JPMorgan Chase & Co (NYSE:JPM) Q2 2016 Earnings Conference Call - Preliminary Transcript

Jul 14, 2016 • 08:30 am ET


JPMorgan Chase & Co (NYSE:JPM) Q2 2016 Earnings Conference Call - Preliminary Transcript


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Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's second quarter 2016 earnings call. This call is being recorded. [Operator Instructions]. At this time, I would like to turn the call over to JPMorgan Chase's Chairman and CEO, Jamie Dimon and Chief Financial Officer, Marianne Lake. Ms. Lake, please go ahead.

Marianne Lake

Thank you and good morning, everyone. I am going to take you through the earnings presentation, which is available on our website. Please refer to the disclaimer regarding forward-looking statements at the back of the presentation. Starting on page one, the firm reported net income of $6.2 billion, EPS of $1.55 and a return on tangible common equity of 13% on $25.2 billion of revenue, a strong result this quarter, particularly given the backdrop.

And while there were no significant items shown here on the page, our underlying performance was even stronger if you exclude the impact of other notable items, primarily credit, legal and tax, all of which you will hear about as I go through the presentation. And that strength was driven by increased client trading activity across markets and an improvement in IB fees compared to the first quarter, as well as strong core loan growth of 16% reflecting good demand across both consumer and wholesale and record consumer deposit growth, up $54 billion.

Before I go through the results, let me spend a moment on two topics that are top of mind. First an update on wholesale credit. You will see that the total wholesale credit costs this quarter were approximately $200 million. Within this, charge-offs of $150 million were principally driven by oil and gas and metals and mining and those charge-offs were very substantially offset by reserve releases, so they were previously reserved which means underlying the net $50 million reserve build we saw incremental reserve actions this quarter of about $200 million principally one energy name downgraded in the CIB.

Although the oil and gas sector remains stressed and reserves will continue to be idiosyncratic, overall trends have been somewhat positive with oil prices continuing to stabilize and firming sentiment in the sector improving access to capital markets. In addition, outside of energy, we still have not seen contagion or deterioration in our wholesale or consumer credit portfolios. Second on Brexit, uncertainty running up to the referendum led to a risk off environment and following the decision, the markets were quite volatile as expected and volumes were materially higher in the immediate aftermath.

The market functioned quite well absorbing the volatility and despite significant increases in volumes our systems were stable and we continue to support client activity with decent trading performance. With respect to next steps, as you know, the ultimate relationship between the U.K. and the European Union broadly and access to the single market and possible things specifically will likely unfold slowly and over an extended period, depending on when Article 50 is invoked. We continue to work on plans for the full range of outcomes, but we will be