How much of the headline earnings growth was driven by one-time items?

A large share. The $7.9 billion Visa share gain added about $2.04 to EPS, while the $1.0 billion Foundation donation reduced EPS by about $0.18 and $546 million of securities losses reduced it by about $0.14. Net of these items, EPS was $4.40 versus $4.75 a year earlier, implying underlying EPS declined roughly 7% despite the reported 38% increase in EPS to $6.12. Note that the prior-year quarter also included a $2.7 billion First Republic bargain purchase gain.

Is JPMorgan's credit quality deteriorating?

Credit costs are rising, though from a low base and not yet at crisis levels. Net charge-offs were $2.2 billion, up from $1.4 billion a year earlier, mainly in Card Services where the net charge-off rate reached 3.50% versus 2.41% in the prior-year quarter. Card 30+ day delinquencies, however, improved sequentially to 2.08% from 2.23%. Investors should watch whether card losses continue to season upward and whether the wholesale reserve build (including the First Republic portfolio) persists.

Is the dividend and buyback capacity still secure?

Based on the disclosures, yes. The CET1 ratio of 15.3% sits well above regulatory minimums, the Board declared a $1.15 quarterly dividend, and the Firm repurchased $4.9 billion of stock in the quarter with a net payout of 45% over the last twelve months. Management also indicated a second dividend increase earlier in 2024. The Firm did note that Basel III endgame rules create uncertainty around future capital requirements.

What drove the decline in Consumer & Community Banking earnings?

CCB net income fell 21% to $4.2 billion. Banking & Wealth Management revenue declined 5% because lower deposit balances and deposit margin compression (deposit margin 2.72% vs. 2.83% a year earlier) offset higher asset management fees. Noninterest expense rose 13%, partly due to allocation of First Republic expenses, and the provision rose 42% to $2.6 billion, reflecting higher card net charge-offs and reserve builds.

What macro risks does management highlight?

CEO Jamie Dimon cautioned that market valuations and credit spreads appear to reflect a benign economic outlook, while the Firm remains vigilant about tail risks. He cited a geopolitical situation described as potentially the most dangerous since World War II, persistent inflationary pressures from fiscal deficits, infrastructure needs and trade restructuring, the possibility that inflation and interest rates stay higher than markets expect, and the unknown effects of quantitative tightening at current scale.

JPMORGAN CHASE & CO 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed July 12, 2024. Cited figures are marked; the original filing is the authoritative source.

JPMorgan Chase reported second-quarter 2024 net income of $18.1 billion^a, or $6.12 per diluted share, up 25% from $14.5 billion ($4.75) a year earlier.

Reported results were inflated by significant items in Corporate: a $7.9 billion^b net gain on Visa shares, partly offset by a $1.0 billion donation of Visa shares to the Firm's Foundation and $546 million of net investment securities losses. Excluding these items, net income was $13.1 billion ($4.40 per share) and ROTCE was 20% versus a reported 28%. Investors should therefore treat the headline growth as flattered by a one-time gain rather than as a clean run-rate improvement.

Underlying performance was mixed. Reported net revenue rose 22% year over year to $50.2 billion^c, but excluding the Visa gain, noninterest revenue growth was about 14%, driven by investment banking fees (up 50%), asset management fees (up 14%) and Markets (up 10%). Net interest income was roughly flat to slightly up at $22.9 billion on managed basis, with deposit margin compression and lower deposit balances in Consumer & Community Banking offsetting higher revolving card balances.

Credit costs rose sharply, with the provision for credit losses at $3.1 billion^d versus $2.9 billion a year ago and net charge-offs up $820 million, predominantly in Card Services, where the net charge-off rate reached 3.50%. Expenses increased 14% to $23.7 billion. Capital and balance sheet strength remained the central message.

The Standardized CET1 ratio was 15.3% and the Advanced ratio 15.5%, with the Firm stating that it has excess capital even after the Basel III endgame uncertainty. Book value per share rose 13% to $111.29 and tangible book value per share rose 16% to $92.77.

The Board declared a $1.15 quarterly dividend and the Firm repurchased $4.9 billion of common stock net. Management's commentary flagged elevated geopolitical risk, persistent inflation and quantitative tightening as ongoing tail risks.

02—Key points

Key Highlights

Reported Q2 2024 net income of $18.1 billion ($6.12 diluted EPS), up 25% YoY, but includes a $7.9 billion Visa share gain, a $1.0 billion Foundation donation of Visa shares and $546 million of investment securities losses.
Excluding significant items, net income was $13.1 billion ($4.40 per share) and ROTCE was 20% versus 28% reported, a more representative view of recurring earnings power.
Reported net revenue rose 22% to $50.2 billion; managed revenue was $51.0 billion, up 20%, with noninterest revenue up about 14% excluding the Visa gain and prior-year First Republic bargain purchase gain.
Credit costs increased: provision for credit losses was $3.1 billion, with net charge-offs of $2.2 billion (up $820 million YoY) and an $821 million net reserve build, led by Card Services (net charge-off rate 3.50%).
Capital remained strong, with Standardized CET1 of 15.3% (Advanced 15.5%), a 6.1% supplementary leverage ratio, and book value per share of $111.29 (up 13%).
Capital return continued: $3.3 billion in common dividends ($1.15 per share, with a second increase this year) and $4.9 billion of net common stock repurchases; a new $30 billion repurchase program takes effect July 1, 2024.
Segment performance was uneven: CIB net income rose 11% (Investment Banking fees up 50%, Equity Markets up 21%), while CCB net income fell 21% on deposit margin compression and higher credit costs and AWM net income rose 3% with AUM of $3.7 trillion (up 15%).

03—Questions

Frequently Asked Questions

How much of the headline earnings growth was driven by one-time items?
A large share. The $7.9 billion Visa share gain added about $2.04 to EPS, while the $1.0 billion Foundation donation reduced EPS by about $0.18 and $546 million of securities losses reduced it by about $0.14. Net of these items, EPS was $4.40 versus $4.75 a year earlier, implying underlying EPS declined roughly 7% despite the reported 38% increase in EPS to $6.12. Note that the prior-year quarter also included a $2.7 billion First Republic bargain purchase gain.
Is JPMorgan's credit quality deteriorating?
Credit costs are rising, though from a low base and not yet at crisis levels. Net charge-offs were $2.2 billion, up from $1.4 billion a year earlier, mainly in Card Services where the net charge-off rate reached 3.50% versus 2.41% in the prior-year quarter. Card 30+ day delinquencies, however, improved sequentially to 2.08% from 2.23%. Investors should watch whether card losses continue to season upward and whether the wholesale reserve build (including the First Republic portfolio) persists.
Is the dividend and buyback capacity still secure?
Based on the disclosures, yes. The CET1 ratio of 15.3% sits well above regulatory minimums, the Board declared a $1.15 quarterly dividend, and the Firm repurchased $4.9 billion of stock in the quarter with a net payout of 45% over the last twelve months. Management also indicated a second dividend increase earlier in 2024. The Firm did note that Basel III endgame rules create uncertainty around future capital requirements.
What drove the decline in Consumer & Community Banking earnings?
CCB net income fell 21% to $4.2 billion. Banking & Wealth Management revenue declined 5% because lower deposit balances and deposit margin compression (deposit margin 2.72% vs. 2.83% a year earlier) offset higher asset management fees. Noninterest expense rose 13%, partly due to allocation of First Republic expenses, and the provision rose 42% to $2.6 billion, reflecting higher card net charge-offs and reserve builds.
What macro risks does management highlight?
CEO Jamie Dimon cautioned that market valuations and credit spreads appear to reflect a benign economic outlook, while the Firm remains vigilant about tail risks. He cited a geopolitical situation described as potentially the most dangerous since World War II, persistent inflationary pressures from fiscal deficits, infrastructure needs and trade restructuring, the possibility that inflation and interest rates stay higher than markets expect, and the unknown effects of quantitative tightening at current scale.

04—Continue

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