JP Morgan 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“our holding company leverage ratio is estimated at 4.7% at the end of the quarter, based upon the U.S. proposed rules…Given those assumptions, we would be able to add approximately 60 basis points to the leverage ratio by the end of 2014.”

“We continue to see really strong growth in the underlying drivers of the consumer businesses. Deposits were up over $40 billion year on year, an increase of 10%”

“mortgage and auto originations showed strong growth”

“Average business banking loan balances are flat quarter on quarter, up 4% versus last year”

“despite the strong start in April, the environment in late May and June drove mortgage rates up significantly, around 100 basis points.

This pressure continued into July, and we expect it could have a significant impact on the refinance market side in the second half of the year. So if mortgage rates stay at or above current levels, the market could be reduced by an estimated 30% to 40%. Although we will adjust capacity, expense reductions will lag volume reductions, and will challenge profitability and production.”

“We continue to be bank number one year to date in IBCs, and despite weaker credit markets toward the end of the quarter, we had near record debt underwriting fees in the first half of 2013. And equity capital markets, we have the number-one wallet share for the first half of the year.”

“NIM was down 23 basis points quarter-on-quarter we acknowledges this is larger than you may have expected but let me give you some color. Importantly it was principally a result of actions we took to build liquidity to comply with Basel requirements more quickly which we believe is a strong positive.”

“My comment on that is that Glass Steagall didn’t have anything to do with the crisis, and our business model allowed us to be a port in the storm. Our customers like doing business with us in the model that we have now, so we don’t spend time thinking about it.”

[reasons for weak loan growth] “Just demand. And I should tender that with demand and the continuation that we talked about of very, very strong competition. And we are, as I said, prioritizing quality over growth. We would tactically underperform rather than chase a deal we were uncomfortable with.”

“If you have a world where some businesses have to have twice as much capital as other companies, that obviously over time can create huge competitive disadvantages…We have an interest in a safe and sound system, so we’re not against the leverage ratio, but we’re not for a hugely unbalanced competitive playing field.”

“anything which is a low RWA asset, including HQLA, revolvers, certain types of derivatives, those things obviously you’ll look at a little bit differently, because of this leverage ratio asset…we take huge deposits in from countries, and from money funds, etc., that you may not take in because you can’t afford capital against a deposit of a billion dollars that you’re getting from a money fund, that you park at the Fed for 25 days, just waiting to pay the FDIC 10 basis points. You pay the client 5 or 6 or 7 basis points. You’ve got to put 6% capital against it. A whole bunch of things we’ve got to figure out how we’re going to do it, but we want to make sure we manage the client franchise properly. We’ll figure out the other stuff over time.”

“if it’s a consumer deposit, it has a completely different LTR, how you can invest, the kind of spread you can make. If it’s what we would call, like, big wholesale short term deposits, you’re absolutely correct. We would probably restrict some of that over time.”

“This is what the issue is with all this. You spend all this time talking about accounting as opposed to business. The business is deposits, serving clients, doing things, and now we’re talking all of a sudden about AOCI. And we have a lot of asynchronous accounting. And pro-cyclical accounting and stuff like that. We try to explain, but we try to look through all of that and build a business. More clients, more bankers, more branches, happier clients, and so all of our business, that’s how we look at it. We’ll work through the asynchronous accounting.”

“we’re expecting NIM to stay broadly flat from here. We do expect some modest loan growth, our outlook.”

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