Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — Investor Day (February 2015)
30 slides from Jp Morgan Chase &'s investor day presentation, Feb 24, 2015
Slide 1: Corporate & Investment Bank
CORPORATE & INVESTMENT BANK Daniel Pinto, Chief Executive Officer Corporate & Investment Bank February 24, 2015
Slide 2: Topics for discussion
Topics for discussion Best-in-class returns with low revenue volatility Financial Leading market share across all major business lines performance World-class franchise: unique scale, completeness, global reach Strong long-term prospects No significant change to 2014 strategy Strategy by
Slide 3: Agenda
Agenda Page 2014 CIB performance 2 Strategy by business 11 Expense update 23 Conclusion 27 CORPORATE & INVESTMENT BANK 2
Slide 4: CIB has a proven track record of strong and stable performance despite recent headwinds
CIB has a proven track record of strong and stable performance despite recent headwinds 5 year average Net revenues and O/H1,2 ($B) Net income1,2,3 ($B) ROE1,3 (%) and capital ($B) O/H ratio1,3 64% 66% 61% 58% 62% 19% 18% 18% 73 $35.7 $36.7 $33.4 $33.0 $34.6 15% 17% 68 $34.7 13% $10.4 $9.3 $61.0 63
Slide 5: Revenue diversification and scale drive stability
Revenue diversification and scale drive stability CIB Revenue by Line of Business ($B)1 CIB net Revenue $33.4 $33.0 $35.7 $36.7 $34.6 $6.3 Investment $5.8 $6.2 $5.9 $6.6 Banking Fees2 $1.7 Banking3 averaged $1.4 Lending $0.8 $1.1 $1.1 33% of CIB revenue $4.2 $4.2 Treasury Services $3.7 $3.8 $4.1 o
Slide 6: Strong share position and gains over multi-year period
Strong share position and gains over multi-year period 2010 – 2014 Growth in Revenue Pools by Product (charts indexed to 2010) Global IB Fees – Dealogic1 Fixed Income Markets2 Top-10: $109B $74B JPM JPM 25% (9%) JPM: $15B $13.7B 17% Rest of Top 10 Rest of Industry (36%) 2010 2011 2012 2013 2014 2010
Slide 7: We continue to have market-leading positions in most products
We continue to have market-leading positions in most products Top 3 2nd Tier 3rd Tier Competitive ranking in 16 product areas JPM Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 2006 2010 2013 2014 2014 Total leadership positions 8 12 15 15 7 5 5 7 5 2 0 2 BANKING (FY2014) 1 Bond underwritin
Slide 8: International business with our core global clients has driven revenue growth
International business with our core global clients has driven revenue growth Revenue ($B) Key international metrics $35.7 $34.6 2010-14 International Internationalgrowth growthlargely largelydriven drivenbyby $33.4 Change EMEA LatAm 3% 4% 3% EMEAmarket marketshare sharegains gains 12% 14% 14% APA
Slide 9: ROE decline in 2014 driven by lower revenue, higher capital requirements, and higher controls
ROE decline in 2014 driven by lower revenue, higher capital requirements, and higher controls related / legal expenses CIB Normalized ROE walk – FY 2013 to 2014 17.2% (1.6%) FVA/ 0.4% (0.7%) 2.1% (1.8%) DVA (0.5%) 13.0% Predominantly from challenging Fixed 2.9% Legal Capital grew from Income env
Slide 10: Markets franchise client activity remained stable in 2014, but low volatility challenged monetization
Markets franchise client activity remained stable in 2014, but low volatility challenged monetization Client volumes were slightly higher, with …with overall revenue decline driven primarily by In Q4, volatility finally began to pick up… some volatility across asset classes… a more challenging marke
Slide 11: We have successfully completed a number of business exits and simplification initiatives
We have successfully completed a number of business exits and simplification initiatives Business exits completed Business simplification Global Special Opportunities Group (GSOG) Client rationalization Physical Commodities Select Foreign Correspondent Banks Prepaid Cards Tail and inactive acc
Slide 12: Agenda
Agenda Page 2014 CIB performance 2 Strategy by business 11 Expense update 23 Conclusion 27 CORPORATE & INVESTMENT BANK 11
Slide 13: Strategy Overview
Strategy Overview Strategy from last year New constraints need to be considered Going forward CIB scale, completeness and global network facilitates an integrated client coverage model, The core elements of leading to best-in-class Profitability our strategy are still ROEs Constraints valid Op
Slide 14: Major drivers of G-SIB impact in the CIB
Major drivers of G-SIB impact in the CIB CIB G-SIB impact Comments Key G-SIB activities Banking & Investor Services OTC clearing Most products are not meaningfully G-SIB sensitive Intermediation (e.g., IB Fees) Non-operating By Contributing Factor By CIB Business 1 deposits Fine-tuning req
Slide 15: Impact of implemented and proposed capital rules on the cost of OTC client clearing
Impact of implemented and proposed capital rules on the cost of OTC client clearing JPM OTC Client Clearing strategy prior to G-SIB and SLR Focused on building a leadership position to help our clients clear Build expenses have preceded revenue; however, we expected attractive returns at scale a
Slide 16: Our G-SIB strategy will involve optimizing across clients, products, and G-SIB factors
Our G-SIB strategy will involve optimizing across clients, products, and G-SIB factors G-SIB activities by select client segments Comments Long only Hedge Funds Asset Corporates Banks We are a client-oriented Managers franchise and must optimize with our clients’ OTC clearing needs in mind Interme
Slide 17: Global Investment Banking
Global Investment Banking Invest in industries, products and Addressing our areas of weakness Top 3 2nd Tier 3rd Tier regions (e.g., Emerging Markets) FY 2014 rankings 1 Global NA EMEA LatAm Asia where JPM has gaps, to benefit M&A 2 2 1 7 8 from cyclical and secular upswings ECM 3 2 1 3 8 Delive
Slide 18: Treasury Services
Treasury Services Reposition business towards global Revenue / Expense Growth Trend (Index) multinational corporates Indexed to 2012 Corporate Revenue + 9% Capture cross-border payments and FX FI Revenue + 4% associated with increasing global trade Strategy flows (4%) Expenses Grow operating d
Slide 19: Markets
Markets Maintain FICC leadership Maintain FICC leadership Ensure readiness for new market structure – 2014 rankings1 Global Americas EMEA APAC invest in e-trading to prepare for all outcomes G10 Rates 1 1 3 3 G10 Foreign Close the gap in Cash Equities 2 1 2 3 Exchange Strategy Growth in low
Slide 20: We are preparing for a more complex future in our Markets businesses
We are preparing for a more complex future in our Markets businesses Orders Channels Sales & Trading Execution venues Progress so far Equities Principal E-trading volumes up 22% Voice Liquidity / in the US and 57% in Exchanges Client self- inventory EMEA between FY2013 Capital and FY2014 direc
Slide 21: Businesses currently below ROE targets will generate value for shareholders through the cycle
Businesses that are currently below ROE targets will generate value for shareholders through the cycle as we become more efficient and markets improve Example: Through-the-cycle ROE for Rates JPM Global G-10 Rates Revenue ranked #1 in 20141 Below target ROE for Global Rates in 2014 JPM Rest of Marke
Slide 22: Custody and Fund Services
Custody and Fund Services Drive scalable solutions for the most Period-end Assets Under Custody ($T) complex clients and globalize offering across the client base Strategy Leverage current cross product client coverage organization and deep market expertise to optimize relationships with large g
Slide 23: Prime Brokerage & Financing
Prime Brokerage & Financing Complete international prime Global Prime Brokerage Ranking1 brokerage capabilities with the final pieces of Asia product set 2006 2010 2013 2014 Prime Brokerage 9 5 2 2 #2 Continue to partner with Equities Strategy to optimize returns across the hedge fund client bas
Slide 24: Agenda
Agenda Page 2014 CIB performance 2 Strategy by business 11 Expense update 23 Conclusion 27 CORPORATE & INVESTMENT BANK 23
Slide 25: We have been disciplined in cutting expenses since 2010, primarily in the front office
We have been disciplined in cutting expenses since 2010, primarily in the front office CIB expense trend – 2010 to 2014 ($B) $23.3 $22.9 $2.4B reduction $2.2B increase in primarily driven by controls, legal front office expense, and compensation regulatory fees 2010 Front Office Tech & Ops Controls
Slide 26: We have conducted a comprehensive efficiency review and identified several areas of opportunity
We have conducted a comprehensive efficiency review and identified several areas of opportunity Front-to-back efficiency review focused on business levers that impact cost base (e.g., client and front office behavior) Business unit- Optimizing execution channels; driving to low cost electronic c
Slide 27: We are aggressively pursuing cost opportunities to deliver $2.8B of expense saves
We are aggressively pursuing cost opportunities to deliver $2.8B of expense saves CIB expense trend – 2014 to 2017 ($B) $23.3 Legal Expense $1.5 ($1.5) ($0.3) ($1.0) ~$19 $1.3B net expense reduction (excl. business simplification) $2.8B expense reduction 2014 Business Front Office Tech & Ops1 2017 E
Slide 28: Agenda
Agenda Page 2014 CIB performance 2 Strategy by business 11 Expense update 23 Conclusion 27 CORPORATE & INVESTMENT BANK 27
Slide 29: ROE walk forward
ROE walk forward ROE walk (%) 0.7% (0.2%) ~ (2%) 1.3% 0.9% ~ 13% 2.5% 10.1% Revenue ~$34B Overhead Ratio 55-60% Capitalization 12.5% 1 2014 Legal expense Net Growth Expense Rates Credit Cost Higher capital Target Initiatives Normalization Normalization requirements Possible +/- Wallet growth/contr
Slide 30: Conclusion
Conclusion Reinforcing a culture focused on doing the right thing for our clients and stakeholders and protecting the integrity of the global markets is essential to effectively managing our conduct risk and protecting the Firm Unparalleled global franchise: unique scale, completeness, global reac