JP Morgan Chase & Co.

Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's first quarter 2022 earnings call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. Please stand by. At this time, I would like to turn the call over to JPMorgan Chase's chairman and CEO, Jamie Dimon, and Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead.

Thanks, operator. Good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page one, The firm reported net income of $8.3 billion, EPS of $2.63 on revenue of $31.6 billion, and delivered an ROTCE of 16%. These results include approximately $900 million of credit reserve bills, which I'll cover in more detail shortly, as well as $500 million of losses in credit adjustments and other in CIB. Regarding loan growth, we're continuing to see positive trends with loans up 8% year-on-year and 1% quarter-on-quarter ex-PPP, with a sequential growth driven by a continued pickup in demand in our wholesale businesses, including ongoing strength in AWM. On page two, we have some more detail on our results. Revenue of $31.6 billion was down $1.5 billion, or 5% year-on-year, and AIX markets was up $1 billion, or 9%, on balance sheet growth and higher rates, partially offset by lower NII from PPP loans. NIR ex-markets was down $2.2 billion, or 17%, predominantly driven by lower IB fees, lower home lending production revenue, losses in credit adjustments and other in CIB, as well as investment securities losses in corporate. And markets revenue was down $300 million, or 3%, against a record first quarter last year. Expenses of $19.2 billion were up approximately $500 million, or 2%, predominantly on higher investments and structural expenses, largely offset by lower volume and revenue-related expenses. Credit costs were $1.5 billion for the quarter. We built $902 million in reserves, driven by increasing the probability of downside risks due to high inflation and the war in Ukraine, as well as builds for Russia-associated exposures in CIB and AWM. Net charge-offs of $582 million were down year-on-year and comparable to last quarter and remain historically low across our portfolios. On to balance sheet and capital on page three. Our CET1 ratio ended at 11.9%, down 120 basis points from the prior quarter. As a reminder, we exited the fourth quarter with an elevated buffer to absorb anticipated changes this quarter. the largest being SACR adoption, as well as some pickup and seasonal activity. In addition to those anticipated items, there were a couple of other drivers. The rate sell-off led to AOCI drawdowns in our AFS portfolio, but keep in mind, all else equal, these mark-to-market losses accrete back to capital through time and as securities mature. And price increases across commodities resulted in higher counterparty credit and market risk RWA. While of course the environment is uncertain, many of these effects are now in the rear view mirror. And as a result, we believe that our current capital and future earnings profile position us well to continue supporting business growth while meeting increasing capital requirements as we look ahead. With that, let's go to our businesses starting with consumer and community banking on page four. CCB reported net income of 2.9 billion on revenue of 12.2 billion which was down 2% year on year. In consumer and business banking, revenue was up 8%, predominantly driven by growth in deposit balances and client investment assets, partially offset by deposit margin compression. Deposits were up 18% year on year and 4% quarter on quarter, consistent with last quarter. And client investment assets were up 9% year on year, largely driven by flows, in addition to market performance. In home lending, Revenue was down 20% year-on-year on lower production revenue from both lower margins and volumes against a very strong quarter last year, largely offset by higher net servicing revenue. Originations of $24.7 billion declined 37% with the rise in rates, and as a result, mortgage loans were down 3%. Moving to card and auto, revenue was down 8% year-on-year, primarily on strong new card account originations leading to higher acquisition costs. Card outstandings were up 11%, and revolving balances have continued to grow, ending the quarter above the first quarter of 21 levels. And in auto, originations were $8.4 billion, down 25% due to the lack of vehicle supply, while loans were up 3%. Touching on consumer spend, combined credit and debit spend was up 21% year-on-year, with growth stronger in credit as we see a continued pickup in travel and dining. And as the quarter progressed, we saw a robust re-acceleration of T&E spend, up 64%. Expenses of $7.7 billion were up 7% year on year, driven by higher investments and structural expenses, partially offset by lower volume and revenue-related expenses. Next, the CIB on page five. CIB reported net income of $4.4 billion on revenue of $13.5 billion for the first quarter. Investment banking revenue of $2.1 billion was down 28% versus the prior year. IB fees were down 31% year on year. We maintained our number one rank with a wallet share of 8%. In advisory, fees were up 18%, and it was the best first quarter ever, benefiting from the closing of deals announced in 2021. Debt underwriting fees were down 20%, primarily driven by leveraged finance as issuers contended with market volatility. And in equity underwriting, fees were down 76% on lower issuance activity, particularly in North America and EMEA. Moving to markets, total revenue was $8.8 billion, down 3% against a record first quarter last year. Fixed income was relatively flat, driven by a decline in securitized products where rising rates have slowed down the pace of mortgage production, largely offset by growth in currencies and emerging markets and commodities on elevated client activity in a volatile market. Equity markets were down 7% against an all-time record quarter last year. This quarter, however, was our second best, with robust client activity across both derivatives and cash, and Prime continued to perform well with client balances hovering around all-time highs. Credit adjustments and other was a loss of $524 million driven by funding spread widening as well as credit valuation adjustments relating to both increases in commodities exposures and markdowns of derivatives receivables from Russia-associated counterparties. Let me take a second here to address the widely reported situation in the nickel market as it relates to our results this quarter. We were hedging positions for clients closely linked to nickel producers, who generally sell forward a portion of the coming year's production. The extreme price movements created margin calls, which we and other banks are helping to address. Because this is counterparty-related, not trading, it appears in the credit adjustments and other line where it contributed about $120 million to the reported loss I just mentioned. It also drove approximately half of the increase in market risk RWA that I noted on the capital slide, and was a driver of higher reported VAR, which will also be elevated in our upcoming filings. Payments revenue was $1.9 billion, up 33% year-on-year, or up 9%, excluding net gains on equity investments, driven by continued growth in fees, deposit balances, and higher rates. Security services revenue of $1.1 billion was up 2% year-on-year, driven by higher rates and growth in fees. Expenses of $7.3 billion were up 3% year-on-year, mostly due to higher structural expenses and investments, largely offset by lower volume and revenue-related expenses. Moving to commercial banking on page 6. Commercial banking reported net income of $850 million and an ROE of 13%. Revenue of $2.4 billion was flat year on year, with higher payments revenue and deposit balances offset by lower investment banking revenue. Gross investment banking revenue of $729 million was down 35%, driven by both fewer large deals and less flow activity. Expenses of $1.1 billion were up 17% year on year, largely driven by investments and volume and revenue-related expenses. Deposits were down 2% quarter on quarter, as client balances are seasonally highest at year end. Loans were up 5% year on year, and up 3% quarter on quarter, excluding PPP. C&I loans were up 3% sequentially, ex PPP, reflecting higher revolver utilization and originations across middle market and corporate client banking. CRE loans were up 3%, driven by strong loan originations and funding across the portfolio. And then to complete our lines of business, AWM on page 7, asset and wealth management reported net income of $1 billion with a pre-tax margin of 30%. Revenue of $4.3 billion was up 6% year-on-year as growth in deposits and loans and higher management fees and performance fees and alternative investments were partially offset by deposit margin compression and the absence of investment valuation gains from the prior year. Expenses of $2.9 billion were up 11% year on year, predominantly driven by higher structural expenses and investments, as well as higher volume and revenue-related expenses. For the quarter, net long-term inflows of $19 billion were positive across all channels, with strength in equities, multi-asset, and alternatives. And in liquidity, we saw net outflows of $52 billion. AUM of $3 trillion and overall client assets of $4.1 trillion up 4% and 8% year-on-year respectively, were driven by strong net inflows. And finally, loans were up 3% quarter-on-quarter with continued strength in mortgages and securities-based lending, while deposits were up 9%. Turning to corporate on page eight, corporate reported a net loss of $856 million. Revenue was a loss of $881 million, down $408 million year-on-year. NII was up $319 million due to the impact of higher rates, and NIR was down $727 million due to losses on legacy equity investments versus gains last year, as well as approximately $400 million of net realized losses on investment securities this quarter. Expenses of $184 million were lower by $692 million year on year, primarily due to the contribution to the firm's foundation in the prior year. Next, the outlook on page nine. We still expect NIIX markets to be in excess of $53 billion and adjusted expenses to be approximately $77 billion. And we'll update these and give you more color on investor day next month. So to wrap up, once again this quarter, the company's performance was strong in a particularly volatile and challenging environment. We helped our clients navigate very difficult markets, provided support to relief efforts, and implemented economic sanctions of unprecedented complexity with multiple directives from governments around the world. And of course, our thoughts remain with everyone, including our employees, affected by Russia's invasion of Ukraine. Looking ahead, the U.S. economy remains robust, but we're watching high inflation, the reversal of QE, and rising rates, as well as the ongoing effects of the war on the global economy. With that, operator, please open the line for Q&A.

Please stand by. And our first question is coming from John McDonald from Autonomous Research.