JPMorgan Chase & Co. (JPM) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong financial performance with revenue and EPS growth, an increased common dividend, and a positive outlook on NII. The Q&A section reveals confidence in deposit growth, strong commercial loan growth, and effective capital deployment in trading. Although there are concerns about regulatory impacts and market unpredictability, the overall sentiment is positive, driven by strong financial metrics and optimistic management responses.
Key Financial Performance
Net Income $15 billion, EPS of $5.24 on revenue of $45.7 billion, with an ROTCE of 21%. Includes an income tax benefit of $774 million.
Revenue $45.7 billion, down $5.3 billion, or 10% year-on-year. Decline driven by lower rates, deposit margin compression, and offset by higher wholesale deposits, revolving balances in Card, and securities activity.
NII ex Markets Down $185 million, or 1%, due to lower rates and deposit margin compression, offset by higher wholesale deposits and revolving balances in Card.
NIR ex Markets Down $6.3 billion, or 31%. Excluding prior year's Visa shares and securities losses, up $1 billion, or 8%, due to higher Asset Management fees, auto lease income, Investment Banking fees, and Payments fees.
Markets Revenue Up $1.1 billion, or 15%.
Expenses $23.8 billion, up $66 million. Excluding last year's Visa stock contribution, up $1.1 billion, or 5%, due to compensation, brokerage fees, and auto lease depreciation.
Credit Costs $2.8 billion, with net charge-offs of $2.4 billion and a net reserve build of $439 million. Driven by new lending activity and offset by decreased adverse scenario probabilities.
CET1 Ratio 15%, down 40 basis points from the prior quarter due to capital distributions and higher RWA.
CCB Revenue $18.8 billion, up 6% year-on-year. Banking & Wealth Management revenue up 3%, driven by Wealth Management growth. Home Lending revenue down 5% due to lower NII.
Card Services & Auto Revenue Up 15% year-on-year, driven by Card NII on higher revolving balances and higher Auto lease income. Card outstandings up 9%, Auto originations up 5%.
CIB Revenue $19.5 billion, up 9% year-on-year. IB fees up 7%, advisory fees up 8%, debt underwriting fees up 12%, equity underwriting fees down 6%. Payments revenue up 3%, lending revenue down 6%.
Markets Total Revenue Up 15% year-on-year. Fixed income up 14%, equities up 15%, Security Services revenue up 12%.
AWM Revenue $5.8 billion, up 10% year-on-year. Driven by management fees, brokerage activity, and deposit balances. AUM of $4.3 trillion, up 18% year-on-year.
Corporate Revenue $1.5 billion, NII down $875 million year-on-year, NIR up $148 million year-on-year. Expenses down $32 million year-on-year.
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Operating Highlights
Wealth Management Revenue: Revenue grew by 3%, driven by growth in Wealth Management revenue with deposit NII relatively flat. Client investment assets increased by 14% year-on-year, driven by market performance and healthy flows into managed products.
Card Services & Auto Revenue: Revenue increased by 15% year-on-year, driven by higher revolving balances and higher operating lease income in Auto. Card outstandings grew by 9% due to strong new card acquisition, and Auto originations increased by 5%.
Commercial & Investment Bank Revenue: Revenue increased by 9% year-on-year, with IB fees up 7%, advisory fees up 8%, and debt underwriting fees up 12%. Equity underwriting fees were down 6%, but the pipeline remains robust with a more upbeat market tone.
Asset & Wealth Management Revenue: Revenue grew by 10% year-on-year, driven by growth in management fees, strong net inflows, higher brokerage activity, and higher deposit balances. Long-term net inflows were $31 billion, and AUM increased by 18% year-on-year.
Operational Expenses: Expenses increased by 5% year-on-year, driven by higher compensation, brokerage, and technology expenses, as well as auto lease depreciation.
Credit Costs: Credit costs were $2.8 billion, with net charge-offs of $2.4 billion and a net reserve build of $439 million, driven by new lending activity.
Loans and Deposits: Loans increased by 7% year-on-year and 3% quarter-on-quarter, while deposits grew by 9% year-on-year and 2% sequentially.
Dividend Increase: The Board intends to increase the dividend to $1.50 per share in the third quarter.
NII Guidance Update: NII ex Markets is now expected to be approximately $92 billion, driven by changes in the forward curve and strong deposit growth in Payments, Security Services, and balanced growth in Card.
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Risk or Challenges
Revenue Decline: The firm reported a 10% year-on-year decline in revenue, driven by lower rates and deposit margin compression, which could impact profitability.
Credit Costs: Credit costs were $2.8 billion, with net charge-offs of $2.4 billion and a net reserve build of $439 million, indicating potential credit quality concerns.
Deposit Margin Compression: Deposit margin compression negatively impacted revenue in several business lines, including Payments and Home Lending.
Higher Expenses: Expenses increased by $1.1 billion year-on-year, driven by compensation, brokerage, and technology costs, which could pressure margins.
Lending Revenue Decline: Lending revenue was down 6% year-on-year, reflecting higher losses on hedges, which could affect the firm's lending profitability.
Downgrades in C&I Portfolio: Credit costs in the Commercial & Investment Bank were driven by downgrades to a handful of names, indicating potential risks in the corporate lending portfolio.
Economic Uncertainty: The environment remains extremely dynamic, with ongoing uncertainty that could impact both the firm and its clients.
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Guidance & Outlook
Net Interest Income (NII) ex Markets: Expected to be approximately $92 billion, driven by changes in the forward curve and strong deposit growth in Payments, Security Services, and balanced growth in Card.
Total NII Guidance: Projected to be about $95.5 billion, implying $3.5 billion of Markets NII.
Adjusted Expense: Expected to be about $95.5 billion, primarily driven by the impact of the weaker dollar, which is largely bottom line neutral.
Card Net Charge-Off Rate: Projected to be approximately 3.6%.
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Shareholder Return Plan
Dividend Increase: The Board's intention to increase the dividend to $1.50 per share in the third quarter.
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Key Q&A
Q:Jamie, relative to 3 months ago, there's a lot of optimism on financial deregulation and really going to break in the bank's favor. I'm interested if you agree, number one, with this optimism and anything specifically you could point to? And secondarily, on capital, I'm interested in what's on or off the table in terms of uses of capital? What do you need to see from the macro regulatory? And how should we be thinking about the timing?
A:Jeremy Barnum explained the capital hierarchy, emphasizing organic and inorganic growth, sustainable dividends, and buybacks. He noted that despite constant buybacks and organic capital generation, the CET1 ratio dropped slightly due to increased organic usage. He mentioned that everything, including acquisitions, is on the table but must be done carefully. Jamie Dimon added that regulators should take a holistic view of the system to make it simpler, cheaper, and safer. He emphasized the need for clarity on public versus private markets and criticized the notion of regulatory relaxation over the past 15 years.
Q:The inorganic comments. I'm interested in capital allocation between your businesses, where you think, if that were to present an opportunity where -- which businesses would most likely be the use of that capital?
A:Jeremy Barnum stated that any good franchise business that makes sense from a risk perspective and clears the cost of equity would be considered. Jamie Dimon emphasized the importance of organic growth in all businesses without stretching.
Q:First, on the RWA utilization via organic as you described. I wanted to understand in wholesale lending, where you highlighted the CIB was a driver of much of this. Could you speak to the drivers of those drivers? In other words, is it private credit? Is it M&A financing? Is it inventory? What are you seeing in the market here that you're delivering on that's raising that lending profile?
A:Jeremy Barnum stated that the drivers include private credit, M&A financing, and inventory, as JPMorgan acts as the 'Switzerland of financing' and saw significant activity late in the quarter.
Q:Jamie, there's been a lot of discussion around stablecoin. How stablecoin is going to be impacting banks. And I believe you have an opinion on this, would love to hear if you could highlight how JPM is thinking about utilizing, leveraging, competing with stablecoin, and how the JPMD deposit token feeds into all of this as well?
A:Jamie Dimon explained that the JPMorgan deposit token is similar to stablecoins, allowing money movement with interest. He stated that JPMorgan is involved in both deposit tokens and stablecoins to understand and compete in the space, though he questioned the need for stablecoins over traditional payments.
Q:On the topic of open banking. I think that's on hold right now with the CFPB, on hold right now. But just wanted to understand, does this hold period give you an opportunity to change how you're pricing for your open banking and fintech relationships here?
A:Jamie Dimon emphasized that JPMorgan supports customer rights to share information but stressed the importance of transparency, time limits, and restrictions on remarketing or reselling data. He also highlighted the need for liability clarity when customers share bank passcodes with third parties.
Q:Jeremy, going back to your comments on inorganic things being on the table in terms of use of excess capital. So when I look at the company, so you're the largest U.S. bank by assets, you're also the largest in terms of the data you see every day. And you may or may not have seen that Apple is looking at possibly, there's chatter, getting into the AI game more by looking at a company such as Perplexity. Just thinking out loud here, would it make sense for JPMorgan to consider acquiring an LLM, right? The last 2 quarters of buybacks are about the last valuation round for Perplexity, right? I'm thinking of you guys, you could become LLM for the financial services industry. What are your thoughts on this?
A:Jamie Dimon stated that JPMorgan uses LLMs but sees no reason to own one, as they can leverage the technology without acquisition. Jeremy Barnum added that inorganic opportunities are always considered but emphasized that deals must make sense financially and strategically.
Q:Jamie, to your answer to Betsy's question on the tokenized deposit. I get it, how that makes sense in terms of the customers that are inside your walled garden, but it doesn't help them much in terms of dealing with customers outside of your garden. What's holding up you guys and the other banks getting together to issue something joint, similar to what you've done with Zelle and prevent these stablecoin companies like Circle coming in and offering a more convenient solution to your customers?
A:Jamie Dimon acknowledged the importance of interoperability between stablecoins and deposits but did not provide a direct answer, stating that JPMorgan is considering all aspects of the issue.
Q:Jamie, your comments in the press release, give us a sense like when we think about middle market businesses in the U.S., what's the state of play there? When we think about interest rates, tariffs, consumer spending slowing, should we be concerned in terms of credit quality outlook looking out 6, 9, 12 months? Just what's your take based on all the data that we all look at?
A:Jamie Dimon expressed optimism about the middle market business, highlighting its growth potential and diverse offerings like lending, payment services, and asset management. He stated that JPMorgan will continue to grow this business regardless of short-term economic predictions.
Q:Your sense of just the state of play, the health of the balance sheets of these customers. And also if you can expand that into the consumer, any areas of stress from a credit quality perspective that you're beginning to get more concerned today versus 3 or 6 months ago?
A:Jeremy Barnum stated that consumer credit remains strong, with some stress in lower-income bands but within expectations. Delinquency rates and net charge-off guidance are stable. He noted that consumer credit is primarily tied to labor markets, which remain robust. Commercial credit also appears stable, with some sector-specific nuances.
Q:Jeremy, a quick follow-up on the consumer credit, broader comments taken there. But in terms of the NPAs, the nonaccruals in consumers seem to have a bit of a jump. Is there something technical there? Maybe just talk to that.
A:Jeremy Barnum explained that the increase in nonaccruals was due to Home Lending customers in the L.A. area using forbearance options due to wildfires. He emphasized that the actual loss expectation is minimal.
Q:Jeremy, could you remind us of what's given you incremental confidence in seeing some improvement in deposit margin and kind of producing that mid- to upper single-digit deposit growth that Marianne talked about?
A:Jeremy Barnum attributed the confidence to core growth reasserting itself, net new account growth, and ongoing franchise expansion. He noted that yield-seeking flows have abated, and the growth outlook aligns with historical trends and macroeconomic conditions.
Q:Jeremy, can you talk about why commercial loan growth was much stronger in the second quarter and any strength by geography?
A:Jeremy Barnum attributed the growth to deal activity in the second half of the quarter, with assets coming onto the balance sheet late. He noted that relationship lending remains stable, and revolver utilization is flat.
Q:Jamie, can you address what regulators could do to potentially have banks lend more in the future, consistent with what the Treasury Secretary said is his goal.
A:Jamie Dimon suggested that changes to G-SIFI, LCR, CCAR, and other regulatory measures could increase lending and reduce system risk. He emphasized the need for a more active securitization market and streamlined mortgage requirements to lower costs and improve access.
Q:When you say inorganic growth, would you buy a private credit firm? Is that something you can at least consider?
A:Jamie Dimon stated that buying a private credit firm is not a priority as JPMorgan can handle private credit internally. However, he remains open to opportunities that align with the company's strategy and culture.
Q:Jamie and Jeremy, you've talked about simplifying the regulatory construct. And it seems like based on the progress so far, we'll mostly get there, particularly with Basel III endgame and G-SIB, which impacts you so much. And to that end, if we do get a more simplified regulatory construct that addresses both the capital and liquidity constraints, does that move up JPMorgan's natural ROTCE?
A:Jamie Dimon and Jeremy Barnum stated that while a simplified regulatory construct could improve the system, it may not necessarily increase ROTCE due to competitive pressures. They emphasized the importance of reinvesting capital in growth opportunities to create shareholder value.
Q:You mentioned, and clearly, we saw it in the numbers, a late in the quarter pickup in activity levels. And I'm wondering as we think about sentiment and what this means for the second half, is it -- does activity levels pick up because it felt like we were taking extreme outcomes from tariff policy off the table? Is it the tax bill certainty?
A:Jamie Dimon and Jeremy Barnum noted improved sentiment and activity levels but cautioned that risks remain. They highlighted the positive impact of tax bill certainty and progress on tariff policies but emphasized the unpredictability of market conditions.
Q:Jeremy, if I look at your 10-Q and 10-K rate sensitivity disclosures, it looks like you guys have done a lot to reduce your asset sensitivity to the short end of the curve. So can you talk about what you've been doing to change the positioning of the balance sheet, whether extending duration or hedges?
A:Jeremy Barnum explained that JPMorgan added duration in the front end of the yield curve to balance risks and reduce volatility. He noted that the bank is comfortable with its current asset sensitivity and continues to manage it within a defined corridor.
Q:Jeremy, can you talk about the recent Sapphire price changes and just what you're seeing in terms of initial response, and just how that fits in strategically with the competitive landscape on Card and your growth opportunity?
A:Jeremy Barnum stated that the Sapphire price changes have been well-received, with a strong customer value proposition. He emphasized that the changes are part of a normal product refresh and align with the competitive landscape.
Q:On the trading side, I'm just wondering how much the strong results this quarter, the quarter changed a lot from April to June. And I'm just wondering how much do you think that was environmental? Has it calmed down at all? And also how much is just your ability to kind of use the balance sheet to boost results also, could that make it more sustainable regardless of what the environment is doing?
A:Jeremy Barnum attributed the strong trading results to a combination of environmental factors and JPMorgan's ability to deploy capital effectively. He noted that while the market environment shifted, the bank's resource deployment contributed to the durability of results.
Q:Review of Unclear Management Responses
A:Jamie Dimon avoided directly answering a question about interoperability between stablecoins and deposits, stating only that JPMorgan is considering all aspects of the issue.
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JPM Transcript
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