Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — Investor Day (February 2016)
53 slides from Jp Morgan Chase &'s investor day presentation, Feb 23, 2016
Slide 1: Firm Overview
FIRM OVERVIEW Marianne Lake, Chief Financial Officer February 23, 2016
Slide 2: Strong fundamentals and track record of adapting
Strong fundamentals and track record of adapting JPMorgan Chase overview 1 Four leading client franchises – together delivering significant value Building exceptional client franchises Client focus and long-term approach – consistently investing and innovating 2 Strong foundation – capital, li
Slide 3: 2015 results – strong financial performance on an absolute basis
2015 results – strong financial performance on an absolute basis… JPMorgan Chase overview Diversification supporting revenue, despite low rates and macro volatility Revenue1 $97B Net interest income of $45B and noninterest revenue of $52B $56B 2 percentage point decrease in the adjusted overhe
Slide 4: … and on a relative basis – JPM continues to be a leader
… and on a relative basis – JPM continues to be a leader JPMorgan Chase overview 10-year FY2015 Managed revenue1 ($B) FY2015 Net income ($B) FY2015 EPS YoY growth CAGR JPM $97 JPM $24 JPM 13% 10% WFC $87 WFC $23 WFC 0% 6%4 C $78 C $17 C >100% (20)%4 BAC $83 BAC $16 BAC >100% (11)% GS $34 GS $6 GS (2
Slide 5: Sustained tangible book value growth
Sustained tangible book value growth JPMorgan Chase overview Tangible book value per share (TBVPS)1,2 5 year average value creation 10% 2.9% +/- 1.4% 8% 8.4% Current yield 3% YoY growth 8% TCE Repurchases Dividends Multiple 3Y CAGR expansion / $48.13 (contraction) 10% $44.60 5Y CAGR $40.72 $38.68 $3
Slide 6: Diversification drives stability amidst significant macro volatility
Diversification drives stability amidst significant macro volatility JPMorgan Chase overview Peer total revenue volatility1 Peer NIR volatility1,2 JPM 2% USB 3% WFC 3% JPM 3% USB 3% WFC 4% C 4% BAC 6% BAC 5% MS 8% GS 7% GS 11% MS 11% C 11% 2015 Markets cumulative revenue ($B) 20 Third Avenue HY Fed
Slide 7: Our operating model is centered around our clients
Our operating model is centered around our clients JPMorgan Chase overview Operating model Client segmentation Wholesale Individuals Stable performance Deepening client Corporate relationships Middle Market Client Banking $20-500mm $500mm-2B revenue revenue Optimization against Business Share CB Mul
Slide 8: Agenda
Agenda 1 Key Principles Building exceptional Four exceptional client franchises – leaders in their own right client franchises Build our businesses for the long-term – consistently innovating Focus on client experience and lifetime relationships Complete platform and diversified operating mo
Slide 9: Leading client franchises
1 Leading client franchises Deepening client relationships Building exceptional client franchises Share gains and leadership positions Irreplicable client franchise built over the long-term 2006 2014 2015 Relationships with ~50% of U.S. households Deposits market share1 3.6% 7.6% 7.9% #1 primary
Slide 10: Proven best-in-class long-term performance
1 Proven best-in-class long-term performance Deepening client relationships Building exceptional client franchises Share gains and leadership positions EOP core loans: 5-year CAGR1 Deposits: 5-year CAGR2 Total EOP Domestic retail 10% 9% 8% 7% 7% 8% 6% 7% 6% 5% 3% 5% 5% 4% 3% 3% 1% JPM WFC PNC USB C
Slide 11: Proven best-in-class long-term performance (cont’d)
1 Proven best-in-class long-term performance (cont’d) Deepening client relationships Building exceptional client franchises Share gains and leadership positions J.D. Power customer satisfaction score: 2010–20151 Credit card sales: 5-year CAGR2 15% Chase Chase IndustryAverage Industry Average BigBank
Slide 12: Technology and innovation
1 Technology and innovation Deepening client relationships Building exceptional client franchises Scale and efficiency Fortress principles Built to innovate Scale Conduct business in 100+ countries Relationships with ~50% of U.S. households $5T daily payments processed ~$1T in merchant processing vo
Slide 13: Agenda
Agenda 1 Key principles Building exceptional Strong capital and liquidity position client franchises Better, faster, simpler Our balance sheet is less complex and of higher quality Demonstrated strong risk discipline through-the-cycle Executed on significant business simplification agenda
Slide 14: Fortress balance sheet
2 Fortress balance sheet Fortress principles Operating with fortress principles Diversified businesses EOP assets ($B) ∆ On core loan Wholesale $2.6T growth of 10-15% $2.45T +/- Consumer $2.4T Cash1 $512 ($151) Cash1 $361 HQLA ~$500B Securities Securities YoY loan $348 ($57) growth (%) $291 Secured
Slide 15: Wholesale credit risk
2 Wholesale credit risk Fortress principles Operating with fortress principles Diversified businesses Wholesale credit exposure as of 12/31/15 ($B) Oil & Gas lending exposure1 as of 12/31/15 Retained loans By Region Lending related commitments Exploration & Production APAC LatAm 5% Derivative receiv
Slide 16: Credit – net charge-offs
2 Credit – net charge-offs Fortress principles Diversified businesses Operating with fortress principles NCO rates at a cyclical low ($B) Peer NCO rate comparison (avg. 2011-2015) 2015 2016 JPM mix adjusted3 Avg retained loans NCOs +/- 1.15% Mortgage – NCI1 $159 0.15% Card 124 2.50% CCB Auto 56 0.45
Slide 17: Agenda
Agenda 1 Building exceptional Key principles client franchises Delivering strong capital returns – while adapting capital and liquidity frameworks Capital and incentive framework considers multiple constraints Balancing compliance with capacity for capital distributions Delivering significan
Slide 18: We have adapted…starting 2016 from a position of strength
3 We have adapted…starting 2016 from a position of strength Fortress principles Maximizing long-term shareholder value Optimization against constraints 2014 2015 CET11 10.2% ~140bps 11.6% Firm 5.6% ~90bps 6.5% SLR1,2 Total Assets $2.6T ~$(200)B $2.4T RWA1,2 $1.6T ~$(100)B $1.5T Std. / Adv. GSIB3 4.5
Slide 19: GSIB walk
US (Method 2) Framework Score (points) Surcharge 3 GSIB walk 930-1,029 5.0% 830-929 4.5% Fortress principles Maximizing long-term shareholder value – capital 730-829 4.0% Optimization against constraints 630-729 3.5% 530-629 3.0% Estimated JPM method 2 GSIB score ∆ (points) Estimated FX impact: 45-6
Slide 20: Capital management framework
3 Capital management framework Fortress principles Maximizing long-term shareholder value – capital Optimization against constraints Approach to capital management 50bps 11.0% mgmt. buffer CET1 11.0% <11.0% <11.0% Baseline Capital Distributions distributions conservation buffer Procyclicality and gr
Slide 21: Capital glidepath
3 Capital glidepath Fortress principles Maximizing long-term shareholder value – capital Optimization against constraints Standardized RWA glidepath ($B) Illustrative fully phased-in Firm CET1 trajectory³ Punitive treatment for ~$1.5T high-quality loan growth ~12.5% ~12.5% ~12.0% ~12.25% Advanced 11
Slide 22: Benefits of operating model – capital allocation and optimization
3 Benefits of operating model – capital allocation and optimization Optimization against Maximizing long-term shareholder value – capital constraints Capital allocation Select constraints – illustrative⁴ Common equity 2016 Medium ROE 2015 2016 CET1 term target Consumer & Community Banking $51.0 $51.
Slide 23: Composition and calibration of TLAC
3 Composition and calibration of TLAC Fortress principles Maximizing long-term shareholder value – loss absorbing capacity Optimization against constraints JPMorgan Chase & Co. – estimated External LTD requirement ($B)1 Commentary $183 External LTD shortfall modest and manageable $27 $20+/- $21 sh
Slide 24: Resilience of JPM through multiple layers of protection
3 Resilience of JPM through multiple layers of protection Fortress principles Maximizing long-term shareholder value – loss absorbing capacity Capital and liquidity resources (4Q15) Overview Total loss absorbing resources: ~$350B Capital, liquidity and market structure More than 1.5x the entire in
Slide 25: NII – well positioned for rising rates
3 NII – well positioned for rising rates Diversified businesses Maximizing long-term shareholder value – operating leverage NII simulation1 ($B) $12.0 3.5% Spot Fed Funds paths Fed Dot 2 (~25-100bps avg. / yr.) 3.0% + Mix $10.0 2.5% Fed Dot2 2.0% 1.5% Implied3 $8.0 1.0% 0.5% Rates Implied 3 Incremen
Slide 26: Noninterest revenue
3 Noninterest revenue Diversified businesses Maximizing long-term shareholder value – operating leverage NIR walk1 ($B) One-time $52.0 legal benefit2 $0.6 ($0.9) ($0.7) ~$50 ($0.2) Servicing balances in MB continue to decline ~1/3 of NIR is highly correlated with markets $51.4 The remaining NI
Slide 27: Adjusted expense flat despite significant investments
3 Adjusted expense flat despite significant investments Scale and efficiency Maximizing long-term shareholder value – operating leverage Adjusted expense1 ($B) All Other Client facing compensation 3 Investments (marketing and technology) FDIC fees ($2.4)B $58.4 ($0.8) $5.0 ($1.6) Core savings of (
Slide 28: Earnings simulation
4 Earnings simulation Net income walk – 3 years ($B) $6+ ~$30 ~$2.5 ~$2.5 Legal expense $0.9B ~$1.4 Reserve releases ($0.2B) $24.4 ~$2.5 ~$3.5 Legal benefit ($0.3B) ~($1.1) Taxes ($2.9B) ($2.5)1 ~($0.9) Remaining $2.2B of $4.8B ~½ Card renegotiation ~$10B+ pretax NII Adj. Net Income of efficie
Slide 29: Conclusion
Conclusion 1 Four leading client franchises – together delivering significant value Building exceptional client franchises Client focus and long-term approach – consistently investing and innovating 2 Strong foundation – capital, liquidity, balance sheet, risk discipline Operating with Bette
Slide 30: Agenda
Agenda Section Firmwide strategic priorities 29 Appendix – Fixed Income 31 Notes 39 FIRM OVERVIEW 29
Slide 31: Firmwide strategic priorities
Firmwide strategic priorities Consumer & Community Corporate & Investment Bank Commercial Banking Asset Management Banking Deepen relationships with our Leverage our scale, Execute disciplined growth Continue to deliver top-tier, long- customers, simplify and improve completeness, and global
Slide 32: Agenda
Agenda Page Firmwide strategic priorities 29 Appendix – Fixed Income 31 Notes 39 FIRM OVERVIEW 31
Slide 33: Liquidity management and risk oversight
Liquidity management and risk oversight Meet contractual and contingent obligations through normal economic cycles and during stress Ensure that the Firm’s core businesses are able to operate in support of client needs Objectives Optimize funding mix and maintain sufficient liquidity Analyze
Slide 34: Overview of funding sources
Overview of funding sources Continue to maintain diversified funding profile while reducing non-operating deposits EOP liabilities and stockholders’ equity at 12/31/15 ($B) $2,572 Non-operating $2,352 Wholesale deposits6 down 16%, driven by Non-operating a reduction in non-operating deposits Depos
Slide 35: Deposit beta uncertainty and impact on NII
Deposit beta uncertainty and impact on NII Expect deposit beta to be higher than the 2004 cycle… …however, there is uncertainty around deposit repricing 4% JPM deposit rates paid – 2004 cycle1 Longer-term Fed Funds 3% Increaseinincurrent Increase current rates ratesfrom from13bps ~10bpstoto Rates Pa
Slide 36: Total firmwide long-term debt
Total firmwide long-term debt Diversified mix and maturity profile Total long-term secured and unsecured debt issuance and maturities1 ($B) Total long-term debt outstanding3,4 ($B) Hold Co. maturities Hold Co. issuances Hold Co. senior debt Bank senior debt Bank and other maturities2 Bank and other
Slide 37: Hold Co. long-term debt and preferred equity
Hold Co. long-term debt and preferred equity Managing TLAC composition and maturity profile Issuance of unsecured Hold Co. benchmark long-term debt and preferred equity ($B) Preferred Equity Sub debt / TruPs Senior debt $41 $37 $9 $6 $29 $5 $3 $4 $3 $28 $27 $22 2013 2014 2015 Total Hold Co. unsecure
Slide 38: Current capital position
Current capital position Basel III Standardized Fully Phased-In capital ratios and components at 12/31/15 ($B) Total tier 2 capital1 $31 Pfd equity 15.6% $26 $14 Goodwill and 13.5% $17 Qualifying intangibles2 allowance Pfd equity LTD and for credit $45 $3 11.7% $26 other losses qualifying Other CET1
Slide 39: Material entities
Material entities1 JPMorgan Chase & Co. Non-Bank Chain Entities Holding Company JPMorgan Chase Bank, Chase Bank USA U.S. Broker-Dealers N.A. (“JPMCB”) J.P. Morgan Service Entity Material branches Securities LLC JPMCB JPMCB J.P. Morgan Services India Hong Kong Singapore Chase Bankcard J.P. Morgan Pri
Slide 40: Agenda
Agenda Section Firmwide strategic priorities 29 Appendix – Fixed Income 31 Notes 39 FIRM OVERVIEW 39
Slide 41: Notes on non-GAAP financial measures
Notes on non-GAAP financial measures 1. In addition to analyzing the Firm’s results on a reported basis, management reviews the Firm’s results and the results of the lines of business on a “managed” basis, which is a non-GAAP financial measure. The Firm’s definition of managed basis starts with the
Slide 42: Notes on slide 3
Notes on slide 3: … on a relative basis – JPM continues to be a leader 1. See note 1 in slide 40. For GS and MS, reflects revenue on a reported basis 2. See note 4 in slide 40 3. Reflects net capital distribution for 4Q14-3Q15 4. WFC adjusted for 2 for 1 stock split in 2006 and C adjusted for 1 for
Slide 43: Notes on slide 8: Leading client franchises
Notes on slide 8: Leading client franchises 1. Source for market share: FDIC Summary of Deposits survey per SNL financial; excludes all branches with $500mm+ in deposits within two years (excluded branches are assumed to include a significant level of commercial deposits or are headquarter branches
Slide 44: Notes on slide 9
Notes on slide 9: Proven best-in-class long-term performance Source: Company disclosures and SNL financial, unless otherwise noted 1. Core loans calculated as Total EOP Loans less Total EOP Noncore Loans; Total loan CAGR for USB and PNC; “Noncore” defined as “Liquidating” for WFC, “All Other Segment
Slide 45: Notes on slide 10
Notes on slide 10: Proven best-in-class long-term performance (cont’d) 1. Source: J.D. Power U.S. Retail Banking Satisfaction Survey; Big Banks defined as top six U.S. banks 2. Represents GPCC spend which excludes private label and commercial card; based on earnings releases and Chase internal estim
Slide 46: Notes on slide 13: Fortress balance sheet
Notes on slide 13: Fortress balance sheet 1. Includes cash and due from banks and deposits with banks 2. Includes Fed funds sold and securities purchased under resale agreements and securities borrowed 3. Includes firmwide debt, derivative and equity trading assets 4. Net of allowance for loan losse
Slide 47: Notes on slide 14: Wholesale credit risk
Notes on slide 14: Wholesale credit risk 1. O&G lending exposure includes ~$4B of exposure in Natural Gas & Pipelines outside of wholesale industry segment definition of Oil & Gas, and excludes $2B of O&G derivative receivables; M&M lending exposure excludes ~$1B of M&M derivatives receivables 2. Ba
Slide 48: Notes on slide 21
Notes on slide 21: Benefits of operating model – capital allocation and optimization 1. Private Equity, retained operational risk capital, real estate, BOLI/COLI, DTA and pension 2. 2015 reflects the Firm’s 10-K reported average excluding Corporate goodwill. 2016 reflects approximations based on ave
Slide 49: Notes on slide 22: Composition and calibration of TLAC
Notes on slide 22: Composition and calibration of TLAC Note: The Firm’s estimate of minimum total loss absorbing capacity (“TLAC”) is based on the Federal Reserve’s (“Fed”) October 30, 2015 proposed rule establishing total loss-absorbing capacity, long-term debt, and clean holding company requiremen
Slide 50: Notes on slide 26
Notes on slide 26: Adjusted expense flat despite significant investments 1. Adjusted expense defined as total expense excluding firmwide legal expense; see note 2 on slide 40 2. Adjusted overhead ratio defined as adjusted expense divided by total revenue; see note 2 on slide 40 3. Client facing comp
Slide 51: Notes on slide 27: Earnings simulation
Notes on slide 27: Earnings simulation Note: Numbers may not sum due to rounding for illustrative purposes. Amounts are aftertax and reflect an incremental tax rate of 38%, where applicable 1. Includes: • 2015 legal expense in excess of $2B assumed run-rate for legal expense. Amount is for illustrat
Slide 52: Notes on slide 33: Overview of funding sources
Notes on slide 33: Overview of funding sources 1. Other includes: accounts payable and other, Federal Funds purchased and a portion of beneficial interests issued by consolidated variable interest entities (“VIEs”) that are not considered to be secured funding 2. Secured funding includes credit card
Slide 53: Forward-looking statements
Forward-looking statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of JPMorgan Chase & Co.’s management and are subject to significant risks an