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    JPMorgan Chase & Co (JPM)

    Q1 2024 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$169.09January 1, 2024
    Final Price$198.94April 1, 2024
    Price Change$29.85
    % Change+17.65%

    What went well

    • Strong capital position: JPMorgan Chase has a CET1 ratio of 15%, well above the minimum requirement of 11.9%, allowing the firm to increase dividends and consider deploying up to $20 billion in excess capital.
    • Exceptional performance in Wholesale Payments: The Wholesale Payments business is performing exceptionally well, taking market share and benefiting from significant investments in technology and global expansion, demonstrating a key competitive strength. ,
    • Upside potential in Investment Banking: JPMorgan is currently underearning in Investment Banking compared to cycle averages, indicating meaningful upside potential as the market normalizes and activity levels return to pre-pandemic levels.

    What went wrong

    • Net Interest Income (NII) is vulnerable to deposit repricing, as the bank has $900 billion of deposits paying effectively zero, and small changes in deposit rates can significantly impact NII. Jeremy Barnum stated, "very small changes there can make a big difference."
    • Economic uncertainties and geopolitical risks may negatively impact future performance. Jamie Dimon expressed caution about the economic outlook, stating, "We don't really know what's going to happen... I'm just on the more cautious side."
    • Persistent high expenses due to continued investment spending could pressure profitability, even in a downturn. Jeremy Barnum mentioned they "wouldn't change our long-term strategic investment plans... simply because of the business cycle in the short term."

    Q&A Summary

    1. Economic Outlook
      Q: What's your view on the economy and customer health?
      A: The consumer and businesses are currently in good shape, with low unemployment and strong profits. However, there are significant uncertainties due to fiscal spending, QE, and geopolitical risks. We remain cautious about potential inflection points in the economy over the next two to three years. (Document )

    2. Capital Levels and Overearning
      Q: Where are you overearning today with a 15% CET1 ratio?
      A: We are overearning primarily in deposit margins, especially in consumer, due to low rates paid on deposits relative to high policy rates. We expect sequential declines in NII as deposit margins compress. We're also overearning from credit, with wholesale charge-offs particularly low. (Document )

    3. Net Interest Income Outlook
      Q: What's driving your NII outlook and deposit migration trends?
      A: Deposit migration from checking and savings to higher-yielding CDs continues, and we expect ongoing migration even if rates change. Our NII guidance considers the current yield curve and ongoing migration, with some offset from credit card revolve growth. We remain cautious as small changes in deposit pricing can significantly impact NII. (Documents , )

    4. Investment Banking Recovery
      Q: Are you under-earning in Investment Banking?
      A: Yes, we're under-earning as Investment Banking fees are below cycle averages. There is meaningful upside potential as the fee wallet normalizes. We're seeing good momentum in ECM and DCM, but M&A faces regulatory headwinds. We remain focused on capturing market share when conditions improve. (Documents , )

    5. Commercial Real Estate Exposure
      Q: Is higher rates impacting your commercial real estate?
      A: We're fine with good reserves. Higher rates could reduce asset values by 20%, affecting real estate and other assets. If higher rates come with a recession, it could be tougher for real estate, but if the economy remains strong, the sector should muddle through. (Document )

    6. Basel III Impact on Capital
      Q: How does Basel III endgame affect your capital targets?
      A: At 15% CET1, we're prepared for Basel III endgame as proposed. The most important factor for our 17% through-the-cycle target is the denominator expansion. Regardless of the outcome, we'll optimize and adjust, but Basel III will be a headwind. (Document )

    7. First Republic Acquisition Impact
      Q: How is the First Republic acquisition performing?
      A: The acquisition is performing better than expected, with annualized earnings exceeding $2 billion. Integration expenses are coming in lower than initially assumed due to retaining a larger franchise. Discount accretion was front-loaded, so earnings will level off over time. (Document )

    8. Trading Balance Sheet Deployment
      Q: How are you using your balance sheet in trading?
      A: We're deploying more balance sheet into Markets businesses, resulting in higher revenues. While capital and RWA increased this quarter, it's linked to higher run rates in Markets. We're disciplined in balancing capital deployment with returns and will capitalize on opportunities with our strong capital position. (Document )

    9. Consumer Spending and Credit Trends
      Q: Any notable trends in consumer spend and credit?
      A: Card volumes are up 9% year-over-year. Overall spend is fine but not booming, with some substitution from discretionary to non-discretionary spending. Lower-income cohorts are showing spending slowdowns rather than leveraging up, which is encouraging from a credit perspective. (Document )

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