JP Morgan Chase & Co.

Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's second quarter 2024 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. The presentation is available on JPMorgan Chase's website and please refer to the disclaimer in the back concerning forward-looking statements. Please stand by. At this time, I would like to turn the call over to JPMorgan Chase's Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead.

Thank you, and good morning, everyone. Starting on page one, the firm reported net income of $18.1 billion, EPS of $6.12 on revenue of $51 billion, with an ROTCE of 28%. These results included the $7.9 billion net gain related to Visa shares and the $1 billion foundation contribution of the appreciated Visa stock. Also included is $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 an ROGCE of 20%. Touching on a couple of highlights, in the CIB, IB fees were up 50% year-on-year and 17% quarter-on-quarter, and markets revenue was up 10% year-on-year. In CCB, We had a record number of first-time investors and strong customer acquisition across checking accounts and card, and we've continued to see strong net inflows across AWM. Now, before I give more detail on the results, I just want to mention that starting this quarter, we are no longer explicitly calling out the First Republic contribution in the presentation. Going forward, we'll only specifically call it out if it is a meaningful driver in the year-on-year comparisons. As a reminder, we acquired First Republic in May of last year, so the prior year quarter only has two months of First Republic results compared to the full three months this quarter. Also, in the prior year quarter, most of the expenses were in corporate, whereas now they are primarily in the relevant line of business. Now, turning to page two for the firm-wide results. The firm reported revenue of $51 billion, up $8.6 billion, or 20% year-on-year. Excluding both the visa gain that I mentioned earlier, as well as last year's First Republic bargain purchase gain of $2.7 billion, revenue of $43.1 billion was up $3.4 billion, or 9%. NIIX markets was up $568 million, or 3%, driven by the impact of balance sheet mix and higher rates, higher revolving balances in card, and the additional month of First Republic-related NII partially offset by deposit margin compression and lower deposit balances. NIRx markets was up $7.3 billion, or 56%. Excluding the items I just mentioned, it was up $2.1 billion, or 21%, largely driven by higher investment banking revenue and asset management fees. Both periods included net investment securities losses. And markets revenue was up $731 million, or 10% year-on-year. Expenses of $23.7 billion were up $2.9 billion, or 14% year-on-year. Excluding the foundation contribution I previously mentioned, expenses were up 9%, primarily driven by compensation, including revenue-related compensation and growth in employees. And credit costs were $3.1 billion, reflecting net charge-offs of $2.2 billion and a net reserve bill of $821 million. Net charge-offs were up $820 million year-on-year, predominantly driven by CART. The net reserve build included $609 million in consumer and $189 million in wholesale. On to balance sheet and capital on page 3. We ended the quarter with a CT1 ratio of 15.3%, up 30 basis points versus the prior quarter, primarily driven by net income, largely offset by capital distributions and higher RWA. As you know, we completed CCAR a couple of weeks ago and have already disclosed a number of the key points. Let me summarize them again here. Our preliminary SCB is 3.3%, although the final SCB could be higher. The preliminary SCB, which is up from the current requirement of 2.9%, results in a 12.3% standardized CT1 ratio requirement, which goes into effect in the fourth quarter of 2024. And finally, the firm announced that the board intends to increase the quarterly common stock dividend from $1.15 to $1.25 per share in the third quarter of 2024. Now, let's go to our businesses, starting with CCB on page four. CCB reported net income of $4.2 billion on revenue of $17.7 billion, which was up 3% year-on-year. In banking and wealth management, revenue was down 5% year on year, reflecting lower deposits and deposit margin compression, partially offset by growth in wealth management revenue. Average deposits were down 7% year on year and 1% quarter on quarter. Fine investment assets were up 14% year on year, predominantly driven by market performance. In home lending, revenue of $1.3 billion was up 31% year on year, predominantly driven by higher NII, including one additional month of the First Republic portfolio. Turning to card services and auto, revenue was up 14% year-on-year, predominantly driven by higher card NII on higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolve. And in auto, originations were $10.8 billion, down 10% coming off strong originations from a year ago, while continuing to maintain healthy margins. Expenses of $9.4 billion were up 13% year-on-year, predominantly driven by First Republic expenses now reflected in the lines of business, as I mentioned earlier, as well as field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion of $813 million year-on-year, predominantly driven by card, as newer vintages season and credit normalization continues. The net reserve billed was $579 million, also driven by card, due to loan growth and updates to certain macroeconomic variables. Next, the commercial and investment bank on page 5. Our new commercial and investment bank reported net income of $5.9 billion on revenue of $17.9 billion. You'll note that we are disclosing revenue by business as well as breaking down the banking and payments revenue by client coverage segment in order to best highlight the relevant trends in both important dimensions of the wholesale franchise. This quarter, IB fees were up 50% year-on-year, and we ranked number one with year-to-date wallet share of 9.5%. In advisory, fees were up 45%, primarily driven by the closing of a few large deals in a week prior year quarter. Underwriting fees were up meaningfully, with equity up 56% and debt up 51%, benefiting from favorable market conditions. In terms of the outlook, We're pleased with both the year-on-year and sequential improvement in the quarter. We remain cautiously optimistic about the pipeline, although many of the same headwinds are still in effect. It's also worth noting that pull-forward refinancing activity was a meaningful contributor to the strong performance in the first half of the year. Payments revenue was $4.5 billion, down 4% year-on-year, as deposit margin compression and higher deposit-related client credits were largely offset by fee growth. Moving to markets, total revenue was $7.8 billion, up 10% year-on-year. Fixed income was up 5%, with continued strength in securitized products. And equity markets was up 21%, with equity derivatives up on improved client activity. We saw record revenue in prime on growth in client balances amid supportive equity market levels. Security services revenue of $1.3 billion was up 3% year-on-year, driven by higher volumes and market levels, largely offset by deposit margin compression. Expenses of $9.2 billion were up 12% year-on-year, largely driven by higher revenue-related compensation, legal expense, and volume-related non-compensation expense. In banking and payments, average loans were up 2% year-on-year due to the impact of the First Republic acquisition and flat sequentially. Demand for new loans remains muted as middle market and large corporate clients remain somewhat cautious due to the economic environment, and revolver utilization continues to be below pre-pandemic levels. Also, capital markets are open and are providing an alternative to traditional bank lending for these clients. In CRE, higher rates continued to suppress both loan origination and payoff activity. Average client deposits were up 2% year-on-year and relatively flat sequentially. Finally, credit costs were $384 million. The net reserve build of $220 million was primarily driven by incorporating the First Republic portfolio in the firm's model approach. Net charge-offs were $160. of which about half was in office. Then, to complete our lines of business, AWM on page 6. Asset and wealth management reported net income of $1.3 billion with pre-tax margin of 32%. Revenue of $5.3 billion was up 6% year-on-year, driven by growth in management fees on higher average market levels and strong net inflows, as well as higher brokerage activity, largely offset by deposit margin compression. Expenses of $3.5 billion were up 12% year-on-year, largely driven by higher compensation, primarily revenue-related compensation and continued growth in our private banking advisor teams. For the quarter, long-term net inflows were $52 billion, led by equities and fixed income. And in liquidity, we saw net inflows of $16 billion. AUM of $3.7 trillion was up 15% year-on-year, and client assets of $5.4 trillion were up 18% year-on-year, driven by higher market levels and continued net income. And finally, loans and deposits were both flat quarter-on-quarter. Turning to corporate on page 7, corporate reported net income of $6.8 billion on revenue of $10.1 billion. Excluding this quarter's visa-related gain and the First Republic bargain purchase gain in the prior year, NIR was up approximately $450 million year on year. NII was up $626 million year on year, driven by the impact of balance sheet mix and higher rates. Expenses of $1.6 billion were up $427 million year on year. Excluding foundation contribution, expenses were down $573 million year-on-year, largely as a result of moving First Republic-related expense out of corporate into the relevant segments. To finish up, we have the outlook on page 8. Our 2024 guidance, including the drivers, remains unchanged from what we said at investor day. We continue to expect NII and NIIX markets for approximately $91 billion. adjusted expense of about $92 billion, and on credit, card net charge-off rate of approximately 3.4%. So to wrap up, the reported performance for the quarter was exceptional and actually represents record revenue and net income. But more importantly, after excluding the significant items, the underlying performance continues to be quite strong. And as always, we remain focused on continuing to execute with discipline.

And with that, let's open the line for Q&A. Please stand by.