JPMorgan Chase & Co. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Results: Reported net income of $14.6 billion, EPS of $5.07 on revenue of $46 billion. NII ex. Markets down $430 million, NIR ex. Markets up $2.2 billion, Markets revenue up $1.7 billion. Expenses up $840 million, credit costs $3.3 billion.
• Reserve Build: Total allowance for credit losses $27.6 billion, with weighted average unemployment rate in allowance 5.8% due to elevated uncertainty.
• Capital: CET1 ratio 15.4%, down 30 basis points; $11 billion capital distributed to shareholders.
• Business Segments: CCB consumers financially healthy; CIB Investment Banking fees up, Markets strong; AWM revenue up from net inflows and market levels.

Segment Performance

• Consumers and Community Banking (CCB): Reported net income of $4.4 billion on revenue of $18.3 billion, up 4% year-on-year. Banking & Wealth Management revenue down 1% year-on-year, offset by Wealth Management growth. Home Lending revenue up 2% year-on-year with originations up 42% year-on-year. Card Services & Auto revenue up 12% year-on-year, driven by Card NII and higher revolving balances; Auto originations were $10.7 billion, up 20%.
• Commercial & Investment Bank (CIB): Net income of $6.9 billion on revenue of $19.7 billion, up 12% year-on-year. Investment Banking fees up 12%, Payments revenue up 3%, Lending revenue up 11%. Markets revenue up 21%, with Equities up 48%. Securities Services revenue up 7%.
• Asset & Wealth Management (AWM): Net income of $1.6 billion, with revenue of $5.7 billion up 12% year-on-year. AUM of $4.1 trillion and client assets of $6 trillion both up 15% year-on-year, driven by net inflows and market levels.
• Corporate: Net income of $1.7 billion, revenue of $2.3 billion up $102 million year-on-year. NII down $826 million year-on-year, NIR a net gain of $653 million.

Guidance

• NII ex. Markets expected to be approximately $90 billion.
• Firm-wide NII outlook increased to about $94.5 billion, reflecting increase in Markets NII offset in NIR.
• Adjusted expense outlook continues to be about $95 billion.
• Credit card net charge-off rate expected to be in line with previous guidance of approximately 3.6%.

Risks

• Macroeconomic uncertainty including trade wars, interest rate volatility, and potential recession.
• Regulatory risks related to SLR, G-SIB, CCAR, and Basel III.
• Impact of geopolitical events on market plumbing and liquidity.

Question and Answer

Q: Good morning, Jeremy. Wondering if you could start by just kind of amplifying just the macro commentary that you started off on. And given the uncertainty in the world that you referenced, just how are you seeing the activity change across the customer base from consumers to wholesale? And can you just talk through how that's also just informing any changes in your -- some of your growth and reserving expectations?

A: Sure, Ken. So, at a high level, I would say that, obviously, some of the salient news flow is quite recent. So, we've done some soundings and some checking both on the consumer side and on the wholesale side. I think on the consumer side, the thing to check is the spending data. And to be honest, the main thing that we see there is what would appear to be a certain amount of front-loading of spending ahead of people expecting price increases from tariffs. So, ironically, that's actually somewhat supportive all else equal. But I think what it sort of highlights is that during this transitional period and this elevated uncertainty, you might see some distortions in the data that make it hard to draw larger conclusions. In terms of our corporate clients, obviously, they've been reacting to the changes in tariff policy. And at the margin that shifts their focus away from more strategic priorities with obvious implications for the Investment Banking pipeline outlook towards more short-term work, optimizing supply chains and trying to figure out how they're going to respond to the current environment. So, as a result, I think we would characterize what we're hearing from our corporate clients is a little bit of a wait-and-see attitude. I do think you see obvious differences across sectors. Some sectors are going to be much more exposed than others and have more complicated problems to solve, and also across the size of the clients, I think, smaller clients, small business and smaller corporates are probably a little bit more challenged. I think the larger corporates have a bit more experience dealing with these things and more resources to manage. So, that's a little bit of our read of the situation right now, but certainly a bit of a wait-and-see attitude. It's hard to make long-term decisions right now. And so, we'll see how that plays out.

Q: Yeah. And just one question on the NII ex. Markets holding at $90 billion. Can you just walk us through the puts and takes of just what's the new curve you're using, which also is subject to change every day? And what might have been some of the positive offsets to if you put in more expected cuts than you had before?

A: Yeah, that's a good question, Ken, and you're right. So, if you remember, last quarter, we said that we had one cut in the curve. I think latest curve has something like three cuts. And so, we've talked a lot, obviously, about how we're asset-sensitive. You now see our EaR disclosed in the supplement and probably our empirical EaR is a little bit higher than our modeled EaR as a result of the relatively lower-than-modeled rates paid in consumer. So, when you put that together, all else equal, the drop in the weighted average IORB, which is about 22 basis points, should produce a notable headwind in our NII ex. Markets. Jamie Dimon: In the curve basically. Jeremy Barnum: Yeah. That's basically -- that's just mechanically... Jamie Dimon: Guaranteed not to happen. Jeremy Barnum: As Ken said. So, that's mechanically just flowing through the curve. So, yeah, your question is that given that why are you not revising down? And the answer to that is that across all the puts and takes actually, our number is a tiny bit lower. It's just not enough to warrant a change in the outlook, but we do have some offsets. So, we have some balance effects that are favorable. You will have noted that I talked about higher wholesale deposit balances, for example. We see beta outperforming in a couple of different places in CDs and in wholesale. The other thing is that you'll recall we talked before about having a placeholder in our NII outlook for the potential impact of the card late fee rule. We've now removed that, so that's a little bit of an offset as well. So, that's kind of how you get to unchanged even though clearly, all else equal, the lower expected front-end rates are a headwind.