JPMorgan Chase misses on revs; provides FY24 guidance (170.30)
- Reports Q4 (Dec) earnings of $3.04 per share, excluding non-recurring items may not compare to the FactSet Consensus of $3.35; reported revenues rose 11.7% year/year to $38.57 bln vs the $39.73 bln FactSet Consensus. EPS includes FDIC special assessment of $2.9 billion ($0.74 decrease per share).
- The provision for credit losses was $2.8 billion, reflecting net charge-offs of $2.2 billion and a net reserve build of $598 million. The net reserve build included a $546 million net build in Consumer, driven by loan growth in Card Services, and a $41 million net build in Wholesale. Net charge-offs of $2.2 billion were up $1.3 billion, predominantly driven by Card Services and single-name exposures in Wholesale which were largely previously reserved. The prior-year provision was $2.3 billion, reflecting a net reserve build of $1.4 billion and net charge-offs of $887 million.
- Average loans up 27%, or up 6% excluding First Republic; Card Services net charge-off rate of 2.79%>
- Net interest income (NII) was $24.2 billion, up 19%, or up 12% excluding First Republic. NII excluding Markets2 was $23.6 billion, up 18%, or up 11% excluding First Republic, predominantly driven by higher rates and higher revolving balances in Card Services, partially offset by lower deposit balances. Noninterest revenue was $15.8 billion, up 3%, or relatively flat excluding First Republic. The current quarter reflected higher asset management and Investment Banking fees. The prior-year quarter reflected a $914 million gain on the sale of Visa B shares and higher markdowns on equity investments in Payments.
- "2023 was a good example of the power of our investment philosophy and fortress principles, as well as the value of being there for clients—as we always are—in both good times and bad times. The result was continued growth broadly across the Firm. We will highlight a few examples: CCB added over 2 million net new checking accounts in 2023; CIB maintained its #1 rank in both IB and Markets and gained over 100bps of IB market share; CB added over 5,000 new relationships, roughly 2x the prior year; and AWM saw record client asset net inflows of $490 billion, over 20% higher than its prior record.
- The U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing. It is important to note that the economy is being fueled by large amounts of government deficit spending and past stimulus. There is also an ongoing need for increased spending due to the green economy, the restructuring of global supply chains, higher military spending and rising healthcare costs. This may lead inflation to be stickier and rates to be higher than markets expect. On top of this, there are a number of downside risks to watch. Quantitative tightening is draining over $900 billion of liquidity from the system annually, and we have never seen a full cycle of tightening. And the ongoing wars in Ukraine and the Middle East have the potential to disrupt energy and food markets, migration, and military and economic relationships, in addition to their dreadful human cost. These significant and somewhat unprecedented forces cause us to remain cautious. While we hope for the best, the past year demonstrated why we must be prepared for any environment."
- "Guidance: We expect ~$88B in NII ex. Markets for 2024, as loan growth partially offsets lower rates. Our 2024 expense outlook is ~$90 bln. Expect FY2024 Card Services NCO rate of < 3.50%"