Business context and reporting period
JPMorgan Chase & Co. is a diversified financial-services firm with businesses in consumer and community banking, investment banking, commercial banking, payments, securities services, asset management and wealth management. This unaudited Form 10-Q covers the three months ended March 31, 2024, with comparisons to the three months ended March 31, 2023 and the December 31, 2023 balance sheet. Results include the impact of the May 1, 2023 acquisition of certain First Republic Bank assets and liabilities.
Key financial metrics
| Metric | 1Q24 | 1Q23 | Change |
|---|---|---|---|
| Total net revenue | $41.934 billion | $38.349 billion | +9% |
| Net interest income | $23.082 billion | $20.711 billion | +11% |
| Noninterest revenue | $18.852 billion | $17.638 billion | +7% |
| Pre-provision profit | $19.177 billion | $18.242 billion | +5% |
| Provision for credit losses | $1.884 billion | $2.275 billion | -17% |
| Net income | $13.419 billion | $12.622 billion | +6% |
| Diluted EPS | $4.44 | $4.10 | +8% |
| Noninterest expense | $22.757 billion | $20.107 billion | +13% |
| Effective tax rate | 22.4% | 20.9% | +150 bps |
Profitability remained strong, with ROE of 17%, ROTCE of 21%, return on assets of 1.36% and an overhead ratio of 54%. Net interest income excluding Markets increased 10% to $23.020 billion, while Markets net revenue declined 5% to $7.982 billion. Investment banking fees increased 18% to $1.954 billion, and asset management fees increased 20% to $4.146 billion.
Balance sheet, credit, capital and liquidity
- Total assets were $4.091 trillion at March 31, 2024, up 6% from December 31, 2023. Loans were $1.310 trillion, down 1% sequentially, and deposits were $2.428 trillion, up 1%.
- Long-term debt was $395.872 billion, up 1% sequentially. Common stockholders’ equity was $306.737 billion and total stockholders’ equity was $336.637 billion.
- Total allowance for credit losses was $24.7 billion; allowance coverage of retained loans was 1.77%, versus 1.85% a year earlier. Nonperforming assets were $8.3 billion, up 11% year over year.
- Net charge-offs were $1.956 billion, compared with $1.137 billion in 1Q23; the firmwide net charge-off rate increased to 0.62% from 0.43%, primarily due to Card Services.
- CET1 capital was $257.569 billion, with a 15.0% Basel III Standardized CET1 ratio and a 15.3% Advanced ratio. The supplementary leverage ratio was 6.1%.
- Average firmwide liquidity coverage ratio was 112%, with average HQLA of $797.1 billion. At period-end, eligible HQLA were approximately $823 billion, unencumbered marketable securities were approximately $673 billion, and total stated liquidity sources were approximately $1.5 trillion.
Cash flow and capital actions
- Net cash used in operating activities was $154.158 billion, compared with $111.241 billion used in 1Q23. Investing activities used $43.379 billion, while financing activities provided $141.168 billion.
- Cash, deposits with banks and due from banks decreased by $62.035 billion during the quarter to $562.116 billion.
- The firm repurchased 15.9 million common shares for $2.849 billion and declared a common dividend of $1.15 per share, up from $1.00 in 1Q23.
Material changes versus comparable periods
- Net interest income benefited from First Republic, higher rates, balance-sheet mix and higher revolving Card Services balances, partly offset by deposit margin compression and lower CCB average deposits.
- Noninterest revenue benefited from higher asset management and investment banking fees and lower investment securities losses, partly offset by lower Markets revenue.
- Noninterest expense increased 13%, reflecting higher compensation, increased staffing, First Republic-related costs and a $725 million increase to the FDIC special assessment. FDIC-related expense totaled $973 million in 1Q24 versus $317 million in 1Q23.
- Consumer credit costs increased materially: Card Services net charge-offs rose to $1.687 billion from $922 million, and the Card Services net charge-off rate increased to 3.32% from 2.07%.
- Wholesale nonperforming exposure increased, driven principally by Real Estate downgrades concentrated in Office. Criticized wholesale exposure rose to $45.8 billion from $41.4 billion at year-end 2023.
- CCB net income declined 8% despite 7% revenue growth because expenses and credit costs increased. CIB net income increased 8%, CB increased 39% and AWM declined 6%.
Guidance, outlook, risks and unusual items
- Management’s full-year 2024 outlook is approximately $90 billion of net interest income, approximately $89 billion excluding Markets, and approximately $91 billion of adjusted expense, all described as market dependent. Management expects the Card Services net charge-off rate to remain below 3.50%.
- First Republic contributed $1.663 billion of total net revenue and $668 million of net income in 1Q24. Integration activities are expected to be largely completed by the end of 2024. The estimated bargain purchase gain was approximately $2.8 billion, subject to final settlement matters with the FDIC.
- The firm adopted new tax-credit investment accounting guidance on January 1, 2024. The change reduced retained earnings by $161 million and increased reported income tax expense by approximately $450 million, with no material impact on net income.
- Visa commenced an exchange offer for Visa B-1 shares after quarter-end. JPMorgan tendered its 37.2 million shares; acceptance could produce a gain as early as 2Q24, but the amount and timing are not yet clear.
- Key risks include interest-rate and deposit repricing, consumer credit normalization, commercial real estate and Office exposure, market volatility, regulatory capital changes, litigation, geopolitical events, cyber and operational risks, and the ability to complete First Republic integration.
- The firm disclosed an estimated range of reasonably possible legal losses, in excess of established reserves, from zero to approximately $1.4 billion as of March 31, 2024, excluding matters for which a loss estimate could not be made.
- The proposed U.S. Basel III capital framework could materially increase capital requirements for large banking organizations. The proposed effective date is July 1, 2025, with a three-year transition period.
Investor verification checklist
- Reconcile reported GAAP results with managed-basis and other non-GAAP measures, particularly NII excluding Markets, adjusted expense, pre-provision profit and ROTCE.
- Track Card Services delinquencies, charge-offs and allowance levels against management’s below-3.50% full-year charge-off outlook.
- Review Commercial Real Estate, especially Office, criticized exposure, nonaccrual loans and allowance coverage.
- Assess the sustainability of net interest income as deposit costs, deposit balances and interest-rate expectations change.
- Monitor First Republic integration costs, FDIC settlement items, purchase-accounting adjustments and the remaining bargain purchase gain.
- Verify the potential timing and size of any Visa exchange-offer gain and the effect of post-quarter-end preferred-stock redemptions.
- Review pending litigation, regulatory inquiries, trading-surveillance remediation and the disclosed possible-loss range.
- Consider the effect of final U.S. Basel III rules and the 2024 stress-capital-buffer determination on capital distributions and repurchases.