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JPMorgan Chase & Co Earnings - Analysis & Highlights for Q4 2024

Overview

PositivesNegativesOutlook

AUM of $4 trillion and client assets of $5.9 trillion were both up 18% YoY driven by continued net inflows and higher market levels.
Long-term net inflows were $76 billion for the quarter, positive across all asset classes.
Card outstandings were up 11% due to strong account acquisition and revolve growth.
In Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory.

Q4 2024 Earnings Call

Revenue in Banking & Wealth Management was down 7% YoY due to deposit margin compression and lower deposits, partially offset by growth in Wealth Management revenues.
Average deposits were down 4% YoY and flat sequentially as consumer balances have stabilized.
Excluding the prior year's FDIC, special assessment expenses were up $1.2 billion or 5%, driven by compensation and higher brokerage and distribution fees.
Credit costs were $61 million driven by net downgrade activity and the net impact of charge-offs, largely offset by a reserve release due to an update to certain loss assumptions.

Q4 2024 Earnings Call

The company expects modest compression on deposit margin due to lower rates.
The company expects the NII trough could be sometime in the middle of the year, followed by growth.
The company expects to see some pickup in loan growth due to the significant improvement in business sentiment and general optimism.
The company is including an estimate of earnings at risk in the earnings supplement.
The company expects the tapering to complete and end sometime in the middle of the year.

Q4 2024 Earnings Call

Q&A Highlights from JPMorgan Chase & Co Earnings Call Q4 2024

Analyst asked about the differences in investment spending agenda for the current year compared to previous years, and how the company is ensuring efficiency in its outlook.
- The company's investment spending agenda remains consistent, with a focus on high certainty investment choices across all categories. The company continues to analyze and iterate on areas of weakness and throw resources against them. The company is focused on efficiency, with a bottom-up culture that generates organic, BAU, and evergreen efficiency. Additionally, the company has a top-down focus on efficiency, including improving software engineer productivity, hardware utilization, and modernization spend. The company also aims to live within its means on the head count front, and is asking people to generate internal efficiencies while supporting growth. However, there are exceptions to this approach, such as ongoing areas of high certainty investment and growth, and critical non-negotiable areas of risk and control.
Analyst asked about the company's plans for the future, specifically regarding the length of James Dimon's tenure as CEO.
- James Dimon stated that he loves what he does and is on a path that involves the other senior people in the company and the board. He mentioned that his age and health problems make it rational to consider a succession plan, potentially over the next four to five years. He also mentioned that the company's path is not just about him, and that it involves other senior people and the board.
Analyst asked about the company's plan to return excess capital to shareholders.
- The company's capital hierarchy prioritizes organic growth and dividend obligations, and any excess capital not needed for these purposes will be returned to shareholders through buybacks. However, the company does not want to predict the timing or amount of buybacks.
Analyst asked about the company's view on net interest income (NII) and its relationship to the yield curve.
- The company has backed off its view that it is materially over-earning on NII due to the higher rate environment. The company's current assumptions indicate that it may return to sequential growth in the back half of the year, but this is subject to the yield curve panning out in line with current forwards, which is unlikely. The company acknowledges that deposit pricing is a response to the competitive environment and that the current structure of the yield curve is such that for the time being, the difference between the policy rate and the weighted average rate paid on consumer deposits remains elevated. The company does not believe that this is sustainable through the cycle, but will cross that bridge when it comes to it.
Analyst asked about the justification for expanding the company's Consumer Banking business globally, considering the increased regulatory and execution risks.
- Jeremy Barnum, CEO of JPMorgan Chase & Co., explained that the company's approach to global Consumer Banking is not comparable to other players in the industry, and that the strategy is unique to the current moment. He stated that the company has carefully considered the risks and opportunities associated with the decision and that it is one of their strategic initiatives, which are subject to thorough evaluation.
Analyst asked about the drivers of net interest income (NII) outlook and the relationship between loan growth, balance, and other factors.
- Jeremy Barnum explained that loan growth is a significant driver of NII outlook, with acquisition finance being a potential area of inflection. He mentioned that card loan growth and revolve normalization have been significant tailwinds, but that the big normalization tailwinds are gone. He also noted that the mortgage market is a headwind in some other pockets, such as multifamily lending, and that a higher growth environment could lead to more loan growth in Business Banking and C&I. He emphasized that the company is focused on areas that are deal-driven and aligned with their long-standing investment strategies, such as the affluent section of the wealth management space, where they are significantly underpenetrated.
Analyst asked about the company's thoughts on when the Fed should end the pressure on the system and what it may imply for deposit growth.
- The company believes that the conventional wisdom on QT is that the tapering should complete, and they may see an end sometime in the middle of the year. They also mentioned that they are taking into consideration various factors such as the H.8 data, flow of funds models, and peer behavior to determine the impact of QT on deposit growth.
Analyst asked about the pros and cons of a special dividend to reduce the company's excess capital, given its impressive profitability levels.
- The company stated that they have looked into the possibility of a special dividend but have decided against it due to the lack of shareholder value and the belief that having cash in hand is not a bad thing. They also mentioned that special dividends have not worked well in the past and that they want to be patient and not rush into deploying capital.

Q4 2024 Earnings Call