JPMorgan Chase & Co. (JPM)
Q1 2011 Earnings Call Transcript
April 13, 2011 9:00 a.m. ET

Executives

Douglas L. Braunstein – Chief Financial Officer
Jamie Dimon – Chairman and Chief Executive Officer

Analysts

Guy Moszkowski – Bank of America/Merrill Lynch
Jason Goldberg – Barclays Capital
Edward Najarian – ISI Group
Glenn Schorr – Nomura Securities International, Inc.
Betsy Graseck – Morgan Stanley
John McDonald – Sanford C. Bernstein
Moshe Orenbuch – Credit Suisse
Gerard Cassidy – RBC Capital
Michael Mayo – Caylon Securities
Jeffery Harte – Sandler O''Neill
Matthew O''Connor – Deutsche Bank
Ronald Mandle – GIC
Matthew Burnell – Wells Fargo Securities, LLC
James Mitchell – Buckingham Research
Christopher Kotowski – Oppenheimer & Co.

Presentation

Operator

Good morning, ladies and gentlemen. Welcome to JPMorgan Chase''s First Quarter 2011 Earnings Call. This call is being recorded. Your lines will be muted for the duration of the call. We will now go live to the presentation. Please stand by.

At this time, I would like to turn the call over to JPMorgan Chase''s Chairman and CEO, Jamie Dimon and Chief Financial Officer, Doug Braunstein. Mr. Braunstein, please go ahead.

Douglas L. Braunstein

Thanks, operator. It''s Doug here. I am going to be taking you through the earnings presentation; it''s available on our website, as you know. We will take questions after walking through the presentation. And with that let''s turn to page one.

For the quarter, we generated net income of $5.6 billion, $1.28 a share and that was on revenue of $25.8 billion. As we''ve done historically, we are highlighting several significant items in the quarter right up front. I am going to try and cover them in some detail here but they are included in the numbers for the lines of business.

First item is a $0.29 per share increase in earnings and that comes from a reduction in the credit card services allowance for loan losses. I''ll talk you through the specifics of net charge-offs and our delinquency rates when we get to credit card later on.

Second item is a $0.16 per share decrease in earnings, that''s from a fair value adjustment to our MSR servicing asset, and this adjustment really represents the impact of the actual and/or anticipated increases in servicing costs, including the compliance with our anticipated requirements that are going to be imposed through the OCC and Fed through a consent order that we anticipate receiving later today.

The third item is a $0.10 per share decrease in earnings and expected cost for foreclosure-related matters. And these costs are really our best current estimate for affidavit-related delays as well as certain legal expense. We don''t view these costs as run-rate expense, but to be clear there could be further costs around this matter before we''re finished.

We ended the quarter with Tier 1 common of $120 billion, strong Basel I and Basel III ratios of 10% and 7.3% respectively, you see those on the page; an increase of about 20 basis points quarter-over-quarter. You''ll also see on the next page ROE of 13%, ROTCE of 18%, also strong results, and broadly speaking, we had solid performance across our businesses but I''ll dive into those.

I have covered all the items on page two. So if you skip to page three, we''ll start talking about the Investment Bank. Circled net income here on the page of $2.4 billion, that''s on revenue of $8.2 billion. Investment Banking fees in the quarter were $1.8 billion, up 23% year-on-year. We continue to be ranked number one, but it remains a very highly competitive market. Results this quarter reflect record debt underwriting fees and if you go to page 19, you can see our league table results.

Markets revenue this quarter of $6.6 billion, that really reflects very strong client-based revenue. And it was generated in part through the volatility that we experienced in the first quarter in the markets and us at helping our clients manage through that volatility. While these numbers are slightly down from a record first quarter 2010, still very strong results.

$5.2 billion of revenue you see on the page in Fixed Income. There was strong performance across all of our asset classes there -- rates, FX, credit, securitized products and strong performance in commodities. $1.4 billion in revenue in Equities this quarter and that also represented strong performance across cash, derivatives and prime services. DVA for the quarter relates to the structured notes both in Fixed Income and Equities, was not a material number, was a positive $20 million and it really didn''t change quarter-on-quarter performance.

You see here CPG reported a revenue loss of $190 million and just a reminder, there are three items in that number. Typically NII and fees on retained loans are going to be about $200 million plus or minus on a quarter and then you have the market impact of hedges on the loan book which were negative this quarter and the impact of CVA and DVA which were also negative in the quarter and that led to the result.