JPMorgan Chase's Chief Financial Officer, Jeremy Barnum, begins the Second Quarter 2024 Earnings Call by reporting the firm's net income of $18.1 billion, EPS of $6.12, and ROTCE of 28%. He highlights the $7.9 billion net gain related to Visa shares and $1 billion contribution of appreciated Visa stock, as well as $546 million of net investment securities losses in corporate. Excluding these items, the firm had net income of $13.1 billion, EPS of $4.40, and ROTCE of 20%. The CIB saw a 50% increase in IB fees and 10% increase in market revenue, while CCB had record first-time investors and strong customer acquisition. Going forward, the First Republic contribution will only be specifically mentioned if it is a meaningful driver in year-on-year comparison.

In the second paragraph of the article, the firm's firm-wide results are discussed. Revenue for the quarter was $51 billion, a 20% increase from the previous year. Excluding certain gains, revenue was $43.1 billion, a 9% increase. Net interest income was up 3%, while non-interest income saw a significant increase of 56%. Expenses were up 14%, mainly due to compensation and credit costs were $3.1 billion. The CET1 ratio was 15.3%, up 30 basis points from the previous quarter. The firm also completed CCAR, with a preliminary SCB of 3.3%.

The preliminary SCB of 12.3% standardized CET1 ratio requirement will go into effect in the fourth quarter of 2024, and the firm plans to increase the quarterly common stock dividend in the third quarter of 2024. CCB reported a net income of $4.2 billion and revenue of $17.7 billion, with banking and wealth management revenue down 5% year-on-year. Home lending revenue was up 31% year-on-year, while Card services and Auto revenue increased by 14%. Expenses were up 13% due to First Republic expenses now being reflected in the lines-of-business. Credit costs were $2.6 billion, with net charge-offs of $2.1 billion, mainly driven by Card.

The Commercial and Investment Bank reported a net income of $5.9 billion and a revenue of $17.9 billion. IB fees were up 50% year-on-year and the bank ranked number one with a 9.5% wallet share. Advisory fees were up 45% due to the closing of large deals. Underwriting fees also saw significant growth. Payments revenue decreased by 4% due to deposit margin compression, but was partially offset by fee growth. In markets, total revenue was up 10% with fixed income up 5% and equity markets up 21%. Security services revenue increased by 3% due to higher volumes and market levels.

The expenses for the company were $9.2 billion, a 12% increase from the previous year. This was mainly due to higher revenue related compensation, legal expenses, and non-compensation expenses. The banking and payments sector saw a 2% increase in average loans, but demand for new loans remains low due to cautiousness from middle market and large corporate clients. Capital markets are providing alternative lending options. The commercial real estate sector is also seeing suppressed activity due to higher interest rates. Asset and wealth management reported a net income of $1.3 billion with a pre-tax margin of 32%. Revenue was up 6% due to higher market levels and net inflows, but expenses were also up 12% due to higher compensation and private banking advisor teams. Long-term net inflows were $52 billion and liquidity saw net inflows of $16 billion. Assets under management and client assets both saw a significant increase from the previous year. Loans and deposits remained flat from the previous quarter.

Steven Chubak from Wolfe Research asked about the potential impact of favorable revisions to Basel III endgame and GSIB surcharge calculations on the firm's capital and return on tangible common equity (ROTCE) target. He also inquired about the potential impact on the firm's appetite for buybacks. Jeremy Barnum, the speaker, did not provide a direct answer but emphasized the firm's focus on executing with discipline and maintaining strong underlying performance. The firm's 2024 guidance, including NII, expenses, and credit, remains unchanged from what was previously stated at Investor Day. The speaker also noted that the reported performance for the quarter was exceptional, with record revenue and net income, but the underlying performance remains strong after excluding significant items. The call was then opened for Q&A.

Jeremy Barnum, speaking on behalf of JPMorgan Chase, addressed a question about the potential impact of capital and ROTCE (return on tangible common equity) on the company's future. He stated that it is unlikely for the ROTCE to increase, as the company's target remains at 17% and most potential outcomes involve expanding the denominator. He also mentioned that while there has been speculation in the press about potential changes to capital return and buyback plans, the company does not have any reliable information on this and their current trajectory remains the same. This includes the recognition that their current practices lead to a continually growing CET1 ratio.

The speaker discusses the company's plans for capital deployment and their current level of excess capital. They mention the capital hierarchy and their focus on organic growth, dividends, and buybacks. They also address concerns about NII, noting that while there may be some moderation in repricing pressures and deposit attrition, they do not foresee a significant increase in NII in the near future.

Jeremy Barnum responds to a question about the level at which deposit balances could stabilize. He notes that Q2 is still a headwind and loan growth is modest, but RRP has settled at current levels. Overall, there are still net headwinds to deposit balances, but their market share and growth ambitions could offset this. In terms of normalizing higher, it depends on the relative comparison. It is too early to call an end to the over earning narrative or normalization narrative, and the main difference in their current guidance is the change in the Fed outlook. They are focused on running the company and not being distracted by over earning.

Jeremy Barnum, speaking on behalf of the company, declined to comment on any conversations with the Fed regarding the stress capital buffer. He did note that the preliminary number released by the Fed may be adjusted by August 31. The company believes there may be an error in the calculation due to the high amount of OCI gain disclosed by the Fed. However, whether or not the Fed agrees and makes a change is up to them. Barnum also reiterated the company's stance on the volatility and lack of transparency in the stress capital buffer, which makes it difficult to manage capital for banks. He also mentioned that the company believes capital returns will happen, it's just a matter of when.

The speaker is unable to speak for Jamie, but notes that Jamie has expressed limited interest in a special dividend or buybacks at current valuations. They suggest reading Jamie's comments at a recent industry conference for more detail. The company's main priority is deploying capital for growth, followed by maintaining a sustainable dividend and using buybacks as a last resort. Jamie has previously stated that price is a factor in buyback decisions.

The operator introduces Ken Usdin from Jefferies and he asks Jeremy about the progress in investment banking fees. Jeremy mentions that there has been a 50% increase year-over-year and a sequential improvement. He also talks about the elevated dialogue and engagement in the ECM and M&A space, but cautions that there are still some caveats, such as the pull-forward risk in the second half of the year and the fact that a higher percentage of the wallet is refinance rather than acquisition finance.

The current performance of the ECM (equity capital markets) is not as strong as expected, due to factors such as the domination of a few large stocks and high valuations of private capital. This has led to concerns about IPOs and regulatory overhang on the advisory side. On the consumer side, there has been stabilization in delinquencies and loss rates, with no significant changes or deterioration. The company closely monitors income cohorts in this area.

The speaker discusses the current state of private credit, noting that there has been a slight shift in spend patterns and a weakening in lower income segments. They also mention that the economy is strong but showing some signs of moderation. The speaker then addresses a question about progress in direct-lending and asset-backed finance, stating that there is nothing new to report but noting that there has been a lot of money raised in private credit funds.

The acquisition finance market is currently quiet due to a lack of deals and an increase in lender protections. This supports the company's belief in convergence between direct lending and syndicated lending. The company is optimistic about their offering in this space but is currently being patient due to the market conditions. They have not heard much about asset-backed financing trends but will follow up on it. The company is currently being patient and waiting for triggers in the market before extending duration.

Jeremy Barnum, a representative from a financial company, explains that the company has added a little bit of duration over the last couple of quarters, but cautions against looking solely at their reported cash balances and balance sheet to assess their duration strategy. He also mentions that the company aims to be relatively balanced in terms of sensitivity to rates and does not see a big change in duration posture in the near future. In response to a question about the company's ROTCE (return on tangible common equity), Barnum explains that the company's high ROTCE of 20% is not sustainable and will likely normalize to around 17%, mainly due to over-earning on NII (net interest income) and potential adjustments in consumer deposit costs.

Jeremy Barnum discusses the components that contribute to the company's returns, including seasonal trends, normalization of NII, yield curve effects, and expense management. He also mentions the expected expansion of the denominator due to Basel III endgame and other factors. Overall, the company is expecting a higher return than 17% for the year.

The speaker discusses how they arrived at their 17% estimate and how that number could vary depending on economic factors. They also mention the yield curve and how it may not necessarily be a source of structural NII or NIM for banks. They acknowledge that fiscal dynamics could potentially result in a steeper yield curve in the future, but this is currently speculative.

Jeremy Barnum, a representative from the company, stated that it is too early to end the over earning narrative. He mentioned higher deposit costs, lower rates, lower NII, DCM pull-forward, and higher credit costs as factors contributing to this narrative. He also stated that if the company's annual returns were closer to 17%, the narrative may end. When asked about the CET1 ratio for this expectation, he stated that it would depend on the shape of rules and the volatility of certain pools. Ultimately, the uncertainty surrounding the 17% through-the-cycle ROTCE expectation is influenced by factors such as where rules land, RWA, and GSIB recalibration.

The speaker, Jeremy Barnum, is responding to a question from Mike Mayo about the company's return target. Barnum explains that the market is very competitive and they are proud to be in the ballpark of being able to achieve a 17% return, assuming a reasonable outcome on the Basel III endgame. He also mentions the company's performance, share taken, and competition from various banks and non-banks. He concludes by stating that the 17% return is not a guarantee but a goal that can fluctuate.

Betsy Graseck asks Jeremy Barnum about the amount of buybacks the company did in the second quarter, and how they determine the right amount to do each quarter. Barnum explains that they prefer not to guide on buybacks and have the flexibility to change their approach at any time. However, he also mentions that they generally do not exit the market entirely unless the conditions are highly unusual.

The speaker discusses the company's approach to buybacks and how they may increase in the future due to the significant gains from Visa. They also mention the need to address the high levels of CET1 ratio in the long term.

In response to a question about non-interest-bearing deposits, Jeremy Barnum of the company explains that they expect a continued migration of these deposits into interest-bearing accounts, which will be a source of headwinds for the company's net interest margin. He also mentions that they have not specifically focused on the sequential change in average non-interest-bearing deposits, but rather the bigger picture of ongoing migration.

The paragraph discusses the migration of funds from non-interest-bearing accounts to interest-bearing accounts, investments, and money markets. This is seen as a contributor to modest headwinds for net interest income. The C&I portfolio is highlighted as a strong credit quality story, with no signs of cracks or early signs of trouble.

Jeremy Barnum clarifies that the consensus provision for 2024 is $10.7 billion, but Jamie's previous comments at an industry conference suggested a lower number. However, the actual expectation for the provision is slightly higher and may be above the consensus. This is specifically for the Card allowance and the overall allowance change for the year may end up being higher than the consensus.

The speaker explains that the 12% growth in OS can be reconciled with the high build due to a combination of higher revolving mix and seasoning of earlier vintages. They also mention that trading assets have increased by 20% due to client activity, but this is not a significant use of capital. Loan demand outside of Cards has been weak, but there is no indication of a change in demand.

The speaker discusses the current state of loan demand, noting that it remains low except in the Card business. They explain that the company is not constrained by capital in this area and will only lend within their risk appetite. They also mention the challenges of deploying capital in a world with compressed spreads and under pressure terms. The speaker emphasizes the importance of being patient and assessing economic risk when considering opportunities outside the company. The conference call ends with no further questions.

This summary was generated with AI and may contain some inaccuracies.