""In CIB, both IB fees and markets revenue were notably up year-on-year reflecting strength across the franchise." - Jeremy Barnum, CFO" - Jeremy Barnum
JPMorgan Chase & Co (JPM) Q3 2024 Earnings Report: Steady Through Turbulence
Executive Summary
In Q3 2024, JPMorgan Chase & Co reported a net income of $12.9 billion, translating to an earnings per share (EPS) of $4.37, with total revenue of $43.3 billion, representing a 6% increase year-over-year. Management highlighted strong performances in the Consumer & Community Banking (CCB) and Corporate & Investment Bank (CIB) segments, indicating resilience amid economic fluctuations. However, deposit growth stagnation and margin compression present challenges as consumer behavior stabilizes. Key metrics such as non-interest income and market revenue also showed substantial year-over-year increases, reflecting robust operational strength. Management expressed optimism regarding future profitability, driven by strategic balance sheet management and growth in asset management fees.
**Net Interest Income (NII):** Total NII expected at $92.5 billion for 2024, impacted by yield curve trends.
Financial Highlights
1. Financial Overview
- Net Income: $12.9 billion (down 1.92% YoY)
- EPS: $4.37 (down 28.55% QoQ)
- Revenue: $43.3 billion (up 6% YoY)
- Operating Income: $37.7 billion (up 94.94% YoY)
- Net Interest Income (NII): Total NII expected at $92.5 billion for 2024, impacted by yield curve trends.
2. Profitability Ratios
- Net Profit Margin: 30.2%
- Return on Equity (ROE): 19%
- Cost-to-Income Ratio: 22.5%
3. Balance Sheet Strength
- CET1 Ratio: 15.3%, solidifying capital adequacy
- Total Assets: $4.21 trillion
- Total Liabilities: $3.86 trillion
- Total Stockholders’ Equity: $345.8 billion
4. Cash Flow
- Net Cash Flow from Operations: -$74.1 billion, reflecting investment strategies and credit activity.
- Free Cash Flow: -$74.1 billion, consistent with strategic spending on growth initiatives and share buybacks.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
42.66B
7.28%
-14.79%
Gross Profit
42.66B
7.28%
-14.79%
Operating Income
37.69B
94.94%
42.56%
Net Income
12.90B
-1.92%
-28.93%
EPS
4.38
1.15%
-28.55%
Key Financial Ratios
currentRatio
9.48
grossProfitMargin
100%
operatingProfitMargin
88.4%
netProfitMargin
30.2%
returnOnAssets
0.31%
returnOnEquity
3.73%
debtEquityRatio
1.33
operatingCashFlowPerShare
$-25.9
freeCashFlowPerShare
$-25.9
dividendPayoutRatio
28.3%
priceToBookRatio
1.74
priceEarningsRatio
11.69
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key themes discussed during the earnings call highlight JPMorgan's focus on maintaining profitability even amid economic pressures. CEO Jamie Dimon stated, "Our goal is always to serve our clients...we think there are huge opportunities in the innovation economy that takes bankers and certain technologies."
Management emphasized improvement in the Consumer & Community Banking segment with a strong NII from card services, yet noted challenges due to margin compression and deposit behaviors, commenting, "We expect deposits to be relatively flat for the remainder of the year." This mixed outlook underscores strategic adjustments as they navigate through market conditions.
"In CIB, both IB fees and markets revenue were notably up year-on-year reflecting strength across the franchise." - Jeremy Barnum, CFO
— Jeremy Barnum
"We are seeing a slowdown in customer yield-seeking activity including CD volumes and expect deposits to be relatively flat for the remainder of the year." - Jeremy Barnum, CFO
— Jeremy Barnum
Forward Guidance
Management expects NII ex-markets to hit approximately $91.5 billion, positioned for growth despite a projected sequential decrease of about 6% in Q4 NII. There is optimism around a normalization of deposit behaviors and a steady economic landing which, if achieved, could catalyze growth into 2025. CEO Dimon remarked, "We remain upbeat and focused on executing in order to continue delivering excellent returns through the cycle", emphasizing long-term strategies over short-term profits.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
JPM Focus
1.00%
88.40%
3.73%
11.69%
C
1.00%
33.80%
1.55%
9.18%
WFC
1.08%
37.80%
2.79%
9.35%
TD
1.00%
37.80%
-0.16%
-196.82%
NU
45.80%
24.60%
7.24%
29.59%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
JPMorgan Chase's financial metrics reflect a solid foundation with strong profitability and operational efficiency. However, investors should remain cautious due to the potential for margin compression and limited deposit growth. Strategic advancements in asset management and technology will be crucial as management navigates the current economic landscape. Overall, JPM remains a strong investment candidate for long-term growth, particularly if macroeconomic conditions stabilize and consumer behaviors normalize.
Key Investment Factors
Growth Potential
JPMorgan demonstrates substantial growth potential through its diversified segments, particularly in asset management and investment banking, with record flows noted this quarter and a steadfast focus on innovation in financial technology.
Profitability Risk
Risks include compression of deposit margins and fluctuations in credit quality as charge-offs have risen, primarily driven by card services. Additionally, macroeconomic uncertainties and regulatory challenges are potential headwinds.
Financial Position
The financial position remains robust with strong capital ratios supporting future growth strategies. The CET1 ratio of 15.3% places JPMorgan above regulatory requirements, indicating resilience amid financial stress.
SWOT Analysis
Strengths
Leading position in retail deposits with a 19% ROTCE.
Diverse revenue streams across CCB, CIB, and AWM.
Strong brand reputation and established customer relationships.
Weaknesses
Margin compression due to changing interest rates.
Substantial consumer deposit outflows.
High dependency on interest income during rate fluctuations.
Opportunities
Expanding market share in retail banking and wealth management.
Leveraging technology for operational efficiencies.
Potential recovery in consumer lending markets post-rate cuts.
Threats
Increased competition from fintech companies and alternative lenders.
Economic downturn risks affecting loan performance and credit quality.
Regulatory changes impacting capital requirements and operational strategies.