JPMorgan posts record profit; succession plan undetermined

Bloomberg

UPDATE: This article includes analyst commentary, along with information from JPMorgan Chase's fourth-quarter earnings calls.

JPMorgan Chase closed out 2024 with a record profit and a financial performance that handily beat analyst expectations, as credit quality remained solid and investment banking fees surged.

Chairman and CEO Jamie Dimon skirted around the question on many investors' minds – who will succeed him when he chooses to retire – with the megabank focusing instead on net interest income guidance and its capital strategies.

Chief Financial Officer Jeremy Barnum said on Wednesday's call with journalists that hopes for a lighter-touch regulatory environment under a Trump administration and a steadier economic landscape boosted activity in the markets and investment banking units in the last quarter of 2024.

"There's no question that there's a significant amount of increase of optimism in the overall environment," Barnum said. "Obviously, markets have been very active, and that seems to have created a tailwind across the industry. It's hard to establish causality there, but there's no question that we are in a kind of animal-spirits moment right now."

In the fourth quarter, JPMorgan posted diluted earnings per share of $4.81, above analysts' estimate of $4.10, per S&P data. The $4 trillion-asset company's stock was trading up 1.8% by early afternoon, at $251.92.

Equity analysts said in notes that JPMorgan's strong earnings had beat estimates across business lines and held their ratings, which vary between "hold" and "buy."

JPMorgan reeled in $14 billion in net income for the three months ended Dec. 31, with revenues buoyed once again by a 49% year-over-year rise in investment banking fees. Revenue rose 11% from a year ago to $42.8 billion, in line with expectations.

Although deteriorating credit quality at JPMorgan had been flagged as a concern in 2024 after the bank's provision for credit losses doubled in the second quarter, a $2.6 billion provision in the fourth quarter marked the lowest figure since the beginning of 2024 and a 5% decrease from the prior year.

Looking ahead, Dimon noted that despite a resilient economy, the industry isn't out of the woods yet.

"Two significant risks remain," Dimon said in a press release. "Ongoing and future spending requirements will likely be inflationary, and therefore, inflation may persist for some time. Additionally, geopolitical conditions remain the most dangerous and complicated since World War II."

Still, JPMorgan increased its outlook for 2025 net interest income from $89 billion to $90 billion, after earning $92.4 billion in 2024. John McDonald, an analyst at Truist Securities, wrote "We believe the market was expecting an upgrade here, and JPM delivered."

Net interest income at the bank — and across the industry — has been compressed as interest rate cuts limit the possible yield on assets, deposit costs remain elevated and deposit balances shrink. The bank maintained its 2025 expense guidance of $95 billion, compared with $91.1 billion in 2024.

Succession planning

But even as JPMorgan logged a record year, the perennial question of "Who will be Dimon's successor?" sparked renewed electricity on Wednesday, after the bank announced a leadership shuffle the day before.

Dimon told analysts there are several people in the running — adding that "one or two" of whom might be unexpected — but no plan is set in stone. He added that he still expects to step down as CEO in the next five years, which he called "the rational thing to do." Depending on the board's decision, Dimon said he may also leave the chairman seat when the time comes.

JPMorgan said Tuesday that President and Chief Operating Officer Daniel Pinto, who had been floated as a potential heir since he took on the position three years ago, will retire. He'll stay in the role until June 30 and will remain at JPMorgan as vice chairman until 2026. But Jennifer Piepszak, who will be JPMorgan's new COO, "does not want to be considered for the CEO position at this time," a spokesperson said Tuesday.

"This is more of a natural progression," Dimon said Wednesday. "We're thrilled [Piepszak] wants to stay. It'll contribute to sustainability over time, because she'll be here after I leave. And she also thinks the world of all the other folks that she might end up working for."

Succession planning

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Capital strategy

Another top-of-mind strategic focus was JPMorgan's capital plan, as previous concerns about a regulatory overhaul of capital requirements have simmered. Capital levels at the bank grew in the fourth quarter, with Common Equity Tier 1 capital ratio of 15.7%, though the bank repurchased about $4 billion in common stock.

"We feel very comfortable with the notion that it makes sense for us to have a nice store of extra capital, in light of the current environment," Barnum said. "We believe there is a good chance that there will be a moment where we get to deploy it at better levels essentially in whatever way than the current opportunities would suggest."

But after building its cushion for nearly three years, in part to prepare for new rules that now seem unlikely to materialize, Barnum said, JPMorgan doesn't want its stash to continue to grow. That means, unless other opportunities arise, the bank will likely increase buybacks, he said.

Special dividends, however, aren't in the cards, Dimon said. He added the bank will be patient in how it deploys its excess capital.

"I've never thought having cash in your pocket is a bad thing," Dimon said.

Dimon has been critical of the regulators' proposal to hike capital requirements for the largest banks, panning in October what he called an onslaught of regulation that was putting pressure on banks. He said Wednesday that the bank thinks regulation must both support economic growth and protect the banking system.

"It is possible to achieve both goals," Dimon said. "This is not about weakening regulation … but rather about setting rules that are transparent, fair, holistic in their approach and based on rigorous data analysis, so that banks can play their critical role in the economy and markets."

Other big banks, including Wells Fargo, Goldman Sachs and Citigroup, also reported strong fourth-quarter earnings on Wednesday and upgraded guidance that bodes well for 2025, said Bank of America analysts in a note.

"Results reaffirm our constructive view of the mega-cap banks given [net interest income] upside, well-behaved credit costs and our expectations for an improved regulatory backdrop," the note said.