01—Abstract
Summary
Summary of the 8-K filed January 12, 2024. Cited figures are marked; the original filing is the authoritative source.
JPMorgan Chase reported fourth-quarter 2023 net income of $9.3 billiona, or $3.04 per diluted share, down 15% from $11.0 billion ($3.57) in 4Q22.
The decline was driven predominantly by a $2.9 billionb FDIC special assessment (a $0.74 per share hit) tied to bank resolutions in 2023, along with $743 million of net investment securities losses (a $0.19 per share hit). Excluding these significant items, management cites 4Q23 net income of $12.1 billion, EPS of $3.97 and ROTCE of 19%. Reported ROTCE was 15%, and reported revenue was $38.6 billion, down 3% sequentially but up 12% year over year.
Full-year 2023 net income was $49.6 billionc ($16.23 per share), with ROTCE of 21%, representing a record year that management characterized as reflecting over-earning on net interest income and credit. Balance sheet and capital metrics remained strong. The Standardized and Advanced CET1 ratios were both estimated at 15.0%, total loss-absorbing capacity was $514 billion, and cash and marketable securities totaled $1.4 trillion.
Book value per share rose 16% to $104.45d and tangible book value per share rose 18% to $86.08. Growth was supported by the May 2023 acquisition of certain First Republic assets, which lifted average loans 17% (4% excluding First Republic) and drove a $1.3 billion increase in net interest income. Net charge-offs rose to $2.2 billion, largely from Card Services and single-name Wholesale exposures, and the provision for credit losses reached $2.8 billion including a $598 million net reserve build.
Capital returns included a $3.1 billion common dividend ($1.05 per share) and $2.0 billion of net share repurchases. Management remained cautious about the outlook. Jamie Dimon warned that ongoing government deficit spending, persistent spending needs, and quantitative tightening could keep inflation sticky and rates higher than markets expect.
He also flagged the wars in Ukraine and the Middle East as risks, and criticized proposed regulation, including Basel III endgame, as potentially harmful. The release does not provide formal 2024 guidance, so investors should weigh the strong underlying franchise against the expected normalization of net interest income and credit costs.
02—Key points
Key Highlights
- Reported 4Q23 net income of $9.3 billion ($3.04 EPS), down 15% YoY, driven mainly by the $2.9 billion ($0.74/share) FDIC special assessment and $743 million ($0.19/share) of investment securities losses.
- Excluding significant items, 4Q23 net income was $12.1 billion, EPS $3.97 and ROTCE 19%, versus reported ROTCE of 15%.
- Full-year 2023 net income of $49.6 billion ($16.23 per share) with 21% ROTCE; reported ROE 17% for the year.
- Reported net revenue of $38.6 billion rose 12% YoY, with NII up 19% to $24.2 billion (managed) on higher rates and balances, while noninterest expense rose 29% to $24.5 billion.
- Credit costs of $2.8 billion included $2.2 billion of net charge-offs (up $1.3 billion, mainly Card Services) and a $598 million net reserve build.
- Fortress balance sheet: CET1 ratio of 15.0%, $514 billion total loss-absorbing capacity, $1.4 trillion of cash and marketable securities, and book value per share up 16% to $104.45.
- Capital returns of $3.1 billion in common dividends ($1.05/share) and $2.0 billion of net buybacks in the quarter.
03—Questions
Frequently Asked Questions
Why did JPMorgan's 4Q23 net income fall 15% year over year?
The decline was driven predominantly by a $2.9 billion FDIC special assessment, which recovered losses to the Deposit Insurance Fund from protecting uninsured depositors in 2023 bank resolutions. The quarter also included $743 million of net investment securities losses, mainly from sales of U.S. Treasuries and mortgage-backed securities. Together these reduced EPS by about $0.93. Excluding them, net income would have been $12.1 billion, or $3.97 per share.
How did the First Republic acquisition affect results?
The May 2023 acquisition of certain First Republic assets contributed $647 million of 4Q23 net income, with $1.3 billion of net interest income and $533 million of noninterest revenue. It also added $890 million of expense and a $125 million provision. Reported average loans rose 17%, but only 4% excluding First Republic, so underlying loan growth was modest. Excluding First Republic, net income fell 21%.
Is JPMorgan's capital position sufficient despite the special charges?
Yes. The estimated Standardized and Advanced CET1 ratios were both 15.0%, with CET1 capital of $251 billion and a supplementary leverage ratio of 6.1%. Total loss-absorbing capacity was $514 billion. The Firm still returned $3.1 billion in dividends and $2.0 billion in net buybacks during the quarter, and the payout ratio over the last twelve months was 41%.
What risks does management highlight for 2024 and beyond?
Management said it expects normalization of net interest income and credit costs, which were elevated in 2023. Dimon warned that government deficit spending, green-economy and military spending, and supply chain restructuring could keep inflation sticky and rates higher than markets expect. He also cited quantitative tightening, which is draining over $900 billion of liquidity annually, and the wars in Ukraine and the Middle East. He criticized proposed regulation, including Basel III endgame, as potentially harmful to consumers, businesses and markets.
Did the release include formal 2024 guidance?
No. The earnings release and financial supplement report 4Q23 and full-year 2023 results only and do not contain formal 2024 financial guidance. Management's commentary was qualitative, emphasizing that the Firm remains confident it can deliver healthy returns even after its 2023 earnings normalize.
04—Continue