
wallet
Revenue down 8% QoQ, largely driven by the impact of the
enactment of TCJA in 4Q17
Expense of $844mm, up 2% YoY and down 7% QoQ
1Q17 and 4Q17 included $29mm and ~$100mm of impairment
of leased assets, respectively
Credit costs benefit of $5mm
Net charge-off rate of 0 bps
Average loan balances of $202B, up 6% YoY and flat QoQ
C&I4 up 5% YoY and down 1% QoQ
CRE4 up 7% YoY and 1% QoQ
Average client deposits of $176B, down 1% YoY and 3% QoQ
Commercial Banking1
Note: Ef f ective January 1, 2018, the Firm adopted sev eral new accounting standards. Certain of the new accounting standards were applied retrospectiv ely and, accordingly , prior period amounts were rev ised. For additional
inf ormation, see pages 29-30 of the Earnings Release Financial Supplement
1 See note 1 on slide 11
For additional f ootnotes see slide 12
7
Equity $9.0 $9.0 $9.0
ROE 34% 28% 16%
Pretax margin 26 28 15
Assets under management (AUM) $2,016 $2,034 $1,841
Client assets 2,788 2,789 2,548
Average loans 132.6 127.8 118.3
Average deposits 144.2 142.1 158.8
Financial performance
Key drivers/statistics ($B)2
Net income of $770mm
Revenue of $3.5B, up 7% YoY, driven by higher management fees
on growth in AUM as well as strong banking results
Expense of $2.6B, down 7% YoY, driven by lower legal expense,
partially offset by higher revenue-driven external fees and
compensation expense
AUM of $2.0T, up 10% YoY
Client assets of $2.8T, up 9% YoY
Net inflows of $16B into long-term products and net outflows of
$21B from liquidity products
Average loan balances of $133B, up 12% YoY
Average deposit balances of $144B, down 9% YoY and up 1%
QoQ
Asset & Wealth Management1
$mm
1Q18 4Q17 1Q17
Revenue $3,506 ($132) $218
Ass t Management 1,787 (182) 99
Wealth Ma g ment 1,719 50 119
xpense 2,581 (31) (200)
Credit costs 15 6 (3)
Net income $770 $116 $385
$ O/(U)
Note: Ef f ective January 1, 2018, the Firm adopted sev eral new accounting standards. Certain of the new accounting standards were applied retrospectiv ely and, accordingly , prior period amounts were rev ised. For additional
inf ormation, see pages 29-30 of the Earnings Release Financial Supplement
1 See note 1 on slide 11
2 Actual numbers f or all periods, not ov er/(under)
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1Q18 4Q17 1Q17
Treasury and CIO ($187) ($253) ($120)
Other Corporate (196) 2,196 (298)
Net income ($383) $1,943 ($418)
$ O/(U)
$mm Financial performance
Treasury and CIO
Net loss of $187mm primarily driven by investment securities
losses
Other Corporate
Net loss of $196mm, driven by tax adjustments and ~$100mm
after-tax loss on certain legacy private equity investments
4Q17 included ($2.7)B impact of TCJA
1Q17 benefited from the release of certain legal reserves
Corporate
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Outlook
Firmwide
Expect FY2018 net interest income to be $54-55B
Expect FY2018 average core loan growth of 6-7%, excluding CIB loans
Expect FY2018 noninterest revenue growth of ~7%1, market dependent
Expect FY2018 adjusted expense of ~$63B, including the $1.2B impact of the revenue
recognition accounting standard
Expect FY2018 effective income tax rate to be ~20%
1 2018 noninterest rev enue growth expectation of ~7% based on 2017 noninterest rev enue of $53.3B, which has been rev ised to ref lect the $1.2B impact of the rev enue recognition accounting standard
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Notes
Notes on non-GAAP financial measures
1. In addition to analyzing the Firm’s results on a reported basis, management review s Firmw ide results, including the overhead ratio, on a “managed” basis; these Firmw ide managed basis
results are non-GAAP financial measures. The Firm also review s the results of the lines of business on a managed basis. The Firm’s definition of managed basis starts, in each case, w ith
the reported U.S. GAAP results and includes certain reclassif ications to present total net revenue for the Firm and each of the reportable 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. These f inancial measures allow 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 w ithin income tax expense. These adjustments have no impact on net income as reported by the Firm as a w hole or by the lines of
business. For a reconciliation of the Firm’s results from a reported to managed basis, see page 7 of the Earnings Release Financial Supplement.
2. 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 identif iable intangible assets (other than MSRs), net of related deferred tax
liabilities. For a reconciliation from common stockholders’ equity to TCE, see page 9 of the Earnings Release Financial Supplement. ROTCE measures the Firm’s net income applicable to
common equity as a percentage of average TCE. TBVPS represents the Firm’s TCE at period-end divided by common shares at period-end. Book value per share w as $67.59, $67.04
and $64.68 at March 31, 2018, December 31, 2017, and March 31, 2017, respectively. TCE, ROTCE, and TBVPS are utilized by the Firm, as w ell as investors and analysts, in assessing
the Firm’s use of equity.
3. Adjusted expense and adjusted overhead ratio are each non-GAAP financial measures. Adjusted expense excluded Firmw ide legal expense/(benefit) of $70 million, $(207) million and
$218 million for the three months ended March 31, 2018, December 31, 2017, and March 31, 2017 respectively. The adjusted overhead ratio measures the Firm’s adjusted expense as a
percentage of adjusted managed net revenue. Management believes this information helps investors understand the effect of these items on reported results and provides an alternate
presentation of the Firm’s performance.
4. Net charge-offs and net charge-off rates exclude the impact of PCI loans.
5. CIB calculates the ratio of the allow ance for loan losses to end-of-period loans excluding the impact of consolidated Firm-administered multi-seller conduits and trade f inance loans, to
provide a more meaningful assessment of CIB’s allow ance coverage ratio.
Notes on key performance measures
6. The Basel III regulatory capital, risk-w eighted assets and capital ratios, (fully phased-in effective January 1, 2019), and the Basel III supplementary leverage ratio (“SLR”), (fully-phased in
effective January 1, 2018), are all considered key regulatory capital measures. The capital adequacy of the Firm is evaluated against the Basel III approach (Standardized or Advanced)
that results, for each quarter, in the low er ratio (the “Collins Floor”). These measures are used by management, bank regulators, investors and analysts to assess and monitor the Firm’s
capital position. For additional information on these measures, including the Collins Floor, see Capital Risk Management on pages 82-91 of the Firm’s Annual Report on Form 10-K for the
year ended December 31, 2017.
7. Core loans represent loans considered central to the Firm’s ongoing businesses; core loans exclude loans classif ied as trading assets, runoff port folios, discontinued portfolios and
portfolios the Firm has an intent to exit.
11
Notes
Additional Notes on slide 5 – Consumer & Community Banking
2. Actual numbers for all periods, not over/(under)
3. The prior year amount w as revised to conform with the current period presentation
4. Firmw ide mortgage origination volume w as $20.0B, $26.6B and $25.6B for 1Q18, 4Q17 and 1Q17, respectively
5. Excludes the impact of purchased credit-impaired (PCI) loans, including PCI w rite-offs of $20mm, $20mm and $24mm for 1Q18, 4Q17 and 1Q17, respectively. See note 4 on slide 11
6. Excludes Commercial Card
Additional Notes on slide 6 – Corporate & Investment Bank
2. Actual numbers for all periods, not over/(under)
3. Client deposits and other third party liabilities pertain to the Treasury Services and Securities Services businesses
4. Loans held-for-sale and loans at fair value w ere excluded when calculating the loan loss coverage ratio and net charge-off/(recovery) rate. ALL/EOP loans as reported w as 1.00%, 1.27%
and 1.25% for 1Q18, 4Q17 and 1Q17, respectively. See note 5 on slide 11
Additional Notes on slide 7 – Commercial Banking
2. Actual numbers for all periods, not over/(under)
3. Loans held-for-sale and loans at fair value w ere excluded when calculating the net charge-off/(recovery) rate and loan loss coverage ratio
4. Commercial and Industrial (C&I) and Commercial Real Estate (CRE) groupings for CB are generally based on client segments and do not align w ith regulatory definitions
12
Forward-looking statements
This presentation 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, 2017, which has been filed with the Securities and
Exchange Commission and is available on JPMorgan Chase & Co.’s website
(http://investor.shareholder.com/jpmorganchase/sec.cfm), and on the Securities and Exchange Commission’s
website (www.sec.gov). JPMorgan Chase & Co. does not undertake to update any forward-looking statements.
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