Summary
JP Morgan Chase (stock:JPM), a multinational investment bank and financial services company, reported its fourth quarter earnings for the year 2022. The company reported a net income of $11 billion, earnings per share of $3.57, and revenue of $35.6 billion. The company also had an return on tangible common equity (ROTCE) of 20%. The company’s CEO, Jamie Dimon, and CFO, Jeremy Barnum, discussed the results during an earnings call.
According to Barnum, the company had two significant items in corporate, a $914 million gain on the sale of Visa B shares, offset by $874 million of net investment securities loss. He highlighted that combined credit and debit spending was up 9% year-over-year, with growth in both discretionary and non-discretionary spending. The company also ended the year ranked #1 for global IB fees with a wallet share of 8% and credit continues to normalize, but actual performance remains strong across the company.
Regarding the full year results, the company reported net income of $37.7 billion, EPS of $12.09, and record revenue of $132.3 billion and delivered an ROTCE of 18%. The company also reported that it ended the quarter with a CET1 ratio of 13.2%, which was up 70 basis points, primarily driven by the benefit of net income, including the sale of Visa B shares less distributions, AOCI gains and lower RWA.
Dimon added “We had a strong finish to the year, with record revenue and earnings per share, driven by our leading franchises, strong credit performance and disciplined expense management. We are well-positioned to continue to serve our clients and customers, invest in our growth and return capital to our shareholders.”
Highlights
- Net income of $11 billion reported in 4th quarter of 2022
- Earnings per share of $3.57 and revenue of $35.6 billion
- Return on tangible common equity (ROTCE) of 20%
- Significant items in corporate include $914 million gain on the sale of Visa B shares, offset by $874 million of net investment securities loss
- Combined credit and debit spending was up 9% year-over-year, with growth in both discretionary and non-discretionary spending
- Company ranked #1 for global IB fees with a wallet share of 8%
- Credit continues to normalize, but actual performance remains strong across the company
- CET1 ratio of 13.2% at the end of the quarter, up 70 basis points
- CEO Dimon states the company is well-positioned to continue to serve clients, invest in growth and return capital to shareholders
Challenges
- The company may face a mild recession in the central case as well as loan growth in card services
- Sentiment for both reflects recessionary concerns not yet fully reflected in the data
- Consumer cash buffers for the lower income segments are expected to be back to pre-pandemic levels by the third quarter of this year.
Outlook
- Continued pressure on profitability due to lower volumes and yield in Express segment
- Improved demand in Europe, but continued softness in Asia
- Robust pipeline of sales, particularly in small and medium business and European segments
- Continued yield pressure in Asia due to lower demand for priority services, shift towards deferred services
- Prudent expectations for volume and yield in second half of fiscal year, but strong service value proposition and improved relative market position
- $3.7 billion in discrete cost reductions identified, focusing on Express segment
- Reduced capital expenditure forecast by $400 million to $5.9 billion
- Strong liquidity, generating solid cash flows and executing $1.5 billion accelerated share repurchase
- Maintaining commitment to reducing capital intensity and creating value for shareholders while reinvesting in company.
