JP Morgan (JPM) Q3 2016 Earnings Call

posted in: Earnings Call, Notes | 0

JP Morgan (JPM) CFO Marianne Lake said the credit worthiness of their oil & gas clients is improving 

“Dealing with oil and gas here, we’re encouraged by how quickly investor sentiment and risk appetite for the sector returned as the outlook for both oil and gas prices continued to improve. Capital market opened more broadly to these clients and we experienced lower draws against our facilities than previously anticipated.  So, a combination of pay downs opportunistic loan sales and select upgrades more than offset the impact of downgrades. If the environment remains broadly consistent with today, we would not expect further significant builds in the fourth quarter for energy.”

Growing deposit growth faster than competitors 

“We continued to experience record deposit growth more than twice the industry average, up 11% year-on-year. More than half of that growth is from existing customers. And based on the FDIC survey for 2016, we were number one in absolute growth and grew share in each of our top 30 markets.”

The bank benefitted from a large fluctuation in global rates as clients transacted in order to take advantage of low interest rates

“In terms of outlook, given the strength this quarter, we expect IB fees to be down in the fourth quarter sequentially but relatively flat year-on-year. Markets revenue of $5.7 billion was up 33% year-on-year. Clients were active and risk management conditions were favorable. Fixed income revenue was up 48% compared to a weaker third quarter last year. Rates was a standout in terms of performance this quarter as markets stayed active post Brexit with good client flow, as well as anticipation of an uncertainty around central bank actions.”

JP Morgan (JPM) CFO Marianne Lake talked about their incentives of how they incentivize their sales team and how it differs from that of Wells Fargo

“We’ve been very, very focused on investing in customer experience broadly defined and have made great progress I think in doing that. And also we had talked about the fact that what we are looking for very, very clearly is deep customer relationship engaged customers who want to be primary bank, we want to gather a deeper share of wallet, so balances not necessarily products. And so again, remember saying cross-sell is an outcome, it’s not an objective. And that’s certainly the philosophy with which we have designed our compensation and performance structures for the branches. And we review them regularly, at least annually to make sure that they continue to be aligned with our objectives and again objectives about the engaged relationship with customers, good customer experience in the right product, all the right reasons the right way.”