10-QPeriod: Q3 FY2013

JPMORGAN CHASE & CO Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 1, 2013For Securities:JPMJPM-PCJPM-PDJPM-PKJPM-PLJPM-PMJPM-PJAMJBVYLD

Summary

JPMorgan Chase & Co. reported a net loss of $380 million ($0.17 per diluted share) for the third quarter of 2013, a significant decline from a net income of $5.7 billion ($1.40 per diluted share) in the third quarter of 2012. This loss was primarily driven by a substantial increase in noninterest expense, largely due to $9.15 billion in pretax legal expenses, including reserves for litigation and regulatory proceedings. Excluding these legal charges and a benefit from a reduction in the allowance for loan losses, the firm would have reported an adjusted net income of $5.8 billion ($1.42 per share), indicating strong underlying business performance across its segments. Net revenues for the quarter were $23.1 billion, down 8% year-over-year, impacted by lower mortgage fees and related income and reduced securities gains, partially offset by higher principal transactions and asset management revenues. For the nine months ended September 30, 2013, net income was $12.6 billion ($3.05 per diluted share), down from $15.6 billion ($3.81 per diluted share) in the same period of 2012. This decrease was also largely attributable to higher noninterest expense, primarily legal expenses, which were partially offset by a significant decrease in the provision for credit losses. The firm maintained a strong capital position, with a Basel I Tier 1 common capital ratio of 10.5%. Management highlighted solid performance in its Consumer & Community Banking, Corporate & Investment Bank, and Asset Management segments, while the Corporate/Private Equity segment incurred a significant loss, primarily due to legal expenses.

Financial Highlights

30 data points
Beta

Revenue

$23.12B

Net Income

-$380.00M

-1.6% Net Margin

EPS (Diluted)

$-0.17

Total Assets

$2.46T

Free Cash Flow

$26.38B

Financial Statements
Beta
Revenue$23.12B
Interest Expense$2.29B
Net Income-$380.00M
EPS (Basic)$-0.17
EPS (Diluted)$-0.17
Shares Outstanding (Basic)3.77B
Shares Outstanding (Diluted)3.77B

Key Highlights

  • 1Third quarter 2013 net loss of $380 million ($0.17 per diluted share), impacted by significant legal expenses.
  • 2Total net revenue for Q3 2013 decreased by 8% to $23.1 billion compared to Q3 2012, mainly due to lower mortgage fees and securities gains.
  • 3Noninterest expense increased by 54% year-over-year due to approximately $9.3 billion in firmwide legal expenses.
  • 4Provision for credit losses significantly decreased, turning into a benefit of $543 million in Q3 2013 from an expense of $1.8 billion in Q3 2012, reflecting improved credit quality and reductions in loan loss allowances.
  • 5Strong performance noted in key business segments: Consumer & Community Banking (net income up 15%), Corporate & Investment Bank (net income up 12%), and Asset Management (net income up 7%).
  • 6The firm maintained a robust capital position with a Basel I Tier 1 common capital ratio of 10.5% at September 30, 2013.
  • 7The Board of Directors increased the quarterly common stock dividend from $0.30 to $0.38 per share and authorized a $6 billion common equity repurchase program.

Frequently Asked Questions

The primary driver of the net loss in the third quarter of 2013 was a significant increase in legal expenses, totaling approximately $9.15 billion pretax, which included reserves for litigation and regulatory proceedings. These expenses, recorded in 'Other expense' within noninterest expense, heavily impacted the firm's profitability for the period.

The provision for credit losses significantly improved, turning into a benefit of $543 million for the three months ended September 30, 2013, compared to an expense of $1.8 billion in the same period of 2012. This improvement was mainly due to lower net charge-offs and a reduction in the allowance for loan losses, reflecting better credit trends, particularly in the residential real estate and credit card portfolios, and the impact of improving home prices.

JPMorgan Chase's core business segments showed positive performance. Consumer & Community Banking net income increased by 15% year-over-year. The Corporate & Investment Bank saw a 12% increase in net income, and Asset Management reported a 7% increase in net income. The Corporate/Private Equity segment incurred a substantial loss, primarily due to the aforementioned legal expenses.

JPMorgan Chase maintained a strong capital position, with a Basel I Tier 1 common capital ratio of 10.5% at September 30, 2013, which was above regulatory requirements. The Board of Directors increased the quarterly common stock dividend from $0.30 to $0.38 per share and authorized a common equity repurchase program of up to $6 billion.