JS Earnings Call Notes – JPM

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JP Morgan (JPM) CFO Marianne Lake said the company saw strength across its consumer loan segment

“We saw strong growth in consumer drivers, on the back of improvement in the U.S. economy in large part generating core loan growth of 16% for the company.”

The firm is reserving liabilities for its oil & gas clients who will struggle after the recent energy sell off

“the biggest area of stress in wholesale being oil and gas, against, which we built about $550 million in reserves this year including $124 million this quarter.  And has the outlook for oil has weakened, we would expect to see some additional reserve build in 2016 but prices would need to remain at this level for an extended period for them to be significant.”

JP Morgan (JPM) CFO Marianne Lake stated that with the Federal Reserves recent decision to lift interest rates off of zero, the company expects to deliver additional net interest income

With the December rate hike alone so in a rate flat scenario, together with the loan growth that we have seen and expect, we would expect to deliver about $2 billion of incremental NII.”

They were able to deliver significant profitability with lower headcount and lower expenses

You can see headcount was down by 12,000 for the year and nearly 43,000 since 2012.”

The firm held its title from previous years as number one in investment banking fees market share

In Investment Banking for the full year, we continue to rank number one in global ID fees and number one in North America and EMEA.”

JP Morgan (JPM) CFO Marianne Lake said that the 2016 M&A landscape looks different than that of 2015

I would say that the pipeline coming into 2016 in M&A was good.  Obviously, volatility can dampen the confidence of Boards and CEOs. Dialogues are pretty active and we think the types of deals that we’ll see in 2016 will look different. But I think in the first couple of weeks it’s not being particularly strong and we do need to see some of the stability come back I think for us to really see our conversions start to pick up.  Less mega deals, more mid-sized deals, more cross border, it’s a little different. Actually more deal count, less big mega deals could be very constructive for revenue but we’re likely to see it be a little bit different in 2016.”

JP Morgan (JPM) CEO Jamie Dimon said a little bit of weakness in the oil price doesn’t affect a fortress like JP Morgan

Surprisingly the cost again to get the oil out of the ground has also dropped dramatically and probably much more than most of us would have expected. So you take these producing wells. You take the cash flow. You discount. You discounted it 8% or 9%. You lend against it. And so these are our forecasts.  Our energy book isn’t that large relative to JPMorgan Chase. We’re not worried about the big oil companies. These are mostly the smaller ones that you’re talking about these reserve increases on.”

JP Morgan (JPM) CEO Jamie Dimon reminded investors that the bank generates significant goodwill by lending to clients in both bad times and good times

A bank is supposed to be there for clients in good times and bad times. So it’s not a trading market where you try to support clients. So then we can responsibly support clients we are going to. And we lose a little bit more money because so be it. We’ve done that around the world. We did it in 2007, 2008 and 2009. We tried to do responsibly. If banks just completely pull out of markets every time something gets volatile and scary, you’ll be sinking companies left and right.”

JP Morgan (JPM) CEO Jamie Dimon said the economic landscape doesn’t look so bad to him

The U.S. economy has been chugging along at 2% to 2.5% growth for better part of five years now. In the last two years it has created 5 million jobs. And if you look at the actual household formation, car sales, wage, people working, it still looks okay. Corporate credit is quite good. Small business formation, it’s not back to where it was but it’s quite good. Household formation is going up. So, obviously, market turmoil we all look at it every day but I’m not sure most of the 143 million Americans look at it that much who have jobs and you have a big change in the world out there. People are getting adjusted to China slowing down. When you have commodity prices go down like that there are big winners and losers. The oil companies are the losers. Consumers are the benefit. Brazil gets hurt. India benefits. South Korea benefits. Japan benefits. And those kind of terribly worse and hopefully this will all settle down. It’s not the beginning of something really bad.”