JP Morgan Chase 2015 Annual Report Download - page 81

JPMorgan Chase & Co./2015 Annual Report 71
Business outlook
These current expectations are forward-looking statements
within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements are based on
the current beliefs and expectations of JPMorgan Chase’s
management and are subject to significant risks and
uncertainties. These risks and uncertainties could cause the
Firm’s actual results to differ materially from those set forth in
such forward-looking statements. See Forward-Looking
Statements on page 173 and the Risk Factors section on pages
8–18.
Business Outlook
JPMorgan Chase’s outlook for the full-year 2016 should be
viewed against the backdrop of the global and U.S.
economies, financial markets activity, the geopolitical
environment, the competitive environment, client activity
levels, and regulatory and legislative developments in the
U.S. and other countries where the Firm does business. Each
of these inter-related factors will affect the performance of
the Firm and its lines of business. The Firm expects it will
continue to make appropriate adjustments to its businesses
and operations in response to ongoing developments in the
legal and regulatory, as well as business and economic,
environment in which it operates.
In the first quarter of 2016, management expects net
interest income and net interest margin to be relatively flat
when compared with the fourth quarter of 2015. During
2016, if there are no changes in interest rates, management
expects net interest income could be approximately $2 billion
higher than in 2015, reflecting the Federal Reserve’s rate
increase in December 2015 and loan growth.
Management expects core loan growth of approximately
10%-15% in 2016 as well as continued growth in retail
deposits which are anticipated to lead to the Firm’s balance
sheet growing to approximately $2.45 trillion in 2016.
Management also expects managed noninterest revenue of
approximately $50 billion in 2016, a decrease from 2015,
primarily driven by lower Card revenue reflecting
renegotiated co-brand partnership agreements and lower
revenue in Mortgage Banking.
The Firm continues to experience charge-offs at levels lower
than its through-the-cycle expectations reflecting favorable
credit trends across the consumer and wholesale portfolios,
excluding Oil & Gas. Management expects total net charge-
offs of up to approximately $4.75 billion in 2016. Based on
the changes in market expectations for oil prices since year-
end 2015, management believes reserves during the first
quarter of 2016 could increase by approximately $500
million for Oil & Gas, and by approximately $100 million for
Metals & Mining.
The Firm continues to take a disciplined approach to
managing its expenses, while investing in growth and
innovation. The Firm intends to leverage its scale and
improve its operating efficiencies, in order to reinvest its
expense savings in additional technology and marketing
investments and fund other growth initiatives. As a result,
Firmwide adjusted expense in 2016 is expected to be
approximately $56 billion (excluding Firmwide legal
expense).
Additionally, the Firm will continue to adapt its capital
assessment framework to review businesses and client
relationships against multiple binding constraints, including
GSIB and other applicable capital requirements, imposing
internal limits on business activities to align or optimize the
Firm’s balance sheet and risk-weighted assets (“RWA”) with
regulatory requirements in order to ensure that business
activities generate appropriate levels of shareholder value.
During 2016, the Firm expects the CET1 capital ratio
calculated under the Basel III Standardized Approach to
become its binding constraint. As a result of the anticipated
growth in the balance sheet, management anticipates that
the Firm will have, over time, $1.55 trillion in Standardized
risk weighted assets, and is expecting that, over the next
several years, its Basel III CET1 capital ratio will be between
11% and 12.5%. In the longer term, management expects to
maintain a minimum Basel III CET1 ratio of 11%. It is the
Firm’s current intention that the Firm’s capital ratios continue
to exceed regulatory minimums as they are fully
implemented in 2019 and thereafter. Likewise, the Firm will
be evolving its funding framework to ensure it meets the
current and proposed more stringent regulatory liquidity
rules, including those relating to the availability of adequate
Total Loss Absorbing Capacity (“TLAC”).
In Mortgage Banking within CCB, management expects
noninterest revenue to decline by approximately $700
million in 2016 as servicing balances continue to decline
from year-end 2015 levels. The Card net charge-off rate is
expected to be approximately 2.5% in 2016.
In CIB, management expects Investment Banking revenue in
the first quarter of 2016 to be approximately 25% lower
than the prior year first quarter, driven by current market
conditions in the underwriting businesses. In addition,
Markets revenue to date in the first quarter of 2016 is down
approximately 20%, when compared to a particularly strong
period in the prior year and reflecting the current challenging
market conditions. Prior year Markets revenue was positively
impacted by macroeconomic events, including the Swiss franc
decoupling from the Euro. Actual Markets revenue results for
the first quarter will continue to be affected by market
conditions, which can be volatile. In Securities Services,
management expects revenue of approximately $875 million
in the first quarter of 2016.