10-QPeriod: Q1 FY2019

JPMORGAN CHASE & CO Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 2, 2019For Securities:JPMJPM-PCJPM-PDJPM-PKJPM-PLJPM-PMJPM-PJAMJBVYLD

Summary

JPMorgan Chase & Co. reported a strong first quarter of 2019, with record net income of $9.2 billion, or $2.65 per diluted share, on record net revenue of $29.1 billion. This performance was driven by robust revenue growth across most segments, particularly in Consumer & Community Banking and Commercial Banking, supported by higher net interest income and solid fee-based revenues. The firm demonstrated healthy profitability with a return on common equity (ROE) of 16% and a return on tangible common equity (ROTCE) of 19%. Capital ratios remained strong, with Common Equity Tier 1 (CET1) at 12.1%, exceeding regulatory minimums. While total net revenue increased 4% year-over-year, driven by a 9% rise in net interest income primarily due to higher rates and balance sheet growth, noninterest expense also increased by 2%, primarily reflecting investments in technology and business growth. The provision for credit losses saw a significant increase, driven by the wholesale portfolio, which investors should monitor. Key business segments showed varied performance, with Consumer & Community Banking delivering a strong 19% net income increase and a 30% return on equity. The Corporate & Investment Bank experienced a 18% decrease in net income due to lower Markets revenue, although Investment Banking fees saw a healthy increase. Commercial Banking and Asset & Wealth Management also showed solid performance, with net income increases of 3% and a decrease of 14% respectively, with AWM's profitability impacted by lower average market levels and reduced brokerage activity.

Financial Highlights

32 data points
Beta

Net Income

$9.18B

EPS (Diluted)

$2.65

Total Assets

$2.74T

Cash & Equivalents

$302.60B

Free Cash Flow

-$80.88B

Financial Statements
Beta
Interest Expense$6.94B
Net Income$9.18B
EPS (Basic)$2.65
EPS (Diluted)$2.65
Shares Outstanding (Basic)3.30B
Shares Outstanding (Diluted)3.31B

Key Highlights

  • 1Record Net Income and Revenue: Net income reached $9.2 billion and net revenue hit $29.1 billion, both record highs.
  • 2Strong Profitability Ratios: ROE stood at 16% and ROTCE at 19%, indicating efficient use of shareholder capital.
  • 3Increased Net Interest Income: Driven by higher rates and balance sheet growth, net interest income grew 9% year-over-year.
  • 4Investment in Technology and Growth: Noninterest expense rose 2% due to investments in technology, marketing, and personnel.
  • 5Higher Provision for Credit Losses: The provision for credit losses increased significantly, primarily due to the wholesale portfolio, warranting investor attention.
  • 6Robust Capital Position: CET1 ratio remained strong at 12.1%, exceeding regulatory requirements.
  • 7Mixed Segment Performance: Consumer & Community Banking showed strong growth, while Corporate & Investment Bank faced headwinds in Markets revenue.

Frequently Asked Questions

The increase in net income was primarily driven by strong total net revenue growth, up 4% to $29.1 billion. This was supported by a significant 9% increase in net interest income, largely due to the impact of higher rates and balance sheet growth. However, the stronger revenue growth was partially offset by increases in the provision for credit losses and noninterest expense.

JPMorgan Chase maintained a strong capital position. The Common Equity Tier 1 (CET1) capital ratio was 12.1%, the Tier 1 capital ratio was 13.8%, and the Total capital ratio was 15.7%. These ratios exceeded the regulatory minimums and reflect the firm's robust capital management.

Noninterest expense increased by 2% to $16.4 billion, primarily due to investments in the business, including technology, marketing, real estate, and front office hires. Higher auto lease depreciation also contributed, partially offset by the absence of the prior-year FDIC surcharge and lower performance-based compensation.

The provision for credit losses increased by 28% to $1.5 billion. This rise was driven by the wholesale portfolio, which reflected a net addition to the allowance for credit losses on select Commercial and Industrial client downgrades. The prior year period included a net reduction in the allowance for credit losses.

JPMorgan Chase continues to execute its firmwide Brexit Implementation program to ensure continuity of services for its EU clients. Legal entities in Germany, Luxembourg, and Ireland are licensed to provide services. A significant proportion of client agreements have been re-documented to EU legal entities, and the firm is actively engaging with clients to complete this process. Certain employees have been relocated, and the final staffing plan will depend on the terms of the UK's withdrawal. The firm is monitoring legislative developments and maintaining flexibility in its implementation plan due to ongoing uncertainties.