01—Abstract
Summary
Summary of the 10-K filed February 25, 2020. Cited figures are marked; the original filing is the authoritative source.
JPMorgan Chase & Co. (JPM) ended 2019 with record results: net income of $36.4 billiona (up 12%), total net revenue of $115.6 billion (up 6%), and diluted EPS of $10.72 (up 19%).
Return on common equity was 15% and return on tangible common equity was 19%. The Firm had $2.7 trillionb in assets and $261.3 billion in stockholders' equity at year-end. Growth was driven by record revenue in Consumer & Community Banking and the Corporate & Investment Bank, offset by higher noninterest expense (up 3% to $65.5 billion) and a higher provision for credit losses ($5.6 billion, up 15%), reflecting wholesale downgrades and credit card growth.
Capital and liquidity remained strong. The CET1 ratio (Standardized) was 12.4%, the supplementary leverage ratio was 6.3%, and the average LCR was 116%. The Firm returned capital through $24.1 billionc of common stock repurchases and $10.9 billion of common dividends declared, with the quarterly dividend raised to $0.90 per share.
Management guided to roughly $57 billiond of 2020 net interest income, adjusted expense near $67 billion, and net charge-offs just over $6 billion, with the CECL adoption on January 1, 2020 reducing retained earnings by $2.7 billion. Key risks flagged in the filing include Brexit uncertainty affecting the European operating model, the expected LIBOR discontinuation after 2021, heightened regulatory and litigation exposure (including the Nigeria, FX, and metals investigations), and cybersecurity threats. Overall, the filing presents a highly profitable, well-capitalized institution whose 2020 outlook is tempered by lower interest rates and rising credit costs.
02—Key points
Key Highlights
- Record 2019 net income of $36.4 billion (up 12%) and diluted EPS of $10.72 (up 19%), with ROE of 15% and ROTCE of 19%.
- Total net revenue rose 6% to $115.6 billion, with net interest income of $57.2 billion (up 4%) and noninterest revenue of $58.4 billion (up 8%).
- Consumer & Community Banking posted record revenue of $55.9 billion and net income of $16.6 billion (up 12%); Corporate & Investment Bank posted record revenue of $38.3 billion.
- Noninterest expense rose 3% to $65.5 billion, and the provision for credit losses increased 15% to $5.6 billion, driven by wholesale client downgrades and card growth.
- Strong capital position: CET1 ratio of 12.4% (Standardized), SLR of 6.3%, and $24.1 billion of share repurchases plus $10.9 billion of common dividends in 2019.
- Tangible book value per share rose 8% to $60.98, and the quarterly common dividend was increased to $0.90 per share.
- 2020 outlook calls for net interest income of about $57 billion, adjusted expense near $67 billion, and net charge-offs just over $6 billion; CECL adoption reduces retained earnings by $2.7 billion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 25, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $115.72B$108.78B | +6.4% |
| Interest Expense | $26.80B$21.04B | +27.3% |
| Net Income | $36.43B$32.47B | +12.2% |
| EPS (Basic) | $10.75$9.04 | +18.9% |
| EPS (Diluted) | $10.72$9.00 | +19.1% |
| Shares Outstanding (Basic) | 3.22B3.40B | −5.1% |
| Shares Outstanding (Diluted) | 3.23B3.41B | −5.4% |
05—Questions
Frequently Asked Questions
How profitable was JPMorgan Chase in 2019 and what drove the improvement?
Net income was $36.4 billion, up 12% from $32.5 billion in 2018, and diluted EPS rose 19% to $10.72. Revenue growth of 6% came from higher noninterest revenue (asset management fees, principal transactions in CIB, and card income) and net interest income. A lower effective tax rate of 18.2% (versus 20.3%) also helped, aided by $1.1 billion of tax-audit benefits.
Is the bank well capitalized and how is it returning capital to shareholders?
Yes. The Standardized CET1 ratio was 12.4%, the Tier 1 leverage ratio was 7.9%, and the SLR was 6.3%, all above regulatory minimums and well-capitalized thresholds. In 2019 the Firm repurchased $24.1 billion of common stock and declared $10.9 billion in common dividends. The Board authorized a $29.4 billion repurchase program running through June 2020, with $15.6 billion remaining at year-end.
What are the main risks to earnings heading into 2020?
Key risks include lower interest rates compressing net interest income, rising credit costs (management expects net charge-offs to increase, mainly in Card), and Brexit, which could fragment the European operating model. The transition away from LIBOR after 2021, ongoing regulatory and legal investigations, and cybersecurity threats are also cited. The filing notes that CECL adoption adds earnings volatility and reduces capital.
What does the 2020 guidance imply for investors?
Management expects 2020 net interest income of about $57 billion (market dependent), adjusted expense of about $67 billion, and net charge-offs just over $6 billion, with an effective tax rate near 20%. First-quarter Markets revenue is expected to be up in the mid-teens percentage range year over year. Together these figures suggest modest revenue pressure from lower rates offset by balance sheet growth and continued expense discipline.
06—Continue