10-QPeriod: Q1 FY2016

JPMORGAN CHASE & CO Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 29, 2016For Securities:JPMJPM-PCJPM-PDJPM-PKJPM-PLJPM-PMJPM-PJAMJBVYLD

Summary

JPMorgan Chase & Co. reported first-quarter 2016 net income of $5.5 billion, or $1.35 per diluted share, a decrease of 7% compared to the prior year quarter. This decline was primarily attributed to lower net revenue, down 3% to $23.2 billion, largely impacted by a challenging market environment affecting the Corporate & Investment Bank (CIB) and Asset Management (AM) segments. Specifically, lower Fixed Income Markets revenue and investment banking fees in CIB, along with reduced asset management fees in AM, contributed to the revenue decline. These headwinds were partially offset by an increase in net interest income, driven by loan growth and higher rates on deposits with banks. The Firm also saw a significant 90% increase in the provision for credit losses to $1.8 billion, primarily due to additions to the wholesale allowance for credit losses, particularly in the Oil & Gas and Metals & Mining portfolios. Despite the increase in credit provisions and lower revenues, total noninterest expense decreased by 7% to $13.8 billion, driven by lower legal expenses and performance-based compensation. The Consumer & Community Banking (CCB) segment demonstrated resilience, with net income up 12% driven by higher revenue and lower expenses, and notable growth in average deposits and loans. Capital ratios remained strong, with the Common Equity Tier 1 (CET1) ratio at 11.9% under the Transitional Basel III rules.

Financial Highlights

28 data points
Beta

Net Income

$5.52B

EPS (Diluted)

$1.35

Total Assets

$2.42T

Free Cash Flow

-$21.38B

Financial Statements
Beta
Interest Expense$2.17B
Net Income$5.52B
EPS (Basic)$1.36
EPS (Diluted)$1.35
Shares Outstanding (Basic)3.71B
Shares Outstanding (Diluted)3.74B

Key Highlights

  • 1Net income for Q1 2016 was $5.5 billion, or $1.35 per diluted share, a 7% decrease year-over-year.
  • 2Total net revenue declined by 3% to $23.2 billion, impacted by weaker performance in CIB and AM due to market conditions.
  • 3Provision for credit losses significantly increased by 90% to $1.8 billion, mainly due to higher wholesale allowances, particularly in the Oil & Gas sector.
  • 4Noninterest expense decreased by 7% to $13.8 billion, benefiting from lower legal and compensation expenses.
  • 5Consumer & Community Banking (CCB) showed strong performance with a 12% increase in net income and 4% growth in total net revenue.
  • 6Common Equity Tier 1 (CET1) capital ratio remained robust at 11.9% under Transitional Basel III rules.
  • 7Tangible book value per share increased 8% year-over-year to $48.96.

Frequently Asked Questions

Net income decreased by 7% year-over-year primarily due to a 3% decline in total net revenue, driven by challenging market conditions impacting the Corporate & Investment Bank and Asset Management segments, and a significant 90% increase in the provision for credit losses, largely attributable to higher wholesale loan loss allowances in the Oil & Gas and Metals & Mining portfolios. These factors were partially offset by a 7% reduction in noninterest expense and growth in the Consumer & Community Banking segment.

The Consumer & Community Banking (CCB) segment showed strength with a 12% increase in net income, driven by higher net revenue and lower noninterest expense. The Corporate & Investment Bank (CIB) experienced a 22% decrease in net income due to lower net revenue and higher credit loss provisions. Commercial Banking saw a 17% decline in net income, primarily due to a higher provision for credit losses. Asset Management's net income increased by 17%, benefiting from lower noninterest expense, although net revenue saw a slight decrease.

For the full year 2016, JPMorgan Chase expects net interest income to be over $2 billion higher than 2015, driven by the December 2015 rate hike and anticipated loan growth. Managed noninterest revenue is expected to be around $50 billion, reflecting a decline from 2015 due to lower Card revenue and Mortgage Banking noninterest revenue. Core loan growth is projected at 10%-15%, and total net charge-offs are expected to be up to approximately $4.75 billion, with increases driven by loan growth and higher charge-offs in the Oil & Gas portfolio. Firmwide adjusted expenses (excluding legal) are projected to be around $56 billion.

JPMorgan Chase maintained a strong capital position, with its Common Equity Tier 1 (CET1) capital ratio at 11.9% under Transitional Basel III rules as of March 31, 2016. The company also reported a tangible book value per share of $48.96, up 8% year-over-year. Management expects to continue supporting shareholders through dividends and common equity repurchases, subject to regulatory approvals and market conditions.