JPMorgan Chase & Co. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 was a year of record revenue and net income. CCB had record first-time investors and nearly 10 million new card accounts. CIB had record revenue in markets, payments, and security services. AWM had record long-term net inflows of $234 billion.
• Ended Q4 with CET1 ratio of 15.7%, up 40 basis points. RWA decreased $24 billion due to seasonal factors and lower lending, partially offset by card growth.
• In 2024, CCB, CIB, and AWM all had strong performances with record metrics in various areas.

Segment Performance

• CCB: Reported net income of $4.5 billion on revenue of $18.4 billion, up 1% year-on-year. Banking and Wealth Management revenue down 7% due to deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Home Lending revenue up 12% year-on-year. Card Services & Auto revenue up 14% largely driven by Card NII on higher revolving balances. Auto originations $10.6 billion, up 7%. Expenses $9.7 billion up 4% year-on-year. Credit costs $2.6 billion.
• CIB: Net income of $6.6 billion on revenue of $17.6 billion. Markets revenue up 21%, payments and security services also saw record revenue. Expenses $8.7 billion up 7% year-on-year. Average deposits up 9% year-on-year. Credit costs $61 million.
• AWM: Net income of $1.5 billion with pre-tax margin of 35%. Revenue $5.8 billion up 13% year-on-year. Long-term net inflows $76 billion for the quarter. AUM of $4 trillion and client assets of $5.9 trillion up 18% year-on-year.
• Corporate: Net income of $1.3 billion. Revenue $2 billion up $223 million year-on-year. NII down due to lower rates but offset by securities reinvestment activity. Expenses $550 million down $3 billion year-on-year due to absence of FDIC Special Assessment.

Guidance

• 2025 NII ex-markets expected to be approximately $90 billion. NII trough could be mid-2025 followed by growth.
• 2025 expense expected to be about $95 billion, driven by volume and revenue-related expenses, tech spend, marketing, and efficiency efforts.
• 2025 card net charge-off rate expected to be in line with previous guidance of approximately 3.6%.

Risks

• Uncertain economic environment and potential stagflation could drive higher credit losses across the board.
• Regulatory changes, including potential shifts in capital requirements and supervisory framework, pose uncertainties.
• Unemployment is a key driver of credit quality, and any significant increase could impact credit losses.

Q: Good morning. Jeremy, I wanted to ask about capital, and the framework for thinking about the opportunity cost of sitting on growing capital and deployment opportunities?

A: Yes, we feel comfortable with having extra capital given the environment. We expect to arrest the growth of excess capital, likely through buybacks if no organic deployment opportunities.

Q: Jamie, who is your successor? And how long will you stay?

A: We have exceptional people, Jen Piepszak will be COO. I'll stay for a few more years, basic case is yes.

Q: Maybe just on regulation, with a new administration, what areas of regulatory structure would be most impactful?

A: We want a coherent, rational regulatory framework. Liquidity, competition, and reducing non-substantive bureaucratic burden are important.

Q: As we think about the NII outlook and the cross currents in terms of the denominator, how should we think about those?

A: G-SIB surcharge was affected by seasonality, we're managing to current rules. The numerator analysis shows significant excess capital.

Q: It seems like you guys have backed off the view that you're materially over-earning on net interest income. What's the reason?

A: NII ex-market is down year-on-year, there's normalization. Deposit pricing is affected by competitive environment and yield curve.

Q: In terms of areas of vulnerability, what are the risks?

A: The biggest driver of credit is unemployment. Stagflation with higher rates and unemployment would drive higher credit losses.

Q: Circling back about capital levels, what are the pros and cons of a special dividend?

A: We don't plan a special dividend, as it doesn't have shareholder value and we prefer patient capital deployment.