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 2Q24 net income of $18.1Ba and diluted EPS of $6.12, but these reported figures were inflated by significant items.
Excluding a $7.9Bb net gain on Visa shares, a $1.0B donation of Visa shares to pre-fund the Firm's Foundation, and $546mm of net investment securities losses, net income was $13.1B, EPS was $4.40, and ROTCE was 20% (versus 28% reported). Managed revenue was $51.0B, up sharply from $8.4B quarter-over-quarter, largely due to the Visa gain, while expense was $23.7B and the managed overhead ratio was 47%. Underlying business performance was solid: Commercial & Investment Bank net income rose 11% YoY to $5.9B on investment banking revenue up 46% YoY, and Asset & Wealth Management net income was $1.3B with AUM of $3.7T, up 15% YoY.
Capital and liquidity remained strong. The Standardized CET1 ratio rose to 15.3% from 15.0% in 1Q24 (Advanced 15.5%), with CET1 capital of $267Bc and Standardized RWA of $1.74T. The Firm distributed $3.3B in common dividends ($1.15 per share) and $4.9B in net share repurchases, and the net payout ratio over the last twelve months was 45%.
Tangible book value per share increased to $92.77d from $88.43 in the prior quarter. Credit quality showed gradual normalization: net charge-offs were $2.2B, up from $2.0B in 1Q24 and $1.4B a year earlier, driven mainly by Card Services, with the Card net charge-off rate at 3.50%. Credit costs totaled $3.1B, including an $0.8B reserve build.
Management's FY2024 outlook calls for net interest income of approximately $91B (market dependent), adjusted expense of approximately $92B (market dependent, excluding legal expense and including the Foundation contribution), and a Card Services NCO rate of approximately 3.4%. Investors should focus on the underlying run-rate earnings power of roughly $13B per quarter excluding one-time Visa-related items, the trajectory of card credit losses, and the sustainability of the investment banking recovery.
02—Key points
Key Highlights
- Reported 2Q24 net income of $18.1B and EPS of $6.12 include a $7.9B Visa share gain, offset by a $1.0B Foundation donation and $546mm of securities losses; excluding these significant items, net income was $13.1B and EPS was $4.40.
- Excluding significant items, ROTCE was 20% versus a reported 28%; reported ROE was 23%.
- Standardized CET1 ratio rose to 15.3% (Advanced 15.5%) from 15.0% in 1Q24, with CET1 capital of $267B; the increase was supported by net income and included a +32bps benefit from Visa shares.
- Managed revenue of $51.0B (NII $22.9B, NIR $28.1B) and expense of $23.7B produced a managed overhead ratio of 47%; adjusted overhead ratio was 46%.
- Capital returns totaled roughly $8.2B in the quarter ($3.3B dividends plus $4.9B net buybacks), with a 45% LTM net payout ratio.
- Card Services net charge-off rate rose to 3.50% from 2.41% a year earlier, and total NCOs of $2.2B were up $813mm YoY, reflecting credit normalization; the Firm's FY2024 Card NCO guidance is ~3.4%.
- FY2024 outlook: net interest income ~$91B and adjusted expense ~$92B, both market dependent; Commercial & Investment Bank IB fees rose to $2.4B (up 50% YoY).
03—Questions
Frequently Asked Questions
What were JPMorgan's underlying earnings in the second quarter of 2024 after adjusting for one-time items?
Excluding the $7.9B net gain on Visa shares, the $1.0B Visa share donation to the Foundation, and $546mm of net investment securities losses, net income was $13.1B and diluted EPS was $4.40, with ROTCE of 20%. These non-GAAP figures are management's measure of recurring performance and are reconciled in the filing.
How strong is JPMorgan's capital position?
The Standardized CET1 ratio was an estimated 15.3% and the Advanced ratio 15.5%, both up from 15.0% and 15.3% in 1Q24. CET1 capital was $267B against Standardized RWA of $1.74T. The Firm's SLR was 6.1%, its Firm LCR was 112%, and total loss-absorbing capacity was $534B. Capital remains well above typical regulatory minimums, though the Firm continues to return capital to shareholders.
Is credit quality deteriorating at JPMorgan?
Credit costs rose to $3.1B in 2Q24 from $1.9B in 1Q24, including $2.2B of net charge-offs and an $0.8B reserve build. The increase was driven mainly by Card Services as newer loan vintages season and credit normalizes, with the card NCO rate at 3.50%. Management's FY2024 Card NCO guidance of ~3.4% suggests losses are expected to remain elevated but are being managed within the Firm's reserve framework.
How did the investment banking and markets businesses perform?
The Commercial & Investment Bank reported net income of $5.9B, up 11% YoY, with revenue of $17.9B up 9%. Investment banking revenue rose 46% YoY to $2.5B, and total markets revenue was $7.8B, up 10% YoY, led by Equity Markets (up 21%) and Fixed Income Markets (up 5%). Payments revenue declined 4% YoY due to deposit margin compression.
What is management's outlook for the rest of 2024?
Management expects FY2024 net interest income of approximately $91B and adjusted expense of approximately $92B, both dependent on market conditions. Adjusted expense excludes legal expense and includes the increased FDIC special assessment from 1Q24 and the Foundation contribution from 2Q24. The Card Services NCO rate is expected to be about 3.4% for the full year.
04—Continue