JPMorgan Chase & Co., Q1 2009 Earnings Call, Apr-16-2009 - NYSE:JPM

NYSE:JPM

Michael Cavanagh, the Chief Financial Officer of JPMorgan Chase & Co., provided significant details during the Q1 2009 earnings call. Below is a summary of his remarks:

Opening Remarks

• Financial Performance: Noted record firm-wide revenues of $27 billion and pre-tax pre-provision profits of $13.5 billion.
• Accounting Rule Changes: Clarified that there was no impact from changes in fair value accounting or impairment rules on the quarter's results.
• Business Performance:
  • Outstanding quarter in the Investment Bank with record revenues and profitability.
  • Benefits from the WaMu integration in the Retail Banking business.

Balance Sheet Strength

• Capital Position:
  • Tangible common equity of $87.2 billion, up from the previous quarter.
  • Tier 1 capital of 11.3% (11.3% including preferred, 9.2% excluding TARP).
  • Tangible common equity to risk-weighted assets ratio of 7.2%, exceeding the 6% well-capitalized level.
• Loan Loss Reserves:
  • Added $4.2 billion to the allowance for loan loss reserves, totaling $28 billion.
  • Coverage ratio to loans of 4.53%.

Business Segments

• Investment Bank:
  • Record net income of $1.6 billion on record revenue of $8.3 billion.
  • Investment banking fees of $1.4 billion, up year-over-year.
  • Fixed income markets revenue of $4.9 billion, including a $400 million benefit from spread widening.
  • Equities revenue of $1.8 billion, including a $200 million spread widening benefit.
  • Loan loss coverage ratio of 6.68%.
• Retail Financial Services:
  • Deposits of $346 billion, up due to the WaMu acquisition.
  • $46 billion of loan originations in the quarter.
  • Profits of $474 million, broken down into:
    • $900 million profit in retail banking, up from the previous year.
    • $389 million loss in consumer lending.
  • $1 billion of MSR risk management results.
• Home Equity Portfolio:
  • End-of-period portfolio of $112 billion.
  • Chargeoffs of $1.1 billion, in line with expectations.
• Prime Mortgage Portfolio:
  • Balances of $65.4 billion.
  • Chargeoffs of $312 million, up from the previous quarter.
• Subprime Portfolio:
  • Portfolio of $15.3 billion, trending down to $15 billion.
  • Chargeoffs of $364 million.
• WaMu Integration:
  • On track with cost savings of nearly $3 billion.
  • Investments of nearly $0.75 billion in salespeople and facilities.
• Credit Card:
  • Loss of $547 million.
  • $150 billion of end-of-period outstandings.
  • Chargeoff ratio of 6.86% for Chase-only portfolio.
• Commercial Banking:
  • Profits of $338 million.
  • Return on equity of 17%.
  • Loan loss reserves of nearly $3 billion.
• Treasury & Securities Services:
  • Net income of $308 million.
  • Deposit balances of $277 billion.
• Asset Management:
  • Assets under management of $1.1 trillion.
  • Revenues of $1.7 billion.
• Corporate Segments:
  • Losses of $280 million in private equity.
  • Profit of $252 million in the Corporate segment.

Outlook

• FDIC Assessment: Anticipated additional FDIC assessment of $0.75 billion to $1.5 billion later in the year.

Question and Answer Session

• Addressed questions regarding TARP repayment, equity VAR, FASB changes, auto industry exposure, NCO rates, compensation to revenue ratio, credit card losses, and commercial real estate markets.

Cavanagh provided detailed insights into the bank's financial performance, emphasizing the strong capital position and robust loan loss reserves. He also addressed specific inquiries during the Q&A session, offering clarifications on various aspects of the bank's operations and strategies.