JPMorgan Chase & Co. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Results: Net income $14.4 billion, EPS $5.07, return on tangible common equity (ROTCE) 20%. Revenue $47.1 billion (+9% year on year) driven by higher markets revenue and fees; NII impacted by balance sheet growth/mix vs lower rates. Expenses $24.3 billion (+8% year on year) due to higher volume and revenue-related expenses. Credit costs $3.4 billion, net charge-offs $2.6 billion, net reserve build $810 million. CET1 ratio 14.8%, down 30 basis points; higher risk-weighted assets (RWA) from wholesale lending.
• CCB Highlights: Consumers and small businesses resilient; retained retail deposit share; Sapphire portfolio had best year for new account acquisitions.
• CIB Highlights: Revenue growth across markets, payments, etc.; investment banking fees up, markets fixed income strong.
• AWM Highlights: Record revenue from management fees, long net inflows, and brokerage; AUM and client assets growth.

Segment Performance

• CCB: Net income $5 billion, revenue $19.5 billion (+9% year on year), driven by higher net interest income (NII) from higher revolving balances. Consumers and small businesses remain resilient; retained retail deposit share for the fifth consecutive year; Sapphire portfolio had the best year ever for new account acquisitions.
• CIB: Net income $6.9 billion, revenue $19.9 billion (+17% year on year), driven by higher revenues across markets, payments, investment banking, and securities. Investment banking fees up 16% year on year with strength in equity underwriting; fixed income in markets up 21% year on year.
• AWM: Net income $1.7 billion, pretax margin 36%, revenue $6.1 billion (+12% year on year) from management fees, long net inflows, and brokerage activity. AUM $4.6 trillion (+18% year on year), client assets $6.8 trillion (+20% year on year).
• Corporate: Net income $820 million, revenue $1.7 billion.

Guidance

• Fourth Quarter: Expect NII excluding markets ~$23.5 billion and total NII ~$25 billion. Adjusted expense ~$24.5 billion for the fourth quarter, full year ~$95.9 billion. For 2026, central case for NII excluding markets ~$95 billion; formal outlook to be provided at fourth quarter earnings and February update.
• Deposit Growth: Retail deposit growth dynamics affected by macro shifts; net new accounts strong, but average balance per customer evolution pushed out growth inflection.

Risks

• Wholesale Charge-offs: Elevated due to fraud in secured lending facilities (e.g., Tri Color $170 million charge-offs).
• NDFI Exposure: Potential credit risk with some non-bank financial institution (NDFI) lending; need to monitor underwriting and mix shifts.
• Macro Uncertainty: Labor market softening, interest rate changes, and AI impact on expenses are risks.

Question and Answer

• Q: Retail deposit assumptions for 2026? A: Macro shifts pushed out growth inflection, but long-term trajectory confident; core drivers include net new accounts.
• Q: Credit and NDFI exposure? A: Tri Color contributed charge-offs; demand for lending strong, product-agnostic credit strategy; private vs public credit fundamentals not significantly differentiated.
• Q: Expenses and AI? A: Focus on expense discipline, AI productivity tailwinds but proof in pudding; need to balance productivity with investments.
• Q: NDFI risk and processes? A: Tri Color led to process reviews; NBFI lending mostly secured, but monitor underwriting standards; credit may deteriorate more in downturn.
• Q: Mortgage lending and regulators? A: Supply-side reforms needed; Basel III Endgame in progress, focus on holistic capital rule assessment.
• Q: Expense outlook for 2026? A: Labor cost inflation, medical expenses, and competitive pay are factors; productivity efforts including AI.
• Q: NDFI exposure questions and SSFA? A: Don't worry about SSFA accounting; investors should ask about underwriting standards and mix shifts in NDFI.
• Q: Investment banking pipeline and rates? A: Strong deal flow, M&A activity; rate cuts may not drastically change sponsor behavior but supportive environment.
• Q: Loan yields and Sapphire refresh? A: Loan yields affected by mix; Sapphire refresh has transitional period with elevated rewards and fees.
• Q: Retail deposit market share? A: Disciplined pricing; focus on expansion and core value proposition to gain share.