Jp Morgan Chase & Co. · NYSE:JPM
Jp Morgan Chase & — Investor Day (February 2015)
61 slides from Jp Morgan Chase &'s investor day presentation, Feb 24, 2015
Slide 1: Firm Overview
FIRM OVERVIEW Marianne Lake, Chief Financial Officer February 24, 2015
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, liquidit
Slide 3: 2014 results – strong underlying financial performance
2014 results – strong underlying financial performance JPMorgan Chase overview Diversification driving stable revenue, despite low rates, mortgage volatility and Revenue1 $98B challenging markets $58B Adjusted expense down by $640mm in 2014 YoY Adjusted expense2 Adjusted overhead ratio1 of 58-60% ov
Slide 4: JPM continues to be a leader
JPM continues to be a leader JPMorgan Chase overview FY2014 Managed revenue1 ($B) FY2014 Net income ($B) FY2014 EPS YoY growth JPM $98 JPM $22 JPM 22% JPM CAGR WFC $85 WFC $23 WFC 5% 2010-2014 8% C $78 C $8 C (49)% BAC $85 BAC $5 BAC (60)% GS $35 GS $8 GS 10% MS $34 MS $6 MS 117% FY2014 ROTCE2 FY201
Slide 5: Sustained tangible book value growth
Sustained tangible book value growth JPMorgan Chase overview Tangible book value per share (TBVPS)1 10% YoY growth $44.69 2 10% $40.81 2 3Y CAGR $38.75 11% 5Y CAGR $33.69 $30.18 $27.09 11% $21.96 $22.52 10Y CAGR $18.88 $16.45 $15.35 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total capita
Slide 6: NIR – stability driven by diversification of businesses
NIR – stability driven by diversification of businesses JPMorgan Chase overview Noninterest revenue (NIR) ($B) Peer NIR volatility1 Stable sources of revenue Volatile sources of revenue Asset Management, Admin. & Commissions Other (incl. MSR risk mgmt.) Investment banking fees Securities gains Card
Slide 7: NII – well positioned for rising rates
NII – well positioned for rising rates JPMorgan Chase overview Firm NIM simulation Revised NIM range from 2014 Investor Day considers est. cost of TLAC compliance 2.95% 2.65-2.70% ~50 bps $10B+ NII 2.18% Key assumptions: Normalization of interest rates Balance sheet mix shift Faster deposit re-prici
Slide 8: Peer valuation – discount versus peers
Peer valuation – discount versus peers JPMorgan Chase overview 2016 P/E Multiple 2014 Dividend yield2 DPS CAGR 68% 61% 48% 47% 13% 15% 32% nm 13.0x (2010-2014) 12.3x 12.3x 2.5% 11.5x 2.5% 10.2x 2.1% 9.5x 9.5x 9.2x 2.1% 1.2% 0.9% 0.7% 0.1% USB WFC PNC MS GS JPM BAC C JPM WFC USB PNC GS MS BAC C Pre-c
Slide 9: Our businesses generate significant benefits from each other
Our businesses generate significant benefits from each other JPMorgan Chase overview ~$15B ~$3B $18B gross + = $6-7B net income revenue synergies cost synergies Benefits of universal banking model go beyond measured synergies Scale and platform enable a portfolio approach for clients – profitability
Slide 10: Implications of separation scenario – Chase and J.P. Morgan
Implications of separation scenario – Chase and J.P. Morgan JPMorgan Chase overview Comments Conclusion While most revenue synergies should remain – modest portion would be lost Small negative Revenue The ability to invest through-the-cycle and leadership positions could erode Negative – not quantif
Slide 11: Agenda
Agenda 1 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 2 Complete platform and diversified operating model – drives client e
Slide 12: Leading client franchises
1 Leading client franchises Building exceptional client franchises We have built our client franchises over time with substantial share gains and opportunity for more 2006 2014 Relationships with ~50% of U.S. households Deposits market share 3.6%1 7.5% #1 customer satisfaction among the largest U.S.
Slide 13: Proven best-in-class long-term performance
1 Proven best-in-class long-term performance Building exceptional client franchises EOP core loans: CAGR 2010–141 EOP deposits: CAGR 2010–142 8% 8% 10% Total Domestic retail 9% 6% 6% 8% 8% 6% 6% 4% 5% 4% 3% 2% 3% 2% (0%) JPM PNC WFC C USB BAC JPM USB WFC PNC BAC C 2014 2014 YoY growth YoY 8% 5% 8% (
Slide 14: Proven best-in-class long-term performance (cont’d)
1 Proven best-in-class long-term performance (cont’d) Building exceptional client franchises Customer satisfaction score: 2010–141 Credit card sales: CAGR 2010–142 Chase Industry Average Big Banks 12% 11% Regional Banks Midsize Banks 9% 21% market share 6% in 2014 – added ~500 bps over the last 28 q
Slide 15: Consistently innovating
1 Consistently innovating Building exceptional client franchises CCB End-to-End Platform Digital Wallets Self-Service Channels Physical Footprint Strategic partnership with Visa ChasePay: Proprietary platform New mobile app with customized Next generation ATMs with large had successful pilot and is
Slide 16: Agenda
Agenda 1 Building exceptional client franchises Strong capital and liquidity position Simplification and de-risking Our balance sheet is less complex and of higher quality 2 Demonstrated strong risk discipline through-the-cycle Operating with Executed on significant business simplification agenda –
Slide 17: Strong capital and liquidity position
2 Strong capital and liquidity position Operating with fortress principles Capital and liquidity position Estimated Since 2010… 4Q14 Common Equity Tier 1 (CET1) ratio1 >300 bps 10.2% Bank Supplementary Leverage Ratio (SLR)2 5.9% Capital >100 bps Firm SLR 2 5.6% Key takeaways Management has met all o
Slide 18: Fortress balance sheet – assets
2 Fortress balance sheet – assets Operating with fortress principles EOP assets ($B) Wholesale $2,573 Consumer Cash1 $2,118 $480 HQLA +$440B Cash1 $39 ~$600B Securities Securities $316 $348 Secured financing2 Secured financing2 $356 $358 Trading assets3 Firmwide VaR and level 3 Trading assets3 $399
Slide 19: Loan portfolio and performance
2 Loan portfolio and performance Operating with fortress principles EOP loans Peer NCO rate comparison (avg. 2010-2014) CAGR (%) JPM mix adjusted4 2010-2014 1.77% JPM has exhibited best-in-class credit 1.58% performance vs. peers over the last 5 $757B 2% years, when adjusting for loan mix $693B Non-
Slide 20: Executed significant business simplification agenda
2 Executed significant business simplification agenda Operating with fortress principles Business simplification initiatives Other meaningful business actions Completed the spin-out of One Equity Announced exit of Sears Canada and Simplified Mortgage Banking Partners and closed on the sale of a seve
Slide 21: Recommitting to our business principles and reinforcing our culture
2 Recommitting to our business principles and reinforcing our culture Operating with fortress principles Business Principles EXCEPTIONAL CLIENT OPERATIONAL A COMMITMENT TO A GREAT TEAM AND SERVICE EXCELLENCE INTEGRITY, FAIRNESS WINNING CULTURE AND RESPONSIBILITY In 2014 – rearticulated our business
Slide 22: Agenda
Agenda 1 Building exceptional client franchises a) Delivering significant operating leverage – while investing through-the-cycle 2 Consistently self-funded growth and investments Operating with Identified additional expense opportunities – targeting meaningful efficiency fortress principles improvem
Slide 23: Competitive efficiency across businesses – with room for improvement
3a Competitive efficiency across businesses – with room for improvement Maximizing long-term shareholder value – operating leverage 1 JPMorgan Chase managed basis Best-in-class peer Efficiency Overhead ratios2 JPM 2014 weighted by JPM JPM Adjusted overhead ratios revenue mix overhead ratio (%) expen
Slide 24: Adjusted expense trending down despite significant investments
3a Adjusted expense trending down despite significant investments Maximizing long-term shareholder value – operating leverage Adjusted expense1 ($B) Driven by business simplification ($3)B $59.7 $59.0 $58.4 $57+/- 3 3 2 Business simplification 1 2 3 5 5 5 Cost of controls2 Investments in technology
Slide 25: Agenda
Agenda 1 Building exceptional client franchises a) Delivering significant operating leverage – while investing through-the-cycle 2 Consistently self-funded growth and investments Operating with Identified additional expense opportunities – targeting meaningful efficiency fortress principles improvem
Slide 26: Capital and incentive framework
3b Capital and incentive framework Maximizing long-term shareholder value – capital Align incentives and business decisions to maximize ROTCE Framework considers all potential constraints – including SLR, G-SIB, CCAR, Standardized and Advanced RWA JPM to be bound by Standardized RWA – we continue to
Slide 27: Capital allocation
3b Capital allocation Maximizing long-term shareholder value – capital Key takeaways Management expects to reach 11%+/- CET1 by YE2015 Expect incremental LOB equity allocations as the Firm moves up its glidepath Long-term CET1 target is 12% – or lower – by YE2018 CIB to reach 12.5% by 2018 Incl. 50
Slide 28: Capital glidepath
3b Capital glidepath Maximizing long-term shareholder value – capital Key takeaways At current CET1 – above phased-in minimums through YE2018 JPM can achieve ~12% CET1 target by YE2018 while providing significant capital return to shareholders and opportunity to increase dividends Phased-In minimums
Slide 29: Standardized RWA outlook
3b Standardized RWA outlook Maximizing long-term shareholder value – capital Advanced and Standardized RWA1 Advanced RWA – results in ≥$1.5T at YE2015 After which we expect to run at or below this level Given the reduction in Advanced RWA – Standardized will become the Firm’s binding constraint in t
Slide 30: Competitive dynamic
3b Competitive dynamic Maximizing long-term shareholder value – capital Key takeaways G-SIB surcharge unlikely to be a meaningful competitive disadvantage as CCAR will be binding constraint for U.S. peers JPM CCAR implied loss sensitivity lower than most peers, based on 2014 DFAST If G-SIB surcharge
Slide 31: G-SIB capital charge
3b G-SIB capital charge Maximizing long-term shareholder value – capital Overview There are three dimensions to our G-SIB score Absolute exposures – we will aggressively manage Market effects – change in market size and currency impacts Time – have 3 years to optimize for compliance Our framework an
Slide 32: JPM G-SIB score pro forma
Score range Surcharge 3b JPM G-SIB score pro forma 1,030-1,129 5.5% 930-1,029 5.0% Maximizing long-term shareholder value – capital 830-929 4.5% 730-829 4.0% 630-729 3.5% Pro forma G-SIB score based on preliminary estimates (bps) – assumes market held constant Deposit actions 3 Category Pro forma 4Q
Slide 33: Taking immediate action – non-operating deposits
3b Taking immediate action – non-operating deposits Maximizing long-term shareholder value – capital Key takeaways Opportunities for actions exist – decision tree below Across businesses ~$390B deposits from financial institutions – of which ~$200B is non-operating Illustrative FI non-operating depo
Slide 34: Agenda
Agenda 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 Simplification an
Slide 35: Earnings simulation
4 Earnings simulation Leading to strong returns Assumptions – what you need to believe LOB ROE targets Front-end rates rising in 2H15, ~2.25% by 2017 Proforma Target 2014 ROE1 ROE Core loan growth driving ~65% loans-to-deposits ratio $100B shift from non-operating deposits to operating deposits CCB
Slide 36: Conclusion
Conclusion 1 Four exceptional client franchises – leaders in their own right Build our businesses for the long-term – consistently innovating Building exceptional Focus on client experience and lifetime relationships client franchises Complete platform and diversified operating model – drives client
Slide 37: Agenda
Agenda Section Appendix 36 Appendix – Fixed Income 38 Notes 47 FIRM OVERVIEW 36
Slide 38: Benefits of our operating model
Benefits of our operating model ~$18B Select examples – 2014 CB and CIB benefits: ~$4.4B gross revenue ~$2.4B of TS revenue reported in CB (>80% of CB clients use TS products) CIB ~$5.4B1 ~$2.0B gross IB revenue from CB clients (35% of NA IB fees2) AM and CIB benefits: ~$1.1B gross revenue AM is an
Slide 39: Agenda
Agenda Page Appendix 36 Appendix – Fixed Income 38 Notes 47 FIRM OVERVIEW 38
Slide 40: Overview of funding sources
Overview of funding sources Diversified funding profile to maximize cost efficiency and manage liquidity risk Liabilities and stockholders’ equity at 12/31/14 ($B) Deposits Trading liabilities Other1 Secured funding2 Unsecured funding Equity $2,573 Sources of funds (excluding deposits)3 $840 1,363 L
Slide 41: Deposits
Deposits Strong and diversified deposit growth Total average deposits by LOB ($B) CAGR (%) 2011-2014 $1,264 8% $1,189 Corporate $1,106 Corporate Corporate AM 12% $1,012 AM Corporate AM CB 6% AM CB CB CB CIB 10% CIB CIB CIB CCB CCB 8% CCB CCB APPENDIX – FIXED INCOME 2011 2012 2013 2014 40
Slide 42: Long-term debt
Long-term debt Appropriate size, tenor and composition of long-term funding Total long-term secured and unsecured debt issuance and maturities1 ($B) Hold Co. maturities Bank and other maturities2 Hold Co. issuances Bank and other issuances2 100 90 $82 $83 80 $73 10 $73 $68 $68 70 29 $59 60 $53 $53 2
Slide 43: TLAC composition and calibration
TLAC composition and calibration Estimated minimum TLAC ($B)1 Hold co. long-term debt maturities ($B) 22.3% 5.0% TLAC eligible instruments 4 Capital Conservation 40 $83 20.0% Senior Debt G-SIB 40 65 78 9.3% 151 2.4% Potential shortfall 21 24 21 39 16.0% 18 18 Any further potential G-SIB needs will b
Slide 44: Current capital position
Current capital position Basel III Advanced Fully Phased-In capital ratios and components at 12/31/14 ($B) Pfd equity $20 $4 12.8% ~$0 Goodwill1 $45 ~$0 11.4% $18 Qualifying Other Pfd equity allowance for Other tier 1 LTD and credit losses $2 10.2% $20 adjustments other qualifying Other instruments
Slide 45: 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 liquidi
Slide 46: Liquidity and interest rate risk management
Liquidity and interest rate risk management JPM deposits rates paid – 2004 cycle¹ JPM deposit mix – % of total Firm average balances 4% Current rates paid: ~13 bps Noninterest- 31% bearing 19% More 3% noninterest deposits Increaseinincurrent Increase current rates ratesfrom from13bps 13 bpstoto Rate
Slide 47: 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 J.P. Morgan JPMCB Services India Hong Kong Singapore Chase Bankcard J.P. Morgan Pri
Slide 48: Agenda
Agenda Page Appendix 36 Appendix – Fixed Income 38 Notes 47 FIRM OVERVIEW 47
Slide 49: 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 50: Notes on slide 7: Peer valuation – discount versus peers
Notes on slide 7: Peer valuation – discount versus peers Source: FactSet, SNL 1. Pre-crisis P/E multiple represents average next twelve months (NTM) P/E from 1/3/2005-6/29/2007 2. CAGR represents dividend per share (DPS) growth from 2010-2014; FY2014 dividends declared over 12/31/2014 share price; 2
Slide 51: Notes on slide 11: Leading client franchises
Notes on slide 11: Leading client franchises 1. Excludes WaMu and Bank of New York branch purchases. Source: 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
Slide 52: Notes on slide 12: Proven best-in-class long-term performance
Notes on slide 12: Proven best-in-class long-term performance Source: Company 10K and 10Q reports and SNL financial Note: Totals may not sum due to rounding 1. Total loan CAGR for USB and PNC; “Noncore” for each peer defined as “Liquidating” for WFC, “All Other Segment” for BAC and “CitiHoldings” fo
Slide 53: Notes on slide 13: Proven best-in-class long-term performance (cont’d)
Notes on slide 13: Proven best-in-class long-term performance (cont’d) Source: Company reports Note: Totals may not sum due to rounding 1. Source: J.D. Power U.S. Retail banking Satisfaction Study; Big Banks defined as Chase, Bank of America, Wells Fargo, Citibank, U.S. Bank, PNC Bank 2. Excludes Pr
Slide 54: Notes on slide 16: Strong capital and liquidity position
Notes on slide 16: Strong capital and liquidity position 1. Reflects Advanced Fully Phased-In CET1 ratio 2. Refer to footnote 4 on slide 48 3. Based on the Firm’s current understanding of the U.S. final LCR rules, which became effective January 1, 2015 4. Reflects 90-day peak; JPM also compliant wit
Slide 55: Notes on slide 17: Fortress balance sheet – assets
Notes on slide 17: Fortress balance sheet – assets 1. Includes cash and due from banks and deposits with banks (excluding CIB) 2. Includes Fed funds sold and securities purchased under resale agreements, securities borrowed and CIB cash and due from banks 3. Includes firmwide debt, derivative and eq
Slide 56: Notes on slide 22: Competitive efficiency across businesses
Notes on slide 22: Competitive efficiency across businesses 1. Refer to footnote 1 on slide 48 2. Best-in-class overhead ratio represents implied expenses of comparable peer segments weighted by JPM revenue: Wells Fargo Community Banking, Citi Institutional Clients Group, PNC Corporate and Instituti
Slide 57: Notes on slide 29: Competitive dynamic
Notes on slide 29: Competitive dynamic Note: Analysis assumes no RWA growth in baseline, percentages based on Basel III Standardized RWA. Expected G-SIB surcharges include 0.5% management buffer 1. Analyst estimates for 9 quarters net income applicable to common 4Q14-4Q16, assuming 100% payout. Sour
Slide 58: Notes on slide 31: JPM G-SIB score pro forma
Notes on slide 31: JPM G-SIB score pro forma Note: Totals may not sum due to rounding 1. Estimate based on current interpretation of U.S. NPR – subject to change 2. Numerator (JPM) is based upon estimated exposures, converted using Basel-provided FX rates, as of December 31, 2014. Denominator (marke
Slide 59: Notes on slide 34: Earnings simulation
Notes on slide 34: Earnings simulation Note: Numbers may not sum due to rounding for illustrative purposes. Figures are tax effected at an incremental tax rate of 38%, where applicable 1. Reflects 2014 NIAC divided by 2015 allocated equity for the lines of business ROE; Firm ROTCE is as reported 2.
Slide 60: Notes on slide 42: TLAC composition and calibration
Notes on slide 42: TLAC composition and calibration Note: Numbers may not sum due to rounding Note: The estimate of Minimum Total Loss Absorbing Capacity (“TLAC”) reflects the Firm’s current understanding of how the Financial Stability Board’s (“FSB”) November 2014 consultative document on “Adequacy
Slide 61: 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