01—Abstract
Summary
Summary of the 10-K filed February 23, 2016. Cited figures are marked; the original filing is the authoritative source.
JPMorgan Chase reported record full-year 2015 net income of $24.4 billiona and record diluted EPS of $6.00, on net revenue of $93.5 billion (down 2% year over year).
Net income rose 12% from $21.7 billionb, driven mainly by a lower effective tax rate (20.4% versus 29.2%, including $2.9 billion of tax benefits) and lower noninterest expense (down 4% to $59.0 billion), partly offset by lower revenue and a higher provision for credit losses ($3.8 billion, up 22%, largely from Oil & Gas downgrades). Return on common equity was 11%. Management attributes the revenue decline to lower Corporate private equity gains, business simplification in CIB, and lower CCB mortgage banking revenue.
Capital and liquidity strengthened. The fully phased-in Basel III Advanced CET1 ratio reached 11.6% (about $173.2 billionc of CET1 capital), above the approximately 11% target, and the estimated GSIB surcharge fell to 3.5%. Total stockholders' equity was $247.6 billion, tangible book value per share rose 8% to $48.13, and HQLA totaled $496 billion.
The firm reduced wholesale non-operating deposits by about $200 billiond, and the loans-to-deposits ratio rose to 65% from 56%. Credit quality remained favorable overall: net charge-offs fell to $4.1 billion (0.52% rate), and nonperforming assets declined to $7.0 billion, although the wholesale book was pressured by Oil & Gas. The filing also highlights ongoing regulatory and legal exposure.
Management expects to remain subject to heightened regulatory scrutiny, Title I resolution-plan requirements, proposed TLAC rules that could force substantial new long-term debt issuance, and a range of litigation with reasonably possible losses estimated at $0 to about $3.6 billion above reserves. For 2016 management guided to net interest income about $2 billion higher, core loan growth of 10-15%, net charge-offs up to about $4.75 billion, and adjusted expense of about $56 billion.
02—Key points
Key Highlights
- Record 2015 net income of $24.4 billion (up 12%) and record diluted EPS of $6.00; ROE improved to 11% from 10%.
- Net revenue fell 2% to $93.5 billion, reflecting lower Corporate private equity gains, CIB business simplification, and lower CCB mortgage banking revenue.
- Noninterest expense declined 4% to $59.0 billion, and the overhead ratio improved to 63% from 64%.
- The effective tax rate fell to 20.4% from 29.2%, aided by $2.9 billion of tax benefits from audit resolutions and a deferred tax release.
- Fully phased-in Basel III Advanced CET1 ratio of 11.6% exceeded the approximately 11% target; estimated GSIB surcharge fell to 3.5%.
- Provision for credit losses rose 22% to $3.8 billion on Oil & Gas downgrades, although consumer credit improved and net charge-offs fell to $4.1 billion.
- Regulatory and legal risks remain elevated, including proposed TLAC requirements, Title I resolution plan scrutiny, and litigation with reasonably possible losses up to about $3.6 billion above reserves.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 23, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $93.54B$95.11B | −1.6% |
| Interest Expense | $7.46B$7.90B | −5.5% |
| Net Income | $24.44B$21.75B | +12.4% |
| EPS (Basic) | $6.05$5.33 | +13.5% |
| EPS (Diluted) | $6.00$5.29 | +13.4% |
| Shares Outstanding (Basic) | 3.74B3.76B | −0.6% |
| Shares Outstanding (Diluted) | 3.77B3.80B | −0.6% |
05—Questions
Frequently Asked Questions
How profitable was JPMorgan Chase in 2015 and what drove the change?
Net income was a record $24.4 billion, up from $21.7 billion in 2014, and diluted EPS was a record $6.00. The increase was driven mainly by a lower effective tax rate (20.4% vs. 29.2%) and lower noninterest expense, partly offset by lower net revenue and a higher provision for credit losses.
Is JPMorgan's capital position strong enough to support shareholder returns?
Yes, by the filing's measures. The fully phased-in Basel III Advanced CET1 ratio was 11.6%, above the roughly 11% target. The firm returned capital through $5.6 billion of share repurchases and $1.72 per share in dividends declared, and tangible book value per share rose 8% to $48.13.
What are the main credit risks investors should watch?
Oil & Gas exposure of about $42 billion drove wholesale reserve builds and downgrades; criticized exposure rose to $14.6 billion. Management guided to 2016 net charge-offs of up to about $4.75 billion and possible reserve increases tied to oil prices, while consumer credit remained favorable.
What regulatory developments could affect future earnings or funding costs?
Proposed Federal Reserve TLAC rules could require substantial new senior long-term debt, since existing structured and acceleration-permitting notes may not qualify as eligible LTD, raising funding costs. Title I resolution-plan requirements, heightened supervision, and the Volcker Rule also add compliance costs and constraints.
06—Continue