The US investment bank has reported a 6.3% increase in net income in Q1 2024 while its market and securities services stumbled due to a slowdown in rate and commodity trades.

J.P. Morgan Chase Financial, the issuance entity of J.P. Morgan Chase & Co, has significantly elevated its traded volume of the SEC-registered structured notes in the first quarter of the year on the back of two bulky deals booked in March.

During the quarter, the US bank traded US$5.3 billion structured notes registered with the US Securities and Exchange Commission (SEC) across 1,900 new issuances, accounting for 15.5% of the total volume traded, according to SRP data.

The volume was bolstered by two deals booked by institutions in March - the single stock-linked cash convertible notes raised a combined traded notional of US$700m. The new quarterly record for the issuer resulted in a 72.6% surge from US$3.1 billion year-on-year (YoY), 21.4% higher from US$4.4 billion quarter-over-quarter (QoQ).

The growth was also reflected in the entire SEC-registered structured notes market which registered a total of 10,362 products marketed worth US$34.3 billion from January to March, an increase of 50.4% compared to the previous quarter.

During the quarter, equity underliers made up US$4.6 billion of the bank's traded notional, or 87.4%, while hybrid assets, exchange-traded funds (ETFs) and commodities primarily contributed to the remainder 12.6%.

There were 17 structured notes worth US$31m linked to interest rates, including the USD ICE swap rates and USD Sofr ICE swap rates which had investment terms of two and 10 years, respectively.

The SEC registration shelf additionally added 95 callable fixed rate notes with US$799.6m principal amount in total on the paper of J.P. Morgan Chase Co in Q1 2024. The amount showed an increase from US$630.9m compared to the prior-year period, or a slight increase from US$741.9m QoQ.

SRP also registered 21 structured notes issued by J.P. Morgan Structured Products B.V. under its 3(a)(2) bank note programme, which are exempt from the SEC registration. Most of the notes under this category were phoenix autollable structures on single stocks with a tenor from six months to five years.

There were also two market-linked certificates of deposits (MLCDs) valued at US$3.7m on the paper of J.P. Morgan Chase Bank linked to the S&P 500 during a five-year period with the performance capped at 8.01% pa.

In Asia, the US bank issued and listed 1,282 derivative warrants (DWs) and callable bull/bear contracts (CBBCs) in Hong Kong SAR, a rise from 1,049 YoY.

It also marketed 554 retail callable structured notes in Taiwan - denominated in US dollar, Japanese Yen, Euro, African rand, Chinese offshore yuan and Australian dollar with the US dollar being the currency denomination of choice. A quarter of them have a tenor of between one and three years while the reminder had terms of less than one year. 

Yuanta Securities acted as the main distributor among a group of 15 names, including Horizon Securities and Uni-President Securities.

There were an additional 55,174 newly-issued listed structured products in Germany during the Q1 24.

Earnings

The bank led by Jamie Dimon (pictured) reported net income of US$13.4 billion (US$4.4/share) in the first quarter of 2024, up 6.3% from US$12.6 billion in the prior-year period. 

Excluding an A$725m increase to the Federal Deposit Insurance Corporation (FDIC) special assessment, net income came to US$14.0 billion (US$4.63/share).

Reported revenue and managed revenue came to US$41.9 billion and US$42.5 billion, respectively. At the same time, expenses rose 13% to US$22.8 billion year-over-year (YoY).

Return on common equity (ROE) dropped to 18% to 17% while return on tangible equity (ROTCE) fell to 21% from 21% YoY.

By segment, corporate & investment bank (CIB) net income increased 7.5% to US$4.8 billion mainly due to a 3.5% percent decline in expense at US$7.2 billion. Revenues were flat at US$13.6 billion.

Within CIB, investment banking (IB) revenue leaped 27% to US$2.0 billion driven by higher debt and equity underwriting fees.

Market & securities services (MSS) revenue slipped 4.8% to US$8.0 billion. Specifically, fixed income markets revenue was down 7.1% to US$5.3 billion ‘driven by lower activity in rates and commodities compared with a strong prior year, partially offset by higher revenue in securitized products’. Equity markets revenue of US$2.7 billion, flat YoY. At the same time, securities services increased 3.0% to US$1.2 billion.

On 1 May 2023, J.P. Morgan Chase acquired certain assets and assumed certain liabilities of First Republic (FR), which has impacted the earnings of consumer & community banking (CCB) and asset & wealth management (AWM).

CCB net income dropped 15% to US$4.4 billion despite a one percent increase in revenues at US$16.6 billion (ex-FR). Including the FR acquisition impact, the net income increased by US$395m to US$4.8 billion. 

AWM recorded net income of US$1.0 billion, a 26% YoY (ex-FR) as its revenue fell one percent to US$4.7 billion. Including the FR acquisition impact, the net income added US$272m to US$1.3 billion.

At commercial banking, net income jumped 21% to US$1.6 billion on US$3.6 billion in revenue driven by higher non-interest revenues.