10-QPeriod: Q1 FY2020

JPMORGAN CHASE & CO Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:JPMJPM-PCJPM-PDJPM-PKJPM-PLJPM-PMJPM-PJAMJBVYLD

Summary

JPMorgan Chase & Co. reported a challenging first quarter of 2020, with net income of $2.9 billion, a 69% decrease compared to the prior year, largely due to a significant increase in the provision for credit losses. This surge in provisions, amounting to $8.3 billion, reflects the deteriorating macroeconomic environment driven by the COVID-19 pandemic and oil price pressures, leading to a substantial addition to the allowance for credit losses. Total net revenue saw a modest 3% decline to $28.3 billion, with noninterest revenue down 6%, impacted by specific valuation losses in the Corporate & Investment Bank segment. Conversely, net interest income remained flat due to balance sheet growth offsetting lower rates. Noninterest expense rose 3% due to higher volume-related and investment expenses, along with increased legal costs. Despite the earnings decline, the Firm maintained strong capital and liquidity positions. The Common Equity Tier 1 (CET1) capital ratio stood at 11.5%, and the Firm grew its tangible book value per share by 5% year-over-year to $60.71. In response to the pandemic's economic impact, JPMorgan Chase temporarily suspended its share repurchase program and provided significant credit and liquidity to clients, including over $100 billion in new and renewed credit in March. The firm also actively participated in the SBA's Paycheck Protection Program, funding approximately $29 billion.

Financial Highlights

32 data points
Beta

Net Income

$2.87B

EPS (Diluted)

$0.78

Total Assets

$3.14T

Cash & Equivalents

$367.53B

Free Cash Flow

-$120.09B

Financial Statements
Beta
Interest Expense$4.72B
Net Income$2.87B
EPS (Basic)$0.79
EPS (Diluted)$0.78
Shares Outstanding (Basic)3.10B
Shares Outstanding (Diluted)3.10B

Key Highlights

  • 1Net income significantly decreased by 69% to $2.9 billion, primarily driven by a substantial increase in the provision for credit losses to $8.3 billion.
  • 2Total net revenue declined by 3% to $28.3 billion, with noninterest revenue down 6% due to valuation losses in the Corporate & Investment Bank segment.
  • 3The provision for credit losses increased by 454% to $8.3 billion, reflecting the impact of COVID-19 and oil price pressures on the macroeconomic environment.
  • 4Common Equity Tier 1 (CET1) capital ratio remained strong at 11.5%, demonstrating robust capital adequacy.
  • 5JPMorgan Chase suspended share repurchases in March 2020 due to the COVID-19 pandemic's economic impact.
  • 6The firm provided over $100 billion in new and renewed credit to clients in March 2020 to support them through challenging economic conditions.
  • 7Diluted earnings per share fell to $0.78 from $2.65 in the prior year's quarter.

Frequently Asked Questions

The primary driver for the significant decrease in net income was the substantial increase in the provision for credit losses. JPMorgan Chase significantly boosted its allowance for credit losses to $8.3 billion in the first quarter of 2020, up from $1.5 billion in the prior year, in anticipation of potential economic fallout from the COVID-19 pandemic and pressures on oil prices.

The COVID-19 pandemic led to a deteriorating macroeconomic environment, which directly impacted the firm's provision for credit losses. The firm also implemented strategies to support clients by providing liquidity and advice, including extending over $100 billion in new and renewed credit in March 2020. Operations were also affected, with a significant portion of employees working remotely.

JPMorgan Chase maintained a strong capital position, with a CET1 capital ratio of 11.5%. In response to the economic uncertainty caused by the COVID-19 pandemic, the firm temporarily suspended share repurchases through the second quarter of 2020. Common stock dividends remained at $0.90 per share.