Unnamed: 0 int64 | symbol string | quarter int64 | year int64 | date string | company_name string | company_id float64 | text string |
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3,800 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Embedded in your question, I think, is a little bit of the what are you thinking about the 17% CET1 in light of the current level of capital and so on. And you did talk about Investor Day. I was hoping that we would have interesting things to say about that at Investor Day in light of potential updates of the Basel III endgame, given that the single most important factor for that 17% is how much denominator expansion do we see through the Basel III endgame.
At the rate we're going, we won't actually know that much more about that by Investor Day. So we might not have that much more to say, except to reiterate what I've said in the past, which is that whatever it is, it's going to be very good, our returns in absolute terms, very good in relative terms. We will optimize. We will seek to reprice. We will adjust in various ways as to the best of our ability.
But given the structure of the rule, as proposed at least, there -- a lot of this cannot be optimized away. And so in the base case, you have to think of it as a headwind.
L. Erika Penala: Got it. And just as a follow-up question. You mentioned that the current curve that you set your NII outlook upon is stale. I guess, does it matter? That it seems like the market down-pricing; and obviously no June cut; no September cut; and a toss-up in December, which shouldn't matter for this year. As we think about that $90 billion, does the -- if we price rate cuts out totally, does that matter much? Given that it seems like June is the only one that...
Jeremy Barnum: Yes. Sorry, Erika. So just quick things on this. One, let's focus on NII ex, not on total NII. So I'd anchor you to the $89 billion. Number two, if you want to do math for like the changes of the average funds rate for the rest of the year and multiply that times the EAR, like be my guest. Looks like as good as an approach as any. |
3,801 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | But I would just once again remind you, of the $900 billion of deposits paying practically 0, that very small changes there can make a big difference. And we've got other factors, we've got the impact of QT on deposit balances, et cetera, et cetera, et cetera. So we want to make sure that we don't get too precise here. We're giving you our best guess based on a series of assumptions. And it's going to be what it's going to be.
James Dimon: Which we know are going to be wrong.
Operator: Our next question comes from Ken Usdin with Jefferies.
Kenneth Usdin: Jeremy, I was wondering if you could expand a little bit on one of your prepared comments. When you talked about -- we will have hopes and expectations for the Investment Banking pipeline to continue to move along. We obviously saw the good movement in ECM and DCM and the lag in Advisory. Can you just talk about that?
You mentioned like potential cautiousness around the election. Just what are you hearing from both the corporate side and the sponsor side with -- when it relates to M&A on like go, no-go type of feel and conversation levels? And then what are you thinking we need to have to kick start just another good level of IPO activity in the ECM markets?
Jeremy Barnum: Sure. Yes. Let me take the IPO first. So we had been a little bit cautious there. Some cohorts and vintages of IPOs had performed somewhat disappointingly. And I think that narrative has changed to a meaningful degree this quarter. So I think we're seeing better IPO performance. Obviously, equity markets have been under a little bit of pressure the last few days. But in general, we have a lot of support there, and that always helps.
Dialogue is quite good. A lot of interesting different types of conversations happening with global firms, multinationals, carve-out type things. So dialogue is good. Valuation environment is better, like sort of decent reasons for optimism there. |
3,802 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | But of course, with ECM, there's always a pipeline dynamic, and conditions were particularly good this quarter. And so we caution a little bit there about pull-forward, which is even more acute, I think, on the DCM side, given that quite a high percentage of the total amount of debt that needed to be refinanced this year has gotten done in the first quarter. So that's a factor.
And then the question of M&A, I think, is probably the single most important question, not only because of its impact on M&A but also because of its knock-on impact on DCM through acquisition financing and so on. And there's the well-known kind of regulatory headwinds there, and that's definitely having a bit of a chilling effect.
I don't know. I've heard some narratives that maybe there's like some pent-up deal demand. Who knows how important politics are in all this. So I don't know. We're fundamentally, as I said I think on the press call, happy to see momentum this quarter, happy to see momentum in announced M&A. Little bit cautious about the pull-forward dynamic, a little bit cautious about the regulatory headwinds. And in the end, we're just going to fight really hard for our share of the wallet here.
Kenneth Usdin: Got it. And I guess I'll just stick on the theme of capital markets. And not surprising at all to see a little bit tougher comp in FICC. I think you guys have kind of indicated that maybe a flattish fee pool is a reasonable place, and I know that's impossible to guide on.
But just maybe just talk through some of the dynamics in terms of activity across the fixed income and equities business. And do you feel like this is the type of environment where, given that lingering uncertainty about rates, clients are either more engaged or less engaged in terms of how they're positioning portfolios? |
3,803 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes, a really good question. I would say, in general, that the sort of volatility and uncertainty in the rate environment overall on balance is actually supportive for the Markets revenue pool. And I think that, together with generally more balance sheet deployment as well as sort of some level of natural background growth, is one of the reasons that the overall level of Markets revenue has stabilized at meaningfully above what was normal in the pre-pandemic period.
And while that does occasionally make us a little bit anxious like, oh, is this sustainable? Might there be downside here? For now, that does seem to be the new normal. And I do think that having rates off the lower 0 bound and a sort of more normal dynamic in global rates, that not only affects the rates business, but it affects the foreign exchange business. It generally just makes asset allocation decisions more important and more interesting.
And so all of that creates risk management needs, and active managers need to grapple with it and so on and so forth. So I think that those are some of the themes on the Markets side at the margin. And yes, we'll see how the rest of the year goes. But it sort of seems to be behaving relatively normally, I would say.
Operator: Our next question comes from Mike Mayo with Wells Fargo.
Michael Mayo: Jamie, I'm just trying to reconcile some of your concerns in your CEO letter. I'm sure the 60 pages, I can see you put a lot of effort into that and it's appreciated. But you talked about scenarios, tail risk, macro risk, geopolitical risk and all that over several years, it's not weeks or months, I get it.
On the other hand, the firm is investing so much more outside the U.S., whether it's commercial or some digital banking, Consumer or Wholesale Payments. So I'm just trying to reconcile kind of your actions with your words. And specifically, how is global Wholesale Payments going? You mentioned you're in 60 countries. You do business a lot more. How is that business in particular doing? |
3,804 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Right, Mike. So I'm sorry to tell you that Jamie actually left us because he's at a leadership offsite. That's why he was here remote. So I think he left the call in my hands for better or for worse. So -- but let me try to address some of your points and without sort of speaking for Jamie here.
I think that when we talk about the impact of the geopolitical uncertainty on the outlook, part of the point there is to note that the U.S. is not isolated from that, right? If we have global macroeconomic problems as a result of geopolitical situations, that's not only a problem outside the U.S. That affects the global economy and therefore the U.S. and therefore our corporate customers, et cetera, et cetera.
So -- and in that context, keeping in mind what we always say, that we invest through the cycle, that we sort of go -- we don't go into countries and then leave countries, et cetera. Obviously, we adjust around the edges. We manage risks. We do make choices as a function of the overall geopolitical environment.
But broadly, the notion that we would pull back meaningfully from one of the key competitive strengths that this company has always had, which is its sort of global character because of a particular moment geopolitically would just be inconsistent with how we've always operated.
And in terms of the Wholesale Payments business, it's going great. It's -- we're taking share. There's been a lot of innovation there, a lot of investment in technology, a lot of connectivity to payment systems in different countries around the world. And yes, I'm sure we'll give you more color and other settings on that, but it's a good story. It's a nice thing to see.
Michael Mayo: Just as a follow-up to that, then. Why is it doing great in terms of Wholesale Payments, given such the dislocations in the world from wars to supply chain changes, everything else, why is Wholesale Payments doing great? |
3,805 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Well, I think one of the things about payments businesses is that, in some sense, they're -- I mean, recession-proof is probably the wrong word. And in any case, we're not dealing with a recession, but we're talking fundamentally about moving money through pipes around the world. And that's a thing that people need to do more or less no matter what. So that's one piece.
But I think the other piece is that our willingness to invest, which has always been a focus of yours, is one of the key things separating us in this business right now. And so we are seeing the benefits of that.
Operator: Our next question comes from Glenn Schorr with Evercore.
Glenn Schorr: Your commentary with Ken's questions were great and clear on Investment Banking for the near term and this year. I have a bigger-picture question in terms of you're so good in spelling out where you're overearning. Do you feel like you're underearning on the Investment Banking side?
And I just use some of your own numbers from the past of like, look, the market has added like $40 trillion of equity market cap and $40 trillion of fixed income market cap last 10 years, yes the wallet is like 20% plus below the 10-year average. So is that -- is there just a bigger upside, and it's just a matter of when, not if?
Jeremy Barnum: Yes, Glenn, in short, yes. I mean, I think we're not shy about saying that we're underearning in Investment Banking now. Clearly, we're below cycle averages, as you point out. We've been talking about when do we get back to the pre-pandemic wallet. But as you know, at this point, it was like March 2020, right, it was the beginning of the pandemic. So it's like 4 years ago at this point. So there's been GDP growth, especially in nominal terms during that period, and you would expect the wallet to grow with that. |
3,806 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | So I do think there's meaningful upside in the Investment Banking fee wallet. As I've noted, there are some headwinds, I think, particularly in M&A. But over time, you would hope that the amount of M&A is a function of the underlying industrial logic rather than the regulatory environment. So you could see some mean reversion there.
And yes, so that's why we're sort of leaning in. We're engaging with clients. We're making sure that we're appropriately resourced for a more robust level of the wallet and fighting for every dollar of share.
Glenn Schorr: Maybe one other follow-up. You're always investing. You clearly get paid in growth across the franchise as you do. But relative to a lot of other banks that have been keeping the expenses a lot closer to flat, do you envision an environment -- or maybe I should rephrase that. What type of environment would have JPMorgan pull back on this tremendous investment spending wave that you've been going through?
Jeremy Barnum: Sure. So I think the first thing to say, which is somewhat obvious, but I'm going to say it anyway, is that there are some like auto-governors in this, right? Like some portion of the expense base is directly related to revenue, whether it's volume-related commissions, whether it's incentive compensation, whether it's other things. So there are some auto-correcting elements of the expense base that would happen automatically as part of the normal discipline. So that's point one.
Point two is that, independently of the environment, we are always looking for efficiencies. And it's a little bit hard to see it. And in our world, where we're guiding to, I guess now with the special assessment added, $91 billion of expenses, it's hard to tell a story about all the efficiencies that are being generated underneath. But that is part of the DNA in the company. That does happen in BAU all the time as we grind things out, get the benefits of scale and try to extract that efficiency. |
3,807 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | And I think, to get to the heart of your question, which is, okay, in what type of environment would we make different strategic questions? And in the end, I think that's a little bit about what that environment is really like. So if you talk about like a normal recession with visibility on the cycle, would we change our long-term strategic investment plans, which are always built up from a financial modeling perspective, assuming resilience through the cycle? No, we wouldn't.
Could there be some environments that, for whatever reason, change the business case for certain investments or even certain businesses that lead us to make meaningfully different strategic choices? Yes, but that would be because the through-the-cycle analysis has changed for some reason. I just don't see us fundamentally making strategically different decisions if the strategic outlook is unchanged, simply because of the business cycle in the short term.
Operator: Our next question comes from Matt O'Connor with Deutsche Bank.
Matthew O'Connor: You mentioned one use of capital is to lean into the trading businesses with your balance sheet. And we did see the trading assets going up Q2, which is probably seasonal, but also up a lot year-over-year, but not necessarily translate into higher revenues. And I know they don't like match up necessarily each quarter. But maybe just elaborate like how you're leaning into the trading with the balance sheet and how you expect that to benefit you over time.
Jeremy Barnum: Yes, sure. So let me break this question down into a couple of different parts. So I think what Jamie was sort of suggesting is that you can think of a concept that's kind of like strategic capital versus tactical capital, for lack of a better term. |
3,808 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | And what he's kind of saying is that, in a moment where you're carrying a lot of excess capital sort of for strategic reasons, you have the ability, at least in theory, to deploy portions of that with kind of like -- into relatively short-duration assets or strategies or client opportunities in whatever moment for whatever reason in what might be thought of as a tactical sense.
So he's just pointing out that, that's an option that you have. And the extent to which this quarter's increase in Markets RWA is a reflection of that, maybe a little bit, but probably not. I agree with you that it's hard in any given quarter to specifically link the change in capital and RWA to a change in revenue. There's just too many moving parts there.
But for sure, one thing that's true is that higher run rate of the Markets businesses as a whole that we talked about a second ago is linked also to a higher deployment of balance sheet into those businesses. So as you well know, we pride ourselves on being extremely analytical and extremely disciplined in how we analyze capital liquidity, balance sheet deployment, G-SIB capacity utilization, et cetera, in the Markets business.
And we don't just chase revenue. We go after returns fully measured. And that's part of the DNA, and we continue to do it, and we will. So we still are operating under multiple binding constraints, and obviously, the environment is complex. So the ability to sort of throw a ton of capital at opportunities is not quite that simple always.
But big picture, we are clearly in a very, very strong capital position, which is in no small part in anticipation of all of the uncertainty. But it does also mean that, if opportunities arise between now and when the Basel III endgame is final, we are very well positioned to take advantage of those opportunities. |
3,809 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Matthew O'Connor: Got it. And then just separately, within the consumer card businesses, you highlighted volumes are up 9% year-over-year. Obviously, still a very strong piece. Any trends within that, that are worth noting in terms of changes in spend category -- either overall or among certain segments?
Jeremy Barnum: Maybe a little bit. Jamie already alluded somewhat to this. So I do think spend is fine but not boomy, broadly speaking, I would say. You can look at it a lot of different ways, inflation cohorts, et cetera. But when you kind of triangulate that, you get back to this kind of flattish picture.
There is a little bit of evidence of substituting out of discretionary into nondiscretionary. And I think the single most notable thing is just this effect where in the -- while it is true that real incomes have gone up in the lowest-income cohorts, within that, there's obviously a probability of distribution, and there's some -- or rather just a distribution of outcomes. And there are some such people whose real incomes are not up, they're down, and who are therefore struggling a little bit, unfortunately. And what you observe in the spending patterns of those people is some meaningful slowing rather than what you might have feared, which is sort of aggressive levering up.
So I think that's maybe an economic indicator of sorts, although this portion of the population is small enough that I'm not sure the read-across is that big. But it is encouraging from a credit perspective because it just means that people are behaving kind of rationally and in a sort of normal post-pandemic type of way as they manage their own balance sheets. And that's sort of at the margin good news from a credit perspective.
Operator: Our next question comes from Gerard Cassidy with RBC Capital Markets. |
3,810 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Our next question comes from Gerard Cassidy with RBC Capital Markets.
Gerard Cassidy: Notwithstanding your guys' outlook for uncertainty, and of course, Jamie talked about it in the shareholder letter and addressed it also on this call when he was here earlier. Can you guys share -- or can you share with us the color on what's going on in the corporate lending market in terms of spreads seem to be getting tighter? It's not reflecting, I don't think, a real fear out there in the global geopolitical world. And any color just on what you guys are seeing in the leveraged loan market as well.
Jeremy Barnum: Right. So I think what's true about spreads in general, just broadly credit spreads, including secondary markets, and to some extent the leverage lending space, is that they're exceptionally tight.
So I'm sure that's reversed a little bit in the last few days. But broadly throughout the quarter, we've really seen credit spreads tighten quite a bit. You even see that a little bit in our OCI this quarter, where losses in OCI that we would have had from higher rates have been meaningfully offset by tighter credit spreads in the portfolio. So broadly sort of in keeping with the big run-up that we saw in equity markets and the general sort of bullish tone, you saw quite a bit of credit spread tightening that -- in secondary markets.
That, I think, has manifested itself a little bit in the leveraged lending space in the normal way that it does in that there's a lot of competition among providers for the revenue pool. And you start to see a little bit of loosening of terms, which always makes us a little bit concerned. And as we have in the past, we are going to be very well prepared to lose share in that space if we don't like the terms. We never compromise on structure there. So you are seeing a little bit of that. |
3,811 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | I think that away from the leveraged lending space, in the broader C&I space, there was a moment a few months ago where I think in no small part as a result of banks generally anticipating this more challenging capital environment and sort of disciplining a little bit their lending, we were seeing a little bit of widening actually in those corporate lending spreads. I don't know if that trend has like survived the last few weeks, and it's always a little bit hard to observe in any case.
But I would say broadly the dynamics or the tension between people trying to be careful with their balance sheets and the fact that overall asset prices and conditions are quite supportive, and secondary market credit spreads have rallied a lot.
Gerard Cassidy: And I guess as a tie-in to that question and answer. We've read and seen so much about the private credit growth in this country by private credit companies. Can you give us some color on what you're seeing there as both as a competitor but also as a client of JPMorgan, how you balance the 2 out? Where you may see them bidding on business that you'd like, but at the same time, you're supporting their business.
Jeremy Barnum: Right. Yes. I mean, I think that tension between us as a provider of secured financing to some portions of the private credit, private equity community, now you're talking about different parts of the capital structure. But we do recognize that, that we compete in some areas and we are clients of each other in other areas. And that's part of the franchise, and it's all good at some level. |
3,812 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | But narrowly on private credit, it is interesting to observe what's going on there. So I would say for us, the strategy there is very much to be product-agnostic, actually. It's not so much like, oh, is it private credit or is it syndicated lending? What does it take to be good at this stuff? And what it takes is stuff that we have and have always had and that we're very good at in each individual silos. So you have -- you need underwriting skills, structuring skill, origination, distribution, secondary trading, risk appetite, credit analysis capabilities. And this is what we do, and we're really good at it.
And increasingly, what you see actually is that as you see us doing a little bit, as the private credit space gets bigger, it starts to make sense to actually bring in some co-lenders so that you can sort of do big enough deals without having undue concentration risks. I mean, even if you have the capital, you just may not want the concentration risk.
And so in a funny way, the private credit space becomes a little bit more like the syndicated lending space. At the same time, the syndicated lending space, being influenced a little bit by these private credit unitranche structures, gets pushed a little bit in the private credit direction in terms of like speed of execution, other aspects of how that business works.
So we're watching it. The competitive dynamics are interesting. Certainly, there's some pressure in some areas. But we really do think that our overall value proposition and competitive position here is second to none. And so we're looking forward to the future here.
Operator: Our last question comes from Charles Peabody with Portales.
Charles Peabody: A couple of questions on the First Republic acquisition. Some of us obviously thought that would be a home run, and I'm glad to see that Jamie Dimon validated that in his annual letter. |
3,813 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | When you look at the first quarter, it annualizes out to $2.7 billion, $2.8 billion, above the $2 billion that Jamie published in the letter. Now I know you don't want to extrapolate that. But can you remind us what sort of cost savings you still have in that? Because this quarter did see expenses come down to $800 million, down from $900 million.
And then secondly, is there an offset to that where the accretion becomes less and less, and that's why you don't want to extrapolate the $2.7 billion, $2.8 billion? So that's my first question.
Jeremy Barnum: Okay. Thanks, Charlie. And I'm going to do my best to answer your question while sticking to my sort of guns on not giving too much First Republic-specific guidance. But I do think that kind of framework you're articulating is broadly correct. So let me go through the pieces.
So yes, the current quarter's results annualize to more than the $2 billion Jamie talked about. Yes, a big part of that reason is discount accretion, which was very front-loaded as a result of short-dated assets. So that's part of the reason that you see that converge. Yes, it's also true that we expect the expense run rate to decline later in the year as we continue making progress on integration. Obviously, as I think as I mentioned to you last quarter, from a full year perspective, you just have the offset of the full year calendarization effect.
There was maybe an embedded question then there, too, about we had talked about $2.5 billion of integration expense. And the integration is real, the expenses are real, and also the time spent on that is quite real. It's a lot of work for a lot of people. It's going well, but we're not done yet, and it takes a lot of effort. But broadly, I think that our expectation for integration expense are probably coming in a bit lower than we originally assumed on the morning of the deal for a couple of reasons. |
3,814 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | One is that the framework around the time was understandably quite conservative and sort of assumed that we would kind of lose a meaningful portion of the franchise and would sort of need to size the expense base accordingly. And of course, it's worked out, to your point, quite a bit better than that. And therefore, the amount of expenses that is necessary to keep this bigger franchise is higher. And that means less integration expense associated with taking down those numbers.
It's probably also true that the integration assumptions were conservative. They were based on kind of more typical type of bank M&A assumptions as opposed to the particular nature of this deal, including the FDIC and so on and so forth.
So yes, I think that probably is a pretty complete answer to your question. Thanks, Charlie.
Charles Peabody: As a quick follow-up, where are the next home runs going to come from? And this is more strategic beyond just JPMorgan. But there's probably going to be more regional bank failures, whether it's this year or next year, and opportunities to pick those up.
But what you're seeing is that private equity and family offices are setting up to participate in this next round of bank failures. Mnuchin's buying of NYCB is clearly to create a platform for roll-ups of failed banks. And then there are other family offices that have filed shelf registrations for bank holding companies whose specific purpose is to buy failed banks.
So where -- do you think that these opportunities are going to be competed away by private credit? And as part of that, do you think the regulators are going to view private credit as a different party and less attractive party versus bank takeovers of failed banks? So that's my question. |
3,815 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Right. Okay, Charlie, there's a lot in there. And to be honest, I just don't love the idea of spending a lot of time on this call speculating about bank failures. Like you obviously have a particular view about the next wave in the landscape. I'm not going to bother debating that with you. But I guess let me just try to say a couple of things, doing my best to answer your question.
Like as we talked about earlier, we have a lot of capital. And as Jamie says, the capital is earnings in store. And right now, we don't see a lot of really compelling opportunities to deploy the capital. But if opportunities arise, despite the uncertainty about the Basel III endgame, we will be well positioned to deploy it.
I think embedded there is also sort of a question about the FDIC and the FDIC's attitude towards different types of bidders. And obviously, there's a lot of thinking and analysis happening about the entire process and some recent forums and speeches on bank resolution and so on and so forth.
And I think probably we can all agree that it's better, all else equal, for the system to have as much capital available and as many different types of capital available to ensure that things are stabilized if anything ever goes wrong. But the mechanics of how you do that when you're talking about banks are not trivial and not to be underestimated. So I guess that's probably as much as I have on that.
Operator: We have no further questions at this time.
Jeremy Barnum: Thank you, everyone.
Operator: Thank you all for participating in today's conference. You may disconnect at this time, and have a great rest of your day. |
3,816 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's First Quarter 2025 Earnings Call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. The presentation is available on JPMorgan Chase's website. Please refer to the disclaimer in the back concerning forward-looking statements. Please standby. At this time, I would like to turn the call over to JPMorgan Chase's Chairman and CEO, Jamie Dimon, and the Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead. |
3,817 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14.6 billion, EPS of $5.07 on revenue of $46 billion with an ROTCE of 21%. These results included a First Republic related gain of $588 million, which was previously disclosed in the 10-K. On Page 2, we have more on our first quarter results. The firm reported revenue of $46 billion, up $3.5 billion or 8% year-on-year. NII ex. Markets was down $430 million or 2%, driven by the impact of lower rates and deposit margin compression as well as lower deposit balances in CCB. This was predominantly offset by higher card revolving balances, the impact of securities activity, including from prior quarters, as well as higher wholesale deposits. NIR ex. Markets was up $2.2 billion or 20%, and excluding the significant item I just mentioned was up 14%, largely on higher asset management fees, lower net investment securities losses and higher investment banking fees. And Markets revenue was up $1.7 billion or 21%. Expenses of $23.6 billion were up $840 million or 4%, largely driven by compensation, including growth in employees across the front office and technology, higher brokerage and distribution fees, as well as marketing and legal expense. The quarter also reflected a $323 million release of the FDIC special assessment accrual compared with a $725 million increase in the prior quarter. Credit costs were $3.3 billion, with net charge-offs of $2.3 billion and a net reserve build of $973 million We have more details on the reserve build on Page 3. With this quarter's reserve build, firm's total allowance for credit losses is $27.6 billion. Let's take a second to add a little bit of context to our thinking surrounding this number in light of the unique environment of the last several weeks. Our first quarter allowance is anchored on the relatively benign central case economic outlook, which was in effect at the end of the quarter. But in light of the significantly elevated risks and uncertainties at the time, we |
3,818 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | was in effect at the end of the quarter. But in light of the significantly elevated risks and uncertainties at the time, we increased the probability weightings associated with the downside scenarios in our CECL framework. As a result, the weighted average unemployment rate embedded in our allowance is 5.8%, up from 5.5% last quarter, driving the $973 million increase in the allowance. So, with that in mind, the consumer build of $441 million was driven by changes in the weighted average macroeconomic outlook. The wholesale build of $549 million was predominantly driven by credit quality changes on certain exposures and net lending activity as well as changes in the outlook. In addition, it's important to note that the increase in the allowance is not, to any meaningful degree, driven by deterioration in the actual credit performance in the portfolio, which remains largely in line with expectations. With that, let's go to balance sheet and capital on Page 4. We ended the quarter with a CET1 ratio of 15.4%, down 30 basis points versus the prior quarter as net income and OCI gains were more than offset by capital distributions and higher RWA. This quarter, the firm distributed $11 billion of capital to shareholders, which reflects $7.1 billion of net common share repurchases and the payment of our common dividend, which has been increased to $1.40 per share. This quarter's higher RWA is primarily driven by overall business growth in Markets and some seasonal effects. Now, let's go to our businesses, starting with CCB on Page 5. Consumers and small businesses remain financially healthy. Despite the recent downtrends in consumer and small business sentiment based on our data, spend, cash buffers, payment to income ratios and credit utilization are all in line with our expectations. Moving to the financial results, CCB reported net income of $4.4 billion on revenue of $18.3 billion, which was up 4% year-on-year. In Banking & Wealth Management, revenue was down 1% year-on-year, driven by lower deposit NII, |
3,819 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | which was up 4% year-on-year. In Banking & Wealth Management, revenue was down 1% year-on-year, driven by lower deposit NII, predominantly offset by growth in Wealth Management revenue. Average deposits were down 2% year-on-year and flat sequentially, while end-of-period deposits were up 2% quarter-on-quarter. Client investment assets were up 7% year-on-year, predominantly driven by market performance and we continue to see strong flows into managed products. In Home Lending, revenue was up 2% year-on-year and originations were up 42% year-on-year off a small base in a slowly growing market. Turning to Card Services & Auto, revenue was up 12% year-on-year, predominantly driven by Card NII and higher revolving balances, as well as higher operating lease income in Auto. Card outstandings were up 10% due to strong account acquisition. And in Auto, originations were $10.7 billion, up 20%, driven by higher lease volume. Expenses of $9.9 billion were up 6% year-on-year, predominantly driven by growth in marketing and technology, higher field compensation, as well as higher auto lease depreciation. Credit costs were $2.6 billion, reflecting net charge-offs of $2.2 billion, up $275 million year-on-year, predominantly driven by the seasoning of recent vintages in Card with delinquencies and losses in line with expectations. The net reserve build was $475 million, of which $400 million was in Card. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.9 billion on revenue of $19.7 billion, which is up 12% year-on-year. IB fees were up 12% year-on-year and we ranked #1 with wallet share of 9%. In advisory, fees were up 16%, benefiting from the closing of deals announced in 2024. Debt underwriting fees were up 16%, primarily driven by elevated refinancing activity, particularly in leveraged finance. In equity underwriting, fees were down 9% year-on-year, reflecting challenging market conditions. In light of market conditions, we are adopting a cautious stance on the investment banking outlook. |
3,820 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | market conditions. In light of market conditions, we are adopting a cautious stance on the investment banking outlook. While client engagement and dialogue is quite elevated, both the conversion of the existing pipeline and origination of new activity will require a reduction in the current levels of uncertainty. Payments revenue was up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, predominantly offset by deposit margin compression. Lending revenue was up 11% year-on-year, driven by lower losses on hedges, partially offset by lower balances. Moving to Markets, total revenue was up 21% year-on-year, reflecting record performance in equities. Fixed Income was up 8% with better performance in rates and commodities against a relatively weak prior-year quarter. Equities was up 48% as the business performed well during a period of elevated volatility supported by higher client activity and strong monetization of flows, particularly in derivatives. Securities Services revenue was up 7% year-on-year, driven by fee growth and higher deposit balances, partially offset by deposit margin compression. Expenses of $9.8 billion were up 13% year-on-year, predominantly driven by higher compensation, legal and brokerage expense. Average Banking & Payments loans were down 3% year-on-year and down 1% sequentially as we continue to observe payoff activity and limited demand for new loans across client segments. Average client deposits were up 11% year-on-year and up 2% sequentially, reflecting increased activity across Payments and Securities Services. Finally, credit costs were $705 million, largely driven by the net reserve build. Then, to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.6 billion, with pre-tax margin of 35%. Revenue of $5.7 billion was up 12% year-on-year, predominantly driven by growth in management fees on strong net inflows and higher average market levels, as well as higher brokerage activity and higher |
3,821 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | in management fees on strong net inflows and higher average market levels, as well as higher brokerage activity and higher deposit balances. Expenses of $3.7 billion were up 7% year-on-year, largely driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $54 billion for the quarter, primarily driven by equity and fixed income. In liquidity, we saw net inflows of $36 billion. AUM of $4.1 trillion and client assets of $6 trillion were both up 15% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 5% year-on-year and flat quarter-on-quarter, and deposits were up 7% year-on-year and down 2% sequentially. Turning to Corporate on Page 8. Corporate reported net income of $1.7 billion. Revenue of $2.3 billion was up $102 million year-on-year. NII of $1.7 billion was down $826 million year-on-year. NIR was a net gain of $653 million compared with a net loss of $275 million in the prior year. Current quarter included the significant item I mentioned upfront, while the prior-year quarter included net securities losses of $336 million. Expenses of $185 million were down $1.1 billion year-on-year, driven by the changes to the FDIC special assessment accruals I mentioned upfront. To finish up, let's turn to the full year outlook on Page 9. We continue to expect NII ex. Markets to be approximately $90 billion. The firm-wide NII outlook has increased to about $94.5 billion, reflecting an increase in Markets NII, which you should think of as being primarily offset in NIR. Our adjusted expense outlook continues to be about $95 billion. And on Credit, we expect the card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, to wrap up, we're pleased with another quarter of strong operating performance, but of course, the focus right now is on the future, which is obviously unusually uncertain. But no matter what |
3,822 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | performance, but of course, the focus right now is on the future, which is obviously unusually uncertain. But no matter what outcomes eventually materialize, we are eager to do our part to continue to support our clients, the markets and the broader economy, and we believe the banking system will be a source of strength in this dynamic environment. And with that, let's open the line for Q&A. |
3,823 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Thank you. Please standby. Our first question comes from Ken Usdin with Autonomous. You may proceed.
Ken Usdin: Good morning, Jeremy. Wondering if you could start by just kind of amplifying just the macro commentary that you started off on. And given the uncertainty in the world that you referenced, just how are you seeing the activity change across the customer base from consumers to wholesale? And can you just talk through how that's also just informing any changes in your -- some of your growth and reserving expectations? Thanks. |
3,824 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Sure, Ken. So, I mean, at a high level, I would say that, obviously, some of the salient news flow is quite recent. So, we've done some soundings and some checking both on the consumer side and on the wholesale side. I think on the consumer side, the thing to check is the spending data. And to be honest, the main thing that we see there is what would appear to be a certain amount of front-loading of spending ahead of people expecting price increases from tariffs. So, ironically, that's actually somewhat supportive all else equal. But I think what it sort of highlights is that during this transitional period and this elevated uncertainty, you might see some distortions in the data that make it hard to draw larger conclusions. In terms of our corporate clients, obviously, they've been reacting to the changes in tariff policy. And at the margin that shifts their focus away from more strategic priorities with obvious implications for the Investment Banking pipeline outlook towards more short-term work, optimizing supply chains and trying to figure out how they're going to respond to the current environment. So, as a result, I think we would characterize what we're hearing from our corporate clients is a little bit of a wait-and-see attitude. I do think you see obvious differences across sectors. Some sectors are going to be much more exposed than others and have more complicated problems to solve, and also across the size of the clients, I think, smaller clients, small business and smaller corporates are probably a little bit more challenged. I think the larger corporates have a bit more experience dealing with these things and more resources to manage. So, that's a little bit of our read of the situation right now, but certainly a bit of a wait-and-see attitude. It's hard to make long-term decisions right now. And so, we'll see how that plays out. |
3,825 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Ken Usdin: Yeah. And just one question on the NII ex. Markets holding at $90 billion. Can you just walk us through the puts and takes of just what's the new curve you're using, which also is subject to change every day? And what might have been some of the positive offsets to if you put in more expected cuts than you had before? Thanks.
Jeremy Barnum: Yeah, that's a good question, Ken, and you're right. So, if you remember, last quarter, we said that we had one cut in the curve. I think latest curve has something like three cuts. And so, we've talked a lot, obviously, about how we're asset-sensitive. You now see our EaR disclosed in the supplement and probably our empirical EaR is a little bit higher than our modeled EaR as a result of the relatively lower-than-modeled rates paid in consumer. So, when you put that together, all else equal, the drop in the weighted average IORB, which is about 22 basis points, should produce a notable headwind in our NII ex. Markets.
Jamie Dimon: In the curve basically.
Jeremy Barnum: Yeah. That's basically -- that's just mechanically...
Jamie Dimon: Guaranteed not to happen. |
3,826 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yeah. That's basically -- that's just mechanically...
Jamie Dimon: Guaranteed not to happen.
Jeremy Barnum: As Ken said. So, that's mechanically just flowing through the curve. So, yeah, your question is that given that why are you not revising down? And the answer to that is that across all the puts and takes actually, our number is a tiny bit lower. It's just not enough to warrant a change in the outlook, but we do have some offsets. So, we have some balance effects that are favorable. You will have noted that I talked about higher wholesale deposit balances, for example. We see beta outperforming in a couple of different places in CDs and in wholesale. The other thing is that you'll recall we talked before about having a placeholder in our NII outlook for the potential impact of the card late fee rule. We've now removed that, so that's a little bit of an offset as well. So, that's kind of how you get to unchanged even though clearly, all else equal, the lower expected front-end rates are a headwind.
Operator: Thank you. Our next question comes from Erika Najarian with UBS. You may proceed.
Erika Najarian: Yes, good morning. This question is for Jamie. Jamie, you were on the media today talking about potential economic turbulence, but Jeremy also mentioned that banking should be -- the banking system should be a source of strength in this turbulence. The equity market always seems to think about the banks as weaker players, given how they trade the stocks more on sentiment and fear rather than the math of the ability of the banks to absorb provisions going forward if we do fall into a slower economic downturn. So, I guess, just the question here is, can you double-click on how you think this is going to impact the economy going forward? And maybe double-click on Jeremy's statement that banking -- the banking system should be a source of strength? |
3,827 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: I just -- before Jamie answers that, Erika, I just want to make one brief comment, which is the banking system being a source of strength means what it says. In other words, banks doing their job to support the economy. That's not a statement about bank equity performance and the extent to which banks are cyclical or not. Like obviously, a recessionary environment, as I frequently said, all else equal, is bad for banks from an equity performance perspective. We're talking about the financial strength of banks' balance sheets and our ability to support our clients in a difficult moment. |
3,828 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Everyone trades stocks in a different way. So, sentiment -- but banks are a cork in the ocean when it comes to the economy. If the economy gets worse, credit loss will go up, volumes can change, yield curve can change, and we're not predicting all of that. What I would say is our excellent economist, Michael Feroli, I called him this morning, specifically to ask him with -- how they're looking at their forecast today. They think it's about 50-50 for recession, so I'll just refer to that. Obviously, if there's a recession, credit loss will go up, and other factors will change, too. And I think the one thing I'll add to what Jeremy said is, and I don't usually pay that much attention to anecdotes, but this time I am, and I think you're going to see a lot of companies, you guys -- not you, but the analyst community has already reduced its earnings estimates for the S&P by 5%. So, it's now up 5% as opposed to up 10%. My guess is that'll be 0% and negative 5% probably the next month. And then, you're going to hear a thousand companies report and they're going to tell you what their guidance is. My guess is, a lot will remove it. They're going to tell you what they think it might do to their customers, their base, their earnings, their cost, their tariffs. It's different for every company, but I assume you see that. And anecdotally, a lot of people are not doing things because of this. They're going to wait and see. And that's M&A, M&A with middle market companies, that's people's hiring plans and stuff like that. So, people have to adjust this new environment. And I think you will see what it is. I just also want to point out just so you can round it up, this is to make you feel comfortable, not uncomfortable. When COVID hit, unemployment went from like 4% to 15% in a couple of months, and we had to add to reserves in a two-month period $15 billion. And then, to show you how stupid CECL is, in the three month -- three-quarter period, we took down the $15 billion. So that just sizes up a bad recession. If |
3,829 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | CECL is, in the three month -- three-quarter period, we took down the $15 billion. So that just sizes up a bad recession. If it's a mild recession, it will be less than that. If it's a really bad recession, it will be more than that. Either way, we can handle it and serve our clients. Earnings won't be great and the stock will go down, which I look at as an opportunity to buy back more stock. |
3,830 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Erika Najarian: Got it. And a second follow-up question. And I don't disagree with you guys on equity market performance of bank stocks. It's just that the mindset of portfolio managers is they always go back to sort of the lowest common denominator of fundamental performance versus thinking about resilience? And to that point, the second question is on the reserve. Jeremy, you mentioned a weighted average unemployment rate of 5.8%. I think that's above where economists are thinking we could peak even in a recession scenario. How should we think about any incremental builds from here? And what you're going -- obviously, deterioration in outlook, but what more do you need to see in terms of how you make decisions about further builds from here? |
3,831 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yeah, Erika, it's a good question, but the truth is there's just a little bit too much uncertainty right now for me to sort of give an outlook for reserves, which is generally not a thing that we do anyway. As I mentioned in my prepared remarks, the accident forecast at the end of the quarter was the sort of bog-standard, no landing, barely any increase in unemployment. Given that we knew at the time that there was some -- there were some big pending announcements and there was quite a bit of elevated uncertainty around that, it felt like the forecasts were kind of lagging because people were just waiting to actually get the information. And so, it felt appropriate to add a little bit of downside skew to our probability assessment, which is what led to the increase and what led to the build. We use this weighted average unemployment thing as a useful way to help explain what's going on inside the reserve, but obviously, the actual mechanisms are quite complex, the depth of any potential recession, the timing of it, distribution of outcomes, which sectors it hits, idiosyncratic stuff and wholesale, there's a lot. I think on consumer, as Jamie mentioned, it is worth remembering that by far the most important variable is unemployment. So, if the labor market remains very strong, consumer credit will probably be fine. If it doesn't, then you're going to see it play through the way it always does.
Erika Najarian: Thank you.
Operator: Thank you. Our next question...
Jeremy Barnum: Thanks, Erika.
Operator: I apologize. Our next question comes from John McDonald with Truist Securities. You may proceed.
John McDonald: Hi, good morning. Jeremy, on that same topic, no change to the full year credit card net charge-off forecast. How do we square that with the rising recession risk? Is it because you already have a couple of months of delinquencies kind of baked in the cake and this is more an issue for next year, or just too early to call? |
3,832 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: We should have not given you that forecast. We don't know what the number is going to be. I would say it's a short-term number, and based on what's happening today, there's a wide range of potential outcomes.
John McDonald: Yeah, okay. Okay, yeah, that's what we're kind of thinking, and...
Jeremy Barnum: But mechanically, John, though, as you alluded to, there are some mechanical elements to the way card charge-offs works. That means that it's pretty baked, pretty far out of time...
Jamie Dimon: [At least] (ph) couple of quarters, yeah.
Jeremy Barnum: So, sort of echoing Jamie's point, it just doesn't necessarily tell you that much about what might actually happen through the end of the year. Even if unemployment were to increase significantly, it probably wouldn't flow through the charge-offs until later.
John McDonald: Okay, got it. And then, just on capital, how does this type of macro uncertainty impact your thinking around conserving capital as opposed to deploying it through your investment agenda and buybacks as the stock gets cheaper? Just are you still looking to arrest the increase or does this kind of change it?
Jamie Dimon: The investment that we do in banks, branches, technology, AI is going to continue regardless of the environment. And then, we have, depending what happens to Basel III and CCAR and G-SIFI and all that, $30 billion to $60 billion of excess capital. And in the Chairman's letter, I wrote about what we think of that, but based upon the environment, the turbulence issues, I like having excess capital. We are prepared for any environment and that's so we can serve clients. That's not for any other reason. So -- but we have plenty of capital and plenty of liquidity to get through whatever the stormy seas are.
John McDonald: Okay. Thank you.
Jeremy Barnum: Thanks, John.
Operator: Thank you. Our next question comes from Matt O'Connor with Deutsche Bank. Your line is open. |
3,833 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Thank you. Our next question comes from Matt O'Connor with Deutsche Bank. Your line is open.
Matt O'Connor: Good morning. Just want to drill down on the credit card spend. Any comments in terms of changing patterns on the consumer card spend? There's been headlines and travel kind of going down. Just talk about some of the puts and takes in that up 7% year-over-year. |
3,834 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yeah, it's a good question. We're seeing that, too. So, let me talk about travel. I mean, we obviously saw the airlines discuss what they are seeing as headwinds for them specifically in airline travel and we're seeing that too through the card spend. It's not obvious to us that that's necessarily an indicator for broader patterns. There are a variety of potential explanations for the narrow drop in airline spend. And as I mentioned previously, another thing that we are seeing looking at the April data is what would appear to be a little bit of front-loading of spending, specifically in items that might be -- have prices go up as a function of tariffs. So, you see people behaving rationally and I have noted even you hear anecdotes and I've seen evidence of companies specifically advertising. We have pre-tariff inventory and so on and so forth. So, it's not that surprising that you're seeing that a little bit in the spending data. The other thing that people are kind of interested in the space is like what's happening by income then, because we have seen some of the retailers and other folks talking about weaknesses in the lower-income segment. And I think when we look at our card data and also our cash buffers and people's checking accounts, of course, it is true that it is relatively weaker in the lower-income segment. But when you take a step back and you ask, are we seeing signs of distress in the lower-income segment? The answer is no. So, sure, the margin cash buffers are lower and you see some rotation of spend and spending is a little bit weaker than it was in the peak spending moments, but actually, some of the increases in spending that we're seeing in April are actually coming from the lower-income segment. So, no evidence of distress, I would say. |
3,835 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Matt O'Connor: Okay. That's helpful color. And then, just separately, if we look at the delinquencies for the home lending, they increased both Q2 and year-over-year. Is that just some of the noise from the First Republic deal as you take the marks upfront and then those portfolios essentially [receding] (ph) from an accounting point of view, or is there something else going on there?
Jeremy Barnum: Sorry, I actually didn't hear which fees...
Jamie Dimon: The delinquencies in the home lending.
Jeremy Barnum: I didn't -- interesting. I haven't looked at that. We'll have to get back to you on that. Whatever it is, it wasn't important enough to get raised. So...
Jamie Dimon: It could be the First Republic accounting, yes.
Jeremy Barnum: Yes, anything is possible. We'll get back to you on that.
Matt O'Connor: Okay. Thank you.
Operator: Thank you. Our next question comes from Steven Chubak with Wolfe Research. You may proceed.
Steven Chubak: Hi, good morning, and thanks for taking my questions. Wanted to start off with one on the proposed SLR changes and just the impact of rate volatility. The treasury is committed to providing relief to the banks under the SLR just to help mitigate some of the volatility in the 10-year. But given the geopolitical concerns, weakening global demand for treasuries, how does it inform your appetite just for purchasing US treasuries if those reforms are implemented? And just how you're managing rate risk maybe more holistically across the firm just in light of some of the recent volatility? |
3,836 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Yeah. So, SLR alone isn't going to change that much for us. It may change for other people. We really need reform across SLR, G-SIFI, CCAR, Basel III and LCR, all of which has deep flaws in them, to make a material change. And remember, it's not relief to the banks. It's relief to the markets. JPMorgan will be fine with/without an SLR change. The reason to change some of these things is so banks -- the big market makers could intermediate more in the markets. If they don't -- if they do, spreads will come in, there'll be more active traders. If they don't, the Fed will have to intermediate, which I think is just a bad policy idea, but every time there's a kerfuffle in the markets, the Fed has to come in and intermediate. So, they should make these changes. The reason why is when you have very -- lot of volatile markets and very widespread and low liquidity in treasuries, it affects all other capital markets. That's the reason to do it, not as a favor to the banks themselves. And anyway -- and we don't take more interest rate exposure to this in any way, shape or form. It's not like we're going to change our position. We intermediate the markets, help clients do what they have to do. And if the banks could take bigger positions, they would have just larger dealer positions and take no -- basically take not much more interest rate exposure. I should say that our folks did a fabulous job trading this quarter. |
3,837 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: And Steve, all I would add to that is that it is, of course, true and we all remember the moment a few years ago when intermediaries were in fact bound by us alone as a result of the expansion of deposit base and extraordinary actions needed to be taken to address that. So, we've seen when it is binding and it works not as designed, which is why we do very much agree that it should be fixed. I think our point is a little bit, as Jamie said in his Chairman's letter, that it's not the only thing that needs to be fixed and there are interactions among all these things, and we as a bank are not particularly bound by it. There is some interesting nuance too in terms of the potential TLAC issuance impact there, which is quite sensitive to which particular fix gets put in. So that will be an interesting thing to watch.
Steven Chubak: Thank you both for that perspective. And just for my follow-up, did want to ask on the Markets outlook. So, admittedly less surprising to hear some of the cautious IB commentary in light of the uncertainty, but was hoping you could just speak to the Markets businesses, which have been performing extraordinarily well of late. And just given the combination of elevated volatility, but also some indications that clients are taking down risk, how you expect that business to perform over the coming quarters? |
3,838 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yeah. It's a good question. As you know, Steve, we're obviously not going to give Markets guidance. Your guess is as good as ours at some level, but the ingredients are the right ingredients. I mean, we've often discussed about how this business, all else equal, benefits from a volatile environment if markets are operating relatively normally, which they more or less have been. Of course, it's not guaranteed. We need to do a good job managing the risk. And yeah, there are states of the world where if our clients are struggling or deleveraging or taking down risk that could be a headwind for us. So, we're going to just do what we always do and try to manage the risk well and serve our clients, but we're certainly happy to see the performance this quarter.
Steven Chubak: That's great. Thank you both for taking my questions.
Operator: Thank you. Our next question comes from Gerard Cassidy with RBC Capital Markets. You may proceed.
Gerard Cassidy: Thank you. Hi, Jeremy. Hi, Jamie. Can you guys share with us, if you take a look at the non-traditional lenders, private credit lenders, they've been very active in grabbing market share from the traditional commercial banks over the last two or three years, particularly since the initial Basel III endgame proposal came out in July of '23, which is no longer applicable. But are you guys seeing any opportunities where the customers may re-intermediate back into the banks like your bank because of this volatility? |
3,839 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: I mean, it's hard to tell, Gerard. I think it's too early to tell. But what I would say is that it kind of your question aligns with what we've been saying about the space for some time, which is, we want to be product agnostic here and give our clients the best option that makes sense for them in the moment. Whether that's a traditional syndicated lending facility or something that looks more like a unitranche direct lending-type structure, we're open for business for all of it. And I would say that when we talk about the financial system being a source -- the banking system being a source of strength in this environment, part of what we're talking about is our commitment and willingness to lend through cycles as we've always done in the past and that we have the underwriting capability and the capital and the liquidity and the experience to be reliable lenders and serving our clients no matter what type of environment we're in. So, if that means that we have an opportunity to compete incrementally even more effectively in this environment, that will be great.
Gerard Cassidy: Very good. Thank you. And then, as a follow-up, you both just talked about the potential changes to the different regulatory outcomes for you and your peers, whether it's SLR or the G-SIB buffer, et cetera. Can you opine for us your views? Are you more confident with the new administration, the new personnel, whether it's Treasury Secretary Bessent or others, the nominees for different regulatory heads, that there will be a better chance of real regulatory reform they see it the way you guys do versus the prior administration? |
3,840 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yeah. I mean, Gerard, we always say this and it's true, which is that we work with all administrations and every administration as constructively as possible to express our opinions and advocate for the things that we think are right for the banking system and for the economy as a whole. And that was true before and it's true now with this administration as well. Clearly, the administration has been quite vocal about wanting more pro-growth policies at the margin and for wanting to make it easier for banks to participate more constructively in the economy. And as we see the various folks and the various agencies go through the confirmation process, it will be helpful to have people in seats and get to work on some of the things that we want to get done. So, let's see how that plays out, but we're looking forward to continuing to engage constructively.
Jamie Dimon: Yeah. I think there's a deep recognition of the flaws in the system. And there should be -- and fortunately, they're going to take a good look at it.
Gerard Cassidy: Very good. Thank you.
Jeremy Barnum: Thanks, Gerard.
Operator: Thank you. Our next question comes from Ebrahim Poonawala with Bank of America. You may proceed.
Ebrahim Poonawala: Thank you. Good morning. I guess just wanted to follow-up on the macro uncertainty. I think when you talk to investors, we've gone from enthusiasm for a pro-business administration to a lot of headwinds. And I think Jamie mentioned you will have companies take down guidance, et cetera, potentially over the coming weeks. I'm just wondering what is it you think we need to see before this uncertainty abates? Are the 90-day pause that we saw with some of the other countries on tariffs, is that enough? Or I'm just wondering when you talk to clients, corporate CEOs, what are they looking for from the administration that would inject confidence to get back anywhere close to where we were maybe 60 or 90 days ago? |
3,841 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: First of all, some of all the issues that are raised existed before the new administration, like the geopolitical situation, the excess fiscal deficits, poorly done regulations and all of that. Obviously, pro-growth is good, pro-business is good, pro-dereg is good. I think the best thing to do is to allow the Secretary of Treasury and the folks working with him in the administration to finish as quick as possible the agreements that they need to make with -- around tariffs and with our trading partners. And I think there'll be agreements in principle, they're not going to be -- trade agreements themselves would be 5,000 or 10,000 pages long. And that's the best way to go about it right now. That does not mean you won't have some of the effects take place anyway.
Ebrahim Poonawala: Got it. And I guess, as a follow-up, I think there's a lot of concern also in the treasury markets. We've seen the 10-year move from 3.99% to 4.50% in a matter of week. Just your comfort level in terms of the functioning of the treasury market? Do you see the Fed stepping in, pausing QT, maybe even initiating some treasury purchases? Any color would be great. |
3,842 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Yeah. But again, I mean, we have sticky inflation. We had that before. I personally have told you, I don't think that's going to go away and that relates to that. Obviously, the US dollar still is the reserve currency, and that isn't going to change, though some people may feel slightly differently about it. And the Fed -- we've been consistent. There will be a kerfuffle of the treasury markets because of all the rules and regulations. I've told you that consistently it happened in COVID, it happened before, it happened, that will happen and then when that happens, the Fed will step in. That's what happens. And they're not going to do it now because you don't have all those issues yet. They'll do it when they start to panic a little bit and we don't know if and when that's going to happen and we'll see. But the notion that the 10-year treasury has to go down is a false notion. If we look at history in prior times, we have huge global deficits back in the '70s, in the '60s, the guns and butter, tariffs, at least our economists think, will be inflationary to 0.5% or something like that. So, we'll have to wait and see and deal with it.
Ebrahim Poonawala: Thank you.
Jamie Dimon: For most -- mostly we haven't dealt with this stuff before and you're going to see a lot of stuff taking place shortly in the next couple of months and then we'll know.
Ebrahim Poonawala: Got it. Thank you so much.
Operator: Thank you. Our next question comes from Jim Mitchell with Seaport Global Securities. You may proceed.
Jim Mitchell: Hey, good morning. Jeremy, just on with four -- three to four cuts sort of mostly in the back half, June to December, how do you think about the trajectory of NII this year? Is there a little more pressure towards the end of the year into '26? Just trying to think of that -- around that trajectory and jumping off point into next year. |
3,843 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yeah. It's funny, Jim, because I was asked on the press call how come we're not like suspending guidance or whatever, and my answer was like, well, whatever [the guidance] (ph), we do our best and it's contingent on a variety of external variables and we always make our guidance contingent on that. So -- and that comes...
Jamie Dimon: The yield curve you're using, which we know will not happen.
Jeremy Barnum: And the particular nuance as you recall from last quarter where we went into some detail about the various drivers of the NII outlook, including a little bit of a suggestion about the quarterly trajectory is that it's both the timing of rates and the -- our expected evolution of deposit growth in the different businesses and how evolved and how that was all going to interact, producing potential trough in different moments and then so on and so forth. I think that given everything that's going on, on that one, probably we'll wait for next quarter to give you any more color on that. Certainly, the back-loaded cuts, all else equal, from a run rate perspective introduce a little bit of a headwind on an exit rate going into next year, we'll just have to see how the balances play out through the next three quarters.
Jim Mitchell: Right. And maybe just...
Jamie Dimon: It will not happen that way. And we have a lot of options and we want to do change our exposure to interest rate.
Jim Mitchell: Right. And maybe just on that point on volumes and deposits, obviously, this kind of volatility tends to drive -- as corporates and investors go to cash, tends to drive higher deposits. Did you see that trend in March and particularly in April? What are the trends like in the deposit side of the equation? |
3,844 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: It's a little hard to tell, to be honest. It is true that wholesale deposit this quarter outperformed for us relative to our expectations. I don't think I can say with any confidence that that's a result of the environment that we're in. So, I think next quarter will probably be a better time to assess that.
Jamie Dimon: I'll just also say that it may not be deposits, it may be treasury bills or various other things. And what you've seen, which is different, is not the risk-off trade in the 10-year. That is fundamentally different this time.
Jim Mitchell: Right. Okay. Thanks for taking my questions.
Jeremy Barnum: Thanks.
Operator: Thank you. Our next question comes from Betsy Graseck with Morgan Stanley. You may proceed.
Betsy Graseck: Thanks. Good morning, Jamie. Good morning, Jeremy. Two questions, one for Jamie to kick off. Jamie, you've been through many cycles. And I think we're all interested in understanding how you think this next cycle is likely to progress. And I'm wondering, is there anything that you've seen in the past that looks like this or that you would suggest if any slowdown coming forward, is it more likely to be similar to what kind of prior cycle you've seen? |
3,845 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Again, almost impossible to answer. We look at all the cycles. We prepare for a full range of outcomes. So, not -- I don't personally like predicting what the future is going to hold, but I do -- I pointed out over and over, there's a lot of issues out there. I think some of those issues you are going to see them resolve for better or for worse in the next four months. So, maybe when we're doing this call next quarter, we won't have to be guessing. We actually know what the effect of some of these things was with some predictability and stuff like that. But it's -- the result in a bank is almost always the same, which is volatile markets, credit losses go up, people get more conservative, investments go down. It looks like a recession. Is it mild or hard? I don't know. But we are -- I've been quite cautious and you can see it in our capital, liquidity, our position, our balance sheet, and so we're prepared. But we do all that so we can serve our clients through thick or thin. We're not guessing about what the future is going to hold. Obviously, if you look at our numbers, we have the margins and capability to get through just about anything.
Betsy Graseck: Excellent. Okay. No, thank you for that. And then... |
3,846 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Betsy Graseck: Excellent. Okay. No, thank you for that. And then...
Jamie Dimon: So, Betsy, this is different, okay? This is different. This is the global economy and please read my Chairman's letter, the most important thing to me is the Western world stays together economically when we get through all this and militarily to keep the world safe and free for democracy. That is the most important thing. I really almost don't care fundamentally about what the economy does in the next two quarters. That isn't that important. We'll get through that. We've had recessions before and all that. It's the ultimate outcome. What's the goal? How can we get there? And it's literally that. I mean, and I -- the China issue is a major issue. I don't know how that's going to turn out. We obviously have to follow the law of the land, but it's a significant change we've never seen in our lives.
Betsy Graseck: Okay. Thank you so much for that. And yes, looking forward to the next four months and clarity coming. So, then, one for Jeremy. Question on the wholesale loans. I'm going into this because I noticed your average loan growth, I think it was running at about 2% year-on-year, and then end-of-period loans was up 5% and wholesale loans was up 7%. So, I'm just wondering if there was some line drawdowns at quarter-end. And it's a broader question on just liquidity, do you see your customers looking for more liquidity? Are they drawing down lines? And maybe if you could speak to liquidity in the front end of the market that'd be helpful too. Thank you. |
3,847 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yeah. It's a good question, Betsy. So, a couple of things. One is, in our soundings of our wholesale clients during sort of the moments of peak uncertainty, we did hear them talking about wanting to focus on [shoring up] (ph) liquidity. Interestingly, I actually asked the question like a day ago, whether we were seeing draws -- meaningfully observable draws from clients. And the answer to that question was no, at least not yet. So, I don't know what to make of that, but perhaps it suggests that we do not see that level of heightened anxiety that people are more just focusing on addressing their supply chain issues right now. Yeah, so on wholesale loans, beyond that, I don't think there's that much of a story. Now, we're seeing a bit more growth in sort of like Markets loans as opposed to traditional C&I loans in the current moment, but that's another hurdle there. Did you -- yeah, you asked -- what did you ask, also front end of the yield curve liquidity?
Betsy Graseck: Yeah, just in money markets, fed funds, the front-end seem to suggest...
Jeremy Barnum: Yeah. What we've heard from our markets colleagues is that that's actually functioning quite smoothly.
Betsy Graseck: Okay. Thank you.
Jeremy Barnum: Thanks.
Operator: Thank you. Our next question comes from Mike Mayo with Wells Fargo Securities. You may proceed. |
3,848 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Thank you. Our next question comes from Mike Mayo with Wells Fargo Securities. You may proceed.
Mike Mayo: Hey, Jamie, you just said on this call, there's a "deep recognition of flaws" by the new regulatory regime. And can you put -- you or Jeremy put some meat on the bones as far as what's been an ideal scenario? You keep the safety and soundness of the system, but you rid as much as red tape and bureaucracy as possible. How much could expenses potentially decline? I assume you'd pass on some of that to customers and you'd keep some of that and the regulators would save money. So, some meat on the bones about the potential concrete savings from deregulation? But before that, the negative which you highlight in the press release and the Chairman letter about the trade wars, Jamie, you went from trade wars "get over it" to this week say "do something." So just as far as the tariff journey, what were you initially expecting to what happened? And do you really think next earnings call will be through most of the uncertainty? Thanks. |
3,849 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Yeah. No, I don't think we'll necessarily be through all the uncertainty. I think you'll just know a lot more. And my quote was about to "get over it," I wish I hadn't said it. I was specifically referring tariffs relating to protecting national security. National security is paramount. All things should be subordinated to it. You may need tariffs to help fix some of the problems related to national security. National security is a small part of trade. So -- and it's rare earths, penicillin, medical ingredients, certain types of -- obviously, you've heard about semiconductors. That was my quote about "get over it." I did not change my view about it. I would like to see the administration negotiate trade deals. I think that'll be good for everybody, and they want to do it, too. Maybe the extent they want to do it, they said they're having conversations with 70 or 80 different people. And so, I do think if the regulators change regulations, it will free up capital and liquidity to finance the system. And I don't -- I wouldn't expect an expense drawdown that you're going to see, okay? There will be thousands -- hundreds of people maybe, but it's not going to be [passed on] (ph), but it will reduce net-net the cost of liquidity and the cost of loans and the cost of mortgages if it's done right. I specifically pointed out the mortgage issue in my Chairman's letter this year about if they do some of these reforms, the cost of mortgages come down 70 basis points. If I were them, I'd be focusing that right now.
Mike Mayo: No. And you also mentioned hundreds of billions of dollars of extra lending if you reduce the CET1 ratio, I guess, back down by one-fifth. So... |
3,850 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: If you do all -- if you have to fix LCR, G-SIFI, CCAR, SLR, and I think would free up hundreds of billions of dollars for JPMorgan annually of various types of lending to the system. Some would be markets, some would be middle market loans, et cetera. And I pointed out, if you wanted to look at the big numbers, that loans to deposits are now 70% for the banking system writ large. That used to be 100%. And the reason for that isn't -- it's not just capital. It is also LCR. It is also G-SIFIs. And the question you should ask, because you are very smart, Mike, is could you -- have the same -- and I believe you have a safer system, lend more money, have more liquidity, eliminate bank runs, eliminate what happened to the First Republic of Silicon Valley, and you can accomplish all of that with completely rational and thoughtful regulations. That's what I would like to see them do. I don't know what's going to happen. You can read our -- I think our [MPRs] (ph) are public and stuff like that. And so, they should do that, just make a better system. We have the best in the world. We've kind of started to cripple it slowly. And if you don't -- I'd say, when you look at these rules and regulations, see Europe. If that's where we want to go, let's just go there.
Mike Mayo: One short follow-up. Just first quarter, you mentioned good credit, good trading, good [EPSB] (ph). I'm not sure anyone cares. They're worried more about the things we're talking about here. But in terms of the risk of being an international company, an international US company during trade wars, and I know JPMorgan is a firm that likes to partner with countries as well as communities and customers, so how do you think about that risk? How should we think about that risk? And hopefully, your voice is being heard to speed things along to whatever can be done getting it done because you could be in the crosshairs at some point. |
3,851 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Yeah. I honestly add that to the list of worries. We will be in the crosshairs. That's what's going to happen. And it's okay. We're deeply embedded in these other countries, people like us, but I do think some clients or some countries will feel differently about American banks, and we'll just have to deal with that.
Mike Mayo: All right. Thank you.
Operator: Thank you. Our next question comes from Glenn Schorr with Evercore. Your line is open.
Glenn Schorr: Hi. Just one follow-up on this whole risk management/regulatory front. I see, I hear and I agree flawed regulatory system could be better. We've had massive volatility. The market plumbing has held in okay so far and you and others have had borderline spectacular trading results. So, has something changed? Are you -- are the systems better? Are they better able to handle it as your risk management, your people, the diversity of your platform better? Or are there still environments where not all volatility is good? I'm just curious to get your big picture thoughts. Thanks. |
3,852 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: I mean, maybe I'll start with that one, Glenn. So, I guess I think that your points aren't mutually exclusive, meaning I mean, we're always continually improving the franchise. We've talked a lot about inward investment in all of our businesses, including Markets. And so, we try to be more complete and invest in technology and work more closely with our clients. So, I'm sure we're kind of better at it than we were five years ago as I think probably everyone is at the margin. I'm not sure that you can associate that with the current performance. I think these just happen to be very favorable conditions that we've managed very successfully. And to your point, I think your specific question of like, is there -- are there still forms of volatility that can be bad for the Markets franchise? The answer to that question is definitely yes. When you have gappy volatility with no trading volume, people paralyzed, clients unsure what to do, active managers struggling, those environments are bad. So, people make fun of the kind of good volatility/bad volatility story, but whether we like it or not, it's real. And in the end, we just have to manage the risks and serve the clients. And as I said earlier, we're happy to see that. |
3,853 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Jeremy -- I agree with Jeremy. I'd add to that. Volatility leads to bigger bid/ask spreads that, all things being equal, is better. And it leads sometimes to higher volumes, so you've seen really high volumes in FX and interest rate swaps and a whole bunch of different things, treasuries, that's better. But as Jeremy pointed out, sometimes that kind of volatility leads to very low volumes, like you're seeing in DCM today, when you don't have bond deals, when you have less trading, when you have -- so it will have lower volumes in certain markets and stuff like that. And how it all filters through is almost impossible to tell. But our folks do a great job, and we're here to help our clients. So, we know that volumes can go up or down and spreads go up or down and pretty bad. But the plumbing of the system, I would say, the plumbing worked well during COVID, too. I mean, it wasn't the plumbing that was a problem and it wasn't even a problem to go back to some of the real crises we've had. So -- but you're always worried about that kind of thing, make sure it stays true.
Jeremy Barnum: And I do think that the fact that the revenue performance in this quarter is good, shouldn't make us lose focus on the importance of the larger fixes around financial resource deployment by regulated banks to supporting the capital markets ecosystem. Everything Jamie has been talking about SLR, LCR, ILST, G-SIB, Basel thing, MRWA, the whole panoply of items, which interacts as we've often talked about and is miscalibrated. It will, at the margin, make it harder for banks to serve a stabilizing function in a difficult moment. So that remains quite important as a policy priority.
Glenn Schorr: That's a great point. Thanks for that. Appreciate it.
Jeremy Barnum: Thanks, Glenn.
Operator: Thank you. And our final question will go to the line of Saul Martinez with HSBC. You may proceed. |
3,854 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Thank you. And our final question will go to the line of Saul Martinez with HSBC. You may proceed.
Saul Martinez: Hey, good morning. Thanks for taking my question. Most of my questions have been asked and answered, but I guess I'll ask about costs since nobody has asked it. But I guess, how should we think about the cost structure and any sort of cost optimization efforts? If you do see a revenue slowdown, but not necessarily a severe downturn, I think you do have -- in the $95 billion guidance, you do have good amount of growth penciled in for investing in bankers and branches and tech and marketing. And I guess, do you -- does it make sense or under what conditions would it make sense for you to maybe pull back on some of these investments or do you think that's just completely short sighted unless we see a real significant downturn in the economy? |
3,855 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yeah. So, you've slightly answered your own question there, Saul, but it is nonetheless a good question. So, let me unpack it a little bit. So, the way I think about it is, there are some elements of the expense base, which automatically reset as a function of the business environment. So, we talk about those as volume and revenue related expense. And so, you will see those come down as a function of the environment. It's also true that there are conceivably certain investment business cases, which depending on how the environment changes, could no longer make sense analyzed in the same way that we analyzed them originally, i.e., through the lens of their ability to generate long-term shareholder value through a long investment cycle. And so, if, for whatever reason, the environment changes in such a way as to make certain of those investments less compelling, we would obviously adjust. Of course, the thing that we're not going to do is stop investing in things that we still think are very compelling through our traditional long-term investment lens simply for the purposes of achieving a cosmetic reduction in expenses in an environment where you may or may not have a reduction in revenues for unrelated reasons. As you well know, that's just not how we run the company. This quarter, as it happens, a question you might have is, how are you managing to keep your guidance the same with what you're saying about, for example, the Investment Banking outlook. But it's worth noting that Investment Banking performance this quarter was actually fine. As you know, markets performance was very strong. And there are also some ups and downs in there, I should note, including the fact that there is some sensitivity to the expense base to the strength of the dollar or weakness in this case. And while some of that is offset in revenue, it's a little noisy. So that's a factor as well. It's small, but I'm just highlighting that there's some slightly non-obvious things that are non-strategic of... |
3,856 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: As you said management thing, because I think it's very important. And I always talk about good expenses and bad expenses, and the good expenses of the bankers and branches that we think will pay off. And -- but there are also bad expenses, which I would put in the category of bureaucracy, lack of efficiency, things you don't need to do. And you can imagine -- if you go to -- if you read my Chairman's letter, the last section is called Management Learnings. And if you look at companies that over time fail, it's almost always bureaucracy, complacency, arrogance and lack of attention to detail. And so, there is -- we're making a -- I shouldn't say it, but I'm mad at myself for not doing it sooner to spend a little more time that after COVID, the buildup in headcount, the buildup in rules and regulations, the people working or not working from home. After all of those things, we just think there's more efficiency here. And I think some of the -- and Mike Mayo mentioned the thing about regulation. He is right. There will be reductions in cost because rules and regulations will be modified a little bit. I mean, we -- I pointed out resolution recovery, which is a complete waste of time, is 80,000 pages long, okay? It will never happen that way. CCAR, which is virtually a waste of time, is 20,000 pages long, okay? We report 1 trillion -- I think it's 1 trillion bits of data every day or something like that to the -- all the various regulators and stuff like that. There is this excessive cost built up that we -- that hopefully we can get rid of and reduce the cost of the system and -- but it's not new branches. So, the folks here are working on, we call, streamlining. Jenn Piepszak has got a war room going on it. We already have a significant amount of saves and stuff like that. So -- and we're having fun doing it. It's like -- to me, it's like exercising and eating your spinach. It's what we should be doing. We haven't done it for a while, so -- and I apologize to my shareholders for not having done this a |
3,857 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | what we should be doing. We haven't done it for a while, so -- and I apologize to my shareholders for not having done this a little bit sooner. |
3,858 | JPM | 1 | 2,025 | 2025-04-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Saul Martinez: Okay. That's very clear and very helpful. Thank you.
Jeremy Barnum: With that, thank you very much.
Jamie Dimon: Thank you. Talk with you next quarter.
Operator: Thank you all for participating in today's conference. You may disconnect at this time and have a great rest of your day. |
3,859 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | Operator: At this time, I'd like to welcome everyone to the Coca-Cola Company's Fourth Quarter and Full Year 2024 Earnings Results Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. [Operator Instructions] I would like to remind everyone that the purpose of this conference is to talk with investors, and therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's Media Relations department if they have any questions. I would now like to introduce Mr. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.
Robin Halpern: Good morning, and thank you for joining us. I'm here with James Quincey, our Chairman and Chief Executive Officer; and John Murphy, our President and Chief Financial Officer. We've posted schedules under financial information in the Investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under generally accepted accounting principles. You can also find schedules in the same section of our website that provide an analysis of our growth and operating margins. This call may contain forward-looking statements, including statements concerning long-term earnings objectives which should be considered in conjunction with cautionary statements contained in our earnings release and in the company's periodic SEC reports. [Operator Instructions] Now I will turn the call over to James. |
3,860 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Thanks, Robin, and good morning, everyone. We are pleased with our 2024 results, which include volume growth robust organic revenue growth and comparable gross and operating margin expansion. This led to a 7% comparable earnings per share growth despite nearly double-digit currency headwinds and the impact of bottler refranchising. These results reflect the continuation of delivering on our long-term commitment through our all-weather strategy, we've demonstrated we have agility to navigate what comes at us and continue to grow comparable [indiscernible] Given the strong momentum about this, we're confident we can deliver on our 2025 guidance and longer-term objectives. With that as context, I'll next provide perspective on our industry and review our business performance across our segments in the fourth quarter. Then I'll explain how we're executing our strategy by amplifying what is working and fine-tuning where needed. John will end by discussing our financial results in more detail and providing an overview of our 2025 guidance. One of our fundamental strengths is that we operate in a great industry with steady growth, no matter how you slice it by consumer, by customer, by beverage category, by geography we have vast opportunities ahead of us. During the quarter, we leveraged the power of our portfolio and the local expertise of our franchise system to capitalize on these opportunities. We overall share and had broad-based share gains across our global beverage categories. We're making progress across our total beverage portfolio delivering ongoing growth in sparkling soft drinks as well as momentum in other categories like value-added dairy and tea, which are reaching global scale while remaining tailored to local consumer need. And we're continuing to strengthen alignment across our system, and we believe our global franchise model, which operates locally is an advantage to drive long-term balanced growth. During the quarter, while our operating environment remained dynamic, consumer |
3,861 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | an advantage to drive long-term balanced growth. During the quarter, while our operating environment remained dynamic, consumer demand held up well and our industry remains strong. Starting in Asia Pacific. In Asian and South Pacific, we grew volume during the quarter and benefited from successful integrated marketing campaigns like food marks, which were activated in over 7,000 outlets and led to trademark Coca-Cola volume growth. Our system also drove affordability by increasing refillable offerings and focusing on attractive price points. Refillable offerings contributed to approximately 1/3 of [indiscernible] South Pacific volume growth in 2024. In China, despite continued macro headwinds, we grew volumes during the quarter and while early, we're seeing improved trends across our business. Trademark Coca-Cola continues to gain share and Sprite, Fanta and Minute Made each improved volume performance. Our system is stepping up integrated execution in 2024 by accelerating placement of cold drink equipment and activating integrated marketing campaigns in key channels. In Japan and South Korea, we grew volume during the quarter. Innovation was a strong contributor to growth, led by research [indiscernible] and a number of other brands. We're continuing to benefit from steady performance from Trademark Coca-Cola stepped up integrated execution in key channels. In India, our business rebounded nicely during the quarter, and we grew volume. We recruited consumers with innovative marketing campaigns that link Coca-Cola with music, [indiscernible] travel and Thums Up with movies. And Maza is now our 30th $ 1 billion brand. In 2024, our system added approximately 440,000 outlets to our digital customer platforms in India, which provides more opportunities to better tailor our product, price and packaging offerings. Moving on to EMEA. In Europe, volume declined during the quarter with mixed performance across Western and Eastern markets. Despite volume pressure, we grew both revenue and profit. We're engaging consumers |
3,862 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | across Western and Eastern markets. Despite volume pressure, we grew both revenue and profit. We're engaging consumers with experiential marketing campaigns like the world needs more Fantas for Trademark Coca-Cola and by linking our brands to new occasions like Sprite with spicy meals. Also, innovation velocities and multiyear innovation success rates both performed well in 2024. We're seeing good traction on Fuze Tea, Powerade Zero, Jack and Coke and Absolute and Sprite. In Eurasia and Middle East, despite a confluence of continued macro headwinds, we returned to volume growth during the quarter. We're emphasizing the localness of our business and seeing positive responses. For example, the made in made by campaign in Turkey led to strong volume growth for Trademark Coca-Cola. Fuze Tea also had good momentum across the region. [indiscernible] driving affordability and stepping up integrated execution by increasing cooler placement and share of visible inventory during the year. In Africa, volume declined during the quarter driven primarily by pressure in North Africa and Nigeria and partially offset by strong volume momentum in South Africa. We took acts during the quarter by adjusting our pack price architecture to further drive our ability. Our system is investing for the long term, adding refillable offerings, placing more cold drink equipment and increasing manufacturing capacity in 2024. In Latin America, despite some macroeconomic pressures, we grew volume revenue and profit during the quarter. We drove trial and recruited weekly plus drinkers for trademark Coca-Cola in 2024 by better linking the brand to the meal occasion. Also, to drive [indiscernible] top line growth our system focused on increasing single-serve offerings. Over 90% of our fragmented trade customers are now on our systems digital customer platforms, allowing for greater opportunity to tailor offerings to customers' individual needs. Lastly, in North America, we grew both transactions and volume and had robust top line and profit growth |
3,863 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | individual needs. Lastly, in North America, we grew both transactions and volume and had robust top line and profit growth during the quarter. Trademark Coca-Cola and fairlife remain leaders in at-home retail sales growth. Sparkling flavors gained share in the quarter due to successful limited time innovations like Bright, Winter Spice cranberry and Fanta juice and stepped up integrated execution focused on increased point-of-sale messaging and increased share of visible inventory. Consumers responded well to value messaging in away-from-home channels and we increased distribution of key affordable and premium offerings and benefited from product, package and channel mix in the quarter. To sum everything up, we have good momentum in our business. We're responding to market dynamics locally to execute on our global objectives. While we're delivering on our near-term commitments, we're also investing to improve execution build capabilities and get more granular across our strategic growth flywheel. Our network marketing model is integrating product, digital, live and retail experiences and we are harnessing passion points to connect with consumers in more personalized ways. One great example, Fanta Halloween was our first ever global Halloween activation, and we scaled to nearly 50 markets. Partnering with Warner Brothers Pictures, we've created a limited time plantable juice [indiscernible] apple flavor. Consumers can packages to access personalized experiences and we replicated the bet juice after life train taking over train stations, trams and metros. The campaign was activated in store with our largest customers and contributed to sparkling flavors share gain during the quarter. Our culture increasingly emphasizes acting boldly, learning and scaling successes. This year, for the first time, our Coca-Cola Christmas was created with [indiscernible] Combining emerging technology with human creativity, which allowed us to produce the ad faster and at a lower cost. The power of emerging technologies like |
3,864 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | with human creativity, which allowed us to produce the ad faster and at a lower cost. The power of emerging technologies like generative AI are still at early stages and we will continue to lead and iterate our approach. We're seeing tangible results from our marketing transformation. Over the past 3 years, Trademark Coca-Cola's retail sales have increased approximately $40 billion. According to Time's Magazine, Coca-Cola, Minute Made and fairlife were named world's best brands in their respective beverage categories in 2024. While we're building capabilities in marketing, also focusing on innovation that prioritizes bigger and bolder bets. Each of our innovations have a clear objectives. Sometimes, we innovate to create a short-term buzz like Coke and Oreo or Sprite Winter Spice cranberry. In other instances, we innovate for lasting impact. This year, we focused on sustaining investments behind key innovations to improve multiyear success rates and drive greater impact. This is paying off as Fuze Tea grew retail value 3x faster than the category. Topo Chico supporters continued its momentum and Minute Maid Zero Sugar realized strong growth. In 2024, innovation contributed strongly to revenue growth and our innovation success were improved for the prior year. We're excited about our innovation pipeline for 2025. Moving across our top line flywheel. Our system is investing heavily in digital capabilities and sticking to the fundamentals of commercial excellence to accelerate consumer recruitment, increase consumption and win in the market. Ensuring product availability is one of our systems greatest strengths, yet we still have tremendous opportunity. While our system improved share of visible inventory in 2024 and our brands are found in 33 million outlets, there remains ample headroom to increase outlet coverage, reduce out of stock and better tail our offerings with the right placements. Basket incidence is another opportunity. Winning just 1 point of global beverage incidence translates into over $40 billion |
3,865 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | Basket incidence is another opportunity. Winning just 1 point of global beverage incidence translates into over $40 billion in additional retail sales. To drive basket incidence, our system is focused on better activating integrated marketing campaigns in key channels, increasing point-of-sale displays and winning impulse zones outside the traditional beverage aisle. Final cold drink equipment is one of the strongest consumption drivers in our systems toolbox with approximately 14 million units of cold drink equipment present in our approximately 33 million customer outlets, we have significant opportunity to drive consumption by placing more cold drink equipment. In 2024, our system invested to add nearly 600,000 coolers. Strong commercial execution is enabled by our revenue growth management capabilities, which fuel both top line growth and margin expansion. We're driving affordability and premiumization across our total beverage portfolio. The strong elasticities we're realizing today are a testament to the progress we're making in this area. By focusing on availability, basket incidents and cold drink equipment, coupled with great marketing, innovation and revenue growth management, our system recruited weekly [indiscernible], grew volume and won share in 2024. While we made steady progress executing our all-weather strategy in 2024, we're operating with the mindset that we're only just getting started. As we turn the page to 2025, we anticipate the year will bring both opportunities and challenges. We expect the external environment will be dynamic. Several underpinnings remain constant: One, we operate in a great industry; two, we have many opportunities available to us, and we are primed to capture these and deliver sustained performance; three, our powerful portfolio of brands pervasive distribution system and the unwavering dedication of our system employees are clear advantages. Next Tuesday, at CAGNY, I look forward to sharing more about how we're leading to deliver results in all types of backdrops |
3,866 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | Next Tuesday, at CAGNY, I look forward to sharing more about how we're leading to deliver results in all types of backdrops and I encourage everyone to listen. With that, I'll turn the call over to John. |
3,867 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: Thank you, James, and good morning, everyone. We closed the year with strong fourth quarter results. And as James said earlier, we delivered 7% comparable earnings per share growth in 2024 on top of 6% average comparable earnings per share growth over the prior 5 years. During the fourth quarter, we grew organic revenues 14%. Unit case growth was 2%, which is in line with our multiyear trend. Concentrate sales grew 3 points ahead of unit cases driven primarily by 2 additional days in the quarter and the timing of concentrate shipments. Our price/mix growth of 9% was driven by two items: Approximately 8 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations and approximately one point of favorable mix. Excluding the impact of intense inflationary pricing, organic revenue growth was above our long-term growth algorithm. Comparable gross margin was up approximately 160 basis points and comparable operating margin was up approximately 80 basis points. Bottlers refranchising had a greater benefit to comparable gross margin and currency headwinds had a larger impact to comparable operating margin. [indiscernible] altogether, fourth quarter comparable EPS of $0.55 was up 12% year-over-year despite 11% currency headwinds and 4% headwinds from bottlers refranchising. [Audio Gap] In 2024, adjusted free cash flow conversion was 93%, which is within our long-term targeted range. [Audio Gap] at the high end of our long-term growth algorithm. We continue to focus on driving balanced volume and price/mix and anticipate intense inflationary pricing will play a smaller role in 2025 and will moderate throughout the year. Our refranchise is expected to be a slight headwind to comparable net revenues and comparable earnings per share as we cycle the impact of bottler refranchising in 2024. We'll continue to invest appropriately behind our brands while also driving productivity across all areas |
3,868 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | in 2024. We'll continue to invest appropriately behind our brands while also driving productivity across all areas of marketing. Next week at CAGNY, we'll discuss further our marketing transformation and enhanced resource allocation capabilities give us confidence in our ability to continue to drive more productivity we expect expense to be elevated versus prior year. We believe the step-up is manageable, and we're not expecting significant leverage or deleverage below the line. Based on current rates and our hedge positions, we anticipate an approximate 3- to 4-point currency headwind to comparable net revenues and an approximate 6 to 7-point currency headwind to comparable earnings per share for full year 2025. Our underlying effective tax rate for 2025 is expected to increase to 20.8% and which is driven primarily by the impact of several countries enacting the global minimum tax regulations. All in, we expect comparable earnings per share growth of 2% to 3% and versus $2.88 in 2024. Excluding the fair life contingent consideration payment, we expect to generate approximately $9.5 billion of free cash flow in 2025 through approximately $11.7 billion in cash from operations, less approximately $2.2 billion in capital investments. Included in this guidance are 2 items to highlight: One, a $1.2 billion transition tax payment, an increase of approximately $240 million versus 2024. This is the final year that we will make a payment related to the Tax Cuts and Jobs Act of 2017. Number two, we expect that part of the timing of working capital initiatives that benefited 2024 free cash flow will reverse and impact 2025 free cash flow. Driven by our underlying cash flow generation, we have flexibility to invest in our business and return capital to shareowners. A significant portion of our expected capital investment is to build capacity for fairlife and to continue to invest in our system in India and Africa. With respect to acquisitions and divestitures, we're making good progress on our agenda. Since 2006, we've |
3,869 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | in India and Africa. With respect to acquisitions and divestitures, we're making good progress on our agenda. Since 2006, we've added $9 billion brands via acquisition. Importantly, only 3 of these brands were $1 billion-dollar brands at the time of acquisition, demonstrating progress in scaling acquisitions. In 2024, we realized $3.5 billion in gross proceeds from refranchising bottling investments as a percent of consolidated net revenue is 13%, down from 52% in 2015. Return on invested capital is up 6 points at the same time. Related to capital return, we have an unwavering priority to grow our dividend as we've done for 62 consecutive years. Our dividend is supported by our long-term free cash flow generation. In 2024, dividends paid [indiscernible] as a percent, our adjusted free cash flow was 73%. On share repurchases, we've typically repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritizes agility and we're committed to driving the long-term health of our business and creating value for our stakeholders. There are some considerations to keep in mind for 2025. We expect bottler refranchising to have a greater impact to comparable net revenues and comparable earnings per share during the first quarter as we cycle the impact of refranchising the Philippines, which closed during the first quarter of 2024. We expect the productivity benefits that I previously discussed to have a larger impact during the latter half of 2025. Due to our reporting calendar, there will be 2 less days in the first quarter and 1 additional day in the fourth quarter. So in summary, we're successfully executing our all-weather strategy to deliver on our objectives. Our system remains incredibly focused and motivated. We will continue to invest with discipline and believe we're well positioned to drive quality top line growth and deliver continued margin expansion. A hallmark of our company since its inception has been our ability to create |
3,870 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | growth and deliver continued margin expansion. A hallmark of our company since its inception has been our ability to create enduring value over time, and we expect to continue to do so. With that, operator, we are ready to take questions. |
3,871 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | Operator: [Operator Instructions] Our first question comes from Lauren Lieberman from Barclays.
Lauren Lieberman: The business seemed to buck the trend that we've seen from many other staples companies between strong 4Q results and the conviction in upper end of the sales algorithm for 2025. So I'd just be curious to hear more from you about your perspective about the consumer environment globally, particularly in developed markets where U.S. sentiment has been so mixed. Western Europe, there have been some flags on certain markets lagging. So curious your kind of global perspective on the consumer environment. |
3,872 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Sure. Lauren. I think the overall consumer environment is pretty stable in the sense that there's good economic growth on a broad-based view around the world, and that includes both the developed and the emerging markets. If I look at the developed markets, whilst it is absolutely true that the lower income segments in the U.S. and perhaps even more notably in Europe and Western Europe are under disposable income pressure and have been in '24, and quite possibly will continue for some part of '25, the rest of the consumer base is actually still gaining in terms of disposable income and is spending. Maybe spending a little more in the U.S., North America than Western Europe, where there was more direction to saving, but a pretty strong sustained demand level across the developed world. And similarly, in the emerging markets, yes, it's a little more volatile in ups and downs. But in aggregate, again, you see pretty robust or enduring consumer demand. In the quarter, we saw India rebound. We saw China get a bit better. The Middle East got a bit better, they're still doing pretty well in Latin America, a little softer, perhaps in Africa. But overall, we see continued robustness and grow across consumers that we need to respond to with all the strategies that we have. It's not going to be a one size fits all. We need to focus on delivering for them with the marketing and the innovation and the execution and particularly the affordability and premiumization. So the demand is there. And I think what you see in the fourth quarter has been our ability to focus on what we have to do to get a good result for the company. And that's what we're confident in continuing for 2025.
Operator: Our next question comes from Dara Mohsenian Morgan Stanley. |
3,873 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Dara Mohsenian Morgan Stanley.
Dara Mohsenian: So just on that 5% organic revenue growth forecast for 2025, can you just give us a bit more granularity on the balance volume that you see as well as price and mix? And just wanted to focus on your plans on the pricing component in 2025. You mentioned there's some stress on low-end consumer in a few markets after inflation in recent years. But clearly, with your Q4 results, there seems to be handling pricing from Coke well. There's also FX pressure. So there's just a number of volatile external circumstances. Just how does that impact how you manage pricing in 2025 and how that might be different than a typical year, either on the pricing or the mix front? |
3,874 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Look, I think let's start from the top level down on '25. Our long-term algorithm we called out, we want to be at the top end, so 5 to 6 and expect in the long term a balance between volume and price, so I'd say 2 to 3 of each. It seems more likely in '25, there'll be a little more price and a little less volume but there will be volume growth and obviously, there will be price growth. But perhaps a little weighted a little more to price than volume than a long-term year, but still solid continued volume momentum, which has been an enduring feature of what we have pursued over the last number of years, which is not just keeping people in our franchise, but growing our franchise for the long term. And so that's the headline of what we expect to see. And I would say like if you take 2024, where you've got a kind of a headline price/mix of about 10%, half of that is from these high-inflation countries, which we expect to largely drop out in 2025. Another way of thinking of it is really ex high inflation, you had about 5% price mix in 2024. And you're going to see that continue to moderate as inflation has moderated down to a kind of a slightly lower number in 2025 and largely the dropout of these high-inflation countries in 2025, if that helped give you a factor. And so we feel we've got a level of actual pricing in the marketplace that is proportionate and reasonable relative to inflation and relative to what we can support through the actions we're taking across the whole flywheel from the marketing, the innovation, the execution through affordability and premiumization and all the commercial execution.
Operator: Our next question comes from Bryan Spillane from Bank of America. |
3,875 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Bryan Spillane from Bank of America.
Bryan Spillane: Maybe just to pick up on Dara's question. Maybe John, can you -- and James, can you give us just two perspectives. One, as we think about the organic sales growth for 2025, just given some of the -- I guess, some of the moving parts we saw in 4Q, just how should we kind of think about it from a phasing perspective? Does the -- I guess this is the pricing from some of the emerging markets or inflationary countries kind of fade as we move through the year. So that's the first one. And the second, maybe if you could also just give us a context of 5% to 6% organic sales growth and how that stands against kind of industry growth? If you can give us some perspective on kind of what the exit rate was for the industry and maybe what you're thinking about for next year? And then just last one, I forgot -- I should have called this out last time, but the hold music is amazing. It was a real nice change. And I just want to make sure that, that gets recognized. Robin doing her job.
John Murphy: Thanks, Bryan. Well, I'm glad the last comment was not a question. On the guidance for the -- I'm not going to get into a lot of commentary inside the quarter. We do have 2 less days in the quarter, coming out of '24 decent momentum going into it. On the pricing front, some inflation in -- from the more intense markets in Q1, which we expect to moderate throughout the year. And on the volume phasing itself, I think we're looking at -- there's a Q2, I think, is probably the more challenging uphill of the quarters ahead. On -- as I say, on the intense inflationary markets that we've highlighted in '24, as James said, affecting the headline numbers, we see that moderating throughout the year. |
3,876 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes, on the industry growth, if I I mean clearly, we are planning to and expect and aim to gain share. So to the extent that we end up growing 5% to 6%, then that is based on the idea that the industry is growing at a more normalized level. If you look at the long-term growth rate of the industry, you tend to get a 4 or a 5. So we are absolutely expecting the industry growth rate towards a model, which is kind of what was happening in Q4, the underlying rate, if you take out the high-inflation countries is kind of 6 or 7 in the fourth quarter, and we were gaining share. It's very consistent with this idea we've been talking about, which is [indiscernible] moderates we see a normalization of both the industry growth and our growth rate with us being the long-term winner in the industry with ongoing robust industry growth.
Operator: Our next question comes from Steve Powers from Deutsche Bank.
Stephen Robert Powers: I guess moving down the income statement. Your outlook seems to imply some pretty strong underlying margin and profitability progress just net of the FX pressures and the higher tax rate. So could you talk about some of the key drivers there? And then, I guess, similar to Brian's question, any timing considerations we should keep in mind over the course of the year beyond just the number of days in each fiscal quarter. |
3,877 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Sure. Maybe I'll start and then John will weigh in on some of these considerations. Firstly, yes, there is some implied margin expansion in 2025, coming from some of the marketing expenditure and some of the SG&A. This is the culmination of many of the programs we've been putting in place over the last number of years to continue not just to get effectiveness but to get efficiency. And the simplest example is the marketing transformation where it is helping us continue -- take the Christmas out in Q4 last year, which we made with generative AI as a small example, it was both quicker and cheaper to make the ad. And so what you're seeing come in to 2025 is some of the fruition of work that's been going on across the organization, including the marketing transformation that is producing some productivity in 2025. It's important to say that we are not backing off our bias to investor growth. This is not less marketing, this is more productive spend. And so our old operations going into the year will continue to be. We believe that will be growth in 2025 in the industry. We are going to invest from the marketing all the way down through the system into the commercial levers in order to continue to drive growth. As we find pluses and minuses around the world, of course, we will adapt and be flexible, but this is about leaning into growth, continuing to invest to drive the franchise and being able to capture some of the benefits of the transformational work that's been going on over a number of years. John, do you want to add some considerations? |
3,878 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: Sure. Let me go off a little bit and talk about gross margin. Steve, so I can provide some additional commentary. We're not building an enormous amount of expansion on the gross margin front into our guidance we do expect to continue to have some underlying expansion. But as you alluded to the FX, that's largely maybe offset by currency. It's anticipated for '25, there's quite a lot of moving parts inside of the gross margin equation. So we've -- as I said, we've not for guidance purposes built in an enormous amount of expansion. Commodities will be in the low singles range overall, some pressures on the agricultural particularly juice and coffee that are a big part of our base. We have the usual set of levers that will deploy to cover those. But for -- as I said, for guidance purposes, you can assume modest expansion at the gross margin line. And as Jim said, we've been anticipating for quite some time, the; 25 environment and the sort of the more for same, more for less mantra is certainly alive and well.
Operator: Next question comes from Filippo Falorni from Citi.
Filippo Falorni: I wanted to ask you your thoughts on just the global trade environment, obviously, with tariff coming more into play here. It seems your supply chain is largely localized in most countries. But can you talk about some exposures in terms of import to export? And also just the secondary impact on commodities. I know a lot of it is on your bold system, but just thoughts on the recent tariffs also on aluminum and steel. |
3,879 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Clearly, there's -- it's a dynamic macro environment out there. As as commodities change for whatever reason, up or down, obviously, we -- our number one objective is to look at how we mitigate through that. And whether it's the recent aluminum tariffs or any other tariff based or frankly, weather-based or any other variation in the input commodities, we do a number of things. One, we have hedging programs in place that look to assure supply and price going out. Secondly, as the relative prices of different sources of ingredients, and imports change, of course, we look at mitigation, productivity, efficiency, adjusting where we get our materials from. All of that goes into the equation to constantly manage how this goes through. Net-net, as John just mentioned, we have -- we are expecting more variation in agricultural than industrials, notwithstanding recent actions, we will manage through it. As you said, we are predominantly a local business when it comes to making each of the beverages. The vast majority of everything that's consumed in the U.S. is made in the U.S. Similarly, we've merged every country around the world. And so while it's a global business, it's very local. So yes, every bottler will be importing something from somewhere as a piece of the puzzle, but the economics are more predominantly local than they are global. And so it's a piece of the puzzle we need to manage through. As John said, we have that, we believe, on the under control from a point of view of sustaining gross margin. No doubt the environment will continue to be dynamic, but we will continue to manage and mitigate and adjust and be agile and flexible our way through the year. |
3,880 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: And just one additional comment. Your supply chain continuity continues to be, I think for many industries, an ongoing challenge for a variety of reasons. '24 was no stranger to that. And our cross-enterprise procurement team are managing a vast network and in addition to the economics, just making sure that we can continue to supply our markets around the world consistently is a key priority. And and an important advantage, I think, to enjoy as well in the many markets that we're in.
Operator: Our next question comes from Bonnie Herzog from Goldman Sachs.
Bonnie Herzog: All right. I guess thinking about the new administration and some potential regulatory changes, what percentage of your domestic portfolio might be subject to potential changes? And then, James, how quickly can you pivot or adapt your portfolio if some of these changes are implemented. And then I'll ask it since it's become more topical again lately, but how are you thinking about potential impacts on consumption from GLP-1 drugs. Have you seen any impact? And has your thinking on this potential headwind changed in terms of year-over-year strategy, innovation, et cetera. |
3,881 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Well, Bonnie, I'm tempted to start with the answer to the first question by saying you win the prize for the Vegas question so far this year with that what might happen subject to changes. There are many things that could happen out there in the world. And of course, we do scenario planning on regulations, on economics and all sorts of things, and we will adapt as and when they come. More specifically on the GLP-1s as we've commented on previous calls, we continue to see anecdotal evidence of the impact of GLP-1s on consumption of food and beverages. So far, our take is it's not a big aggregate factor for the beverage industry or the nonalcoholic beverage industry witness the volume for our sales was up 1% in the fourth quarter in North America. So we continue to see pretty sustained momentum in North America. There is anecdotal evidence that people consume slightly less alcohol perhaps, and they do some switching in nonalcoholic beverages. But overall, we're seeing sustained momentum, and we are a total beverage company. So we believe whether it's GLP-1 drugs or changes and adaptations to regulation ingredients, our objective is to have the biggest possible toolbox of ingredients of super high quality and safety, which we use to make a total beverage portfolio that works for consumers. And we believe we can adapt to anything that comes at us.
Operator: Our next question comes from Kaumil Gajrawala from Jefferies.
Kaumil Gajrawala: John, you laid out a long list of very substantial cash payments that have been made this year -- last year, almost all of which will be behind you very soon. So can you maybe just talk about how you think about cash or capital allocation when you're on the other side of it, whether it be buybacks, whether it be more aggressive around M&A. The magnitude of the change of the amount of cash you'll have on hand next year versus this year, so substantial. I'd like to see how you might think about it differently. |
3,882 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: Let me maybe answer that in two parts. First of all, the I don't foresee a substantial change in our focus to support the underlying business and the momentum that, that has. And secondly, as we just talked about in our guidance, we will continue to support the dividend. So those two areas, you can assume will remain top priorities. As we get into '26, it's a little early to anticipate exactly what '26 will deliver for us. But as you said, clearly, we -- the transition tax will be in the rearview mirror. Some of the M&A payments likewise. And it will give us the opportunity to take a closer look as the M&A and the share repurchase agenda. So I think it's premature to get too specific on what '26 might bring for us. But I'm looking forward actually to having to deal with that challenge in the next year or so. We also have, as you are well aware, we also have a keen focus on the overall health of the balance sheet, and we'll take into account the puts and takes on that. We continue to have the tax case in the next couple of years to deal with. So the name of the game for me is to it would be to have more to manage in a flexible manner some of the opportunities that may present themselves.
Operator: Our next question comes from Rob Ottenstein from Evercore ISI.
Robert Ottenstein: So Walmart has created now, I guess, what you call the modern soda shelves. And I'd love to get your thoughts on that category, broadly speaking. Is this something that is a fad in your view? Or is this something that represents some kind of departure and is just very responsive to consumer needs? Is it something like Fairlife, where you just have a better product how do you play in the so-called modern soda area that Walmart seems to at least have some confidence in? |
3,883 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes, look, it's great news that people are innovating and willing to create new brands and dedicate more shelf space to the beverage industry, which is, I think, goals for the whole idea is a vibrant industry with also growth. So that first one. Secondly, we -- our total beverage company, we look to compete everywhere we see enduring consumer demand and traction, including some of the stuff that goes here. Look, in the end, these are solder beverages that are great tasting. That's the central idea. And I think to the extent that saying, we'll take a really hard look at it. But I think the most important thing to take from this is the confidence in the overall industry of beverages to continue to grow. And as John alluded to, and we'll talk more at CAGNY, when you look at the track record of the Coca-Cola Company in terms of creating organically and scaling small bolt-on M&A into billion-dollar brands, we are by far and away the clear leaders in the industry and the winners.
Operator: Our next question comes from Chris Carey from Wells Fargo.
Christopher Carey: James, you mentioned agricultural commodities. You also, I think, said something to the effect of industrial commodities are perhaps moving a bit less, but you're watching developments. I'm assuming you're speaking to aluminum. Can you just maybe provide some context, number one, on how incremental moves in aluminum might impact your cost per case outlook, number one. And just related, there's this element of the system will need to respond to incremental inflation from aluminum. Can you just talk about comfort that affordability and volume durability will not be impacted if the system needs to respond to climbing inflation. So it's a little bit of a 2-part question and the impact to the model but also a bit forward looking and what may be required to protect the model and the impact on the consumer in the coming months. |
3,884 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Yes, sure. I mean, Firstly, this is predominantly an impact in the North American or in the U.S. business with, let's say, the North American business, which is obviously a piece of the puzzle. So from a total company perspective, bear in mind this is over just 1 of the 4 segments largely speaking, as we sit here today. And of course, as it relates to our strategies, around ensuring affordability and ensuring consumer demand. If one package suffers increase in input costs, we continue to have other packaging offerings that will allow us to compete in the affordability space. So for example, if aluminum cans become more expensive, we can put more emphasis on PET bottles, et cetera, et cetera. So we will adapt the packaging strategy in function of change in the relative input costs of what goes into that. So that is part of the total adaptation plan that we use around the world. So I don't believe if part of the question in the second half is, do you think this is going to fundamentally undermine the ability of the system to do well in volume in 2025? The short answer is no. I think we control enough variables that we can adapt and mitigate our way through what is happening because it's a combination of hedging, which we use on the key materials. It's an opportunity to to do mix management between different packaging materials. And of course, we're going to look at where the supply is from because it's all about relative pricing. To the extent relative pricing changes, we can seek to adapt. And so I think this is mitigatable and manageable and 1 of the dynamic elements of 2025 that I think we came through.
Operator: Our next question comes from Andrea Teixeira from JPMorgan. |
3,885 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Andrea Teixeira from JPMorgan.
Andrea Teixeira: I have a question on Mexico and then a follow-up on mix. On Mexico, you have obviously managed cycles, regulation tax as well and arguably, you count on one of the best bottling partners there. But can you comment on the playbook? And if you're embedding a deceleration in volumes there? And can you talk about the potential risk of recession or -- or would we met this is at a stronger dollar, meaning obviously, more business to their pockets, partially offsetting the slowdown? And then on the second point, you both spend a fair amount of time discussing the accelerating innovation results, which are remarkable. On the strong delivery in North America, I believe you posted like 12% growth in price mix, how much is that driven by Fair Life or away from home recovery? And should we expect that comparison to lead to a deceleration there? Or you still see a lot of potential for [indiscernible] distribution and potentially better execution on on-premise ahead? |
3,886 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Wow. Okay. That's a lot of questions in there. Let me try and pack it into two. North American pricing, about half of the North American pricing that you see in Q4 is mix. And therefore, you can basically kind of park that relative to 2025. And so and it's not just fairlife. But if you just take half of that and call that price mix, that is going to continue to moderate as you go into 2025 in the North American sense and the mix will also moderate in 2025. We'll continue to grow fairlife in 2025, but we are -- given the runaway success of the products, we are reaching the need to get the New York factory that we've been building up and running in order to continue unconstrained growth. So we will see some moderation of the fairlife growth in '25, which will obviously then moderate the mix. So much more normalization of U.S. price/mix in 2025. And then Mexico, I mean, unpacking the Mexican playbook is a longer conversation, but I think is a play where par excellence, we have had a dedicated and consistent execution of the play -- the overall playbook, whether it's [ great ] quality marketing, great quality innovation, great quality execution, great quality RGM. So pricing options. I mean the one place you can go and find a package at almost every price point is Mexico. It's one of the broadest beverage portfolios in the world in terms of covering off all the categories. So it's been a long-term dedication by the system in Mexico to build the total beverage company with a product and a package and a price point for everyone, everywhere. And of course, we commented just on the peso we did call out FX headwinds in 2025, but they have taken on a different nature that we're not expecting large impacts to come from the intense inflation countries we're expecting the house headwinds that come from some of the more normal, let's say, emerging markets like Mexico, and that's part of the headwind you see on the peso conversion to the U.S. dollar for 2025. |
3,887 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Peter Grom from UBS.
Peter Grom: So James, I was hoping to follow up on your response to Dara's question. And I apologize if I misheard this, but I think you mentioned organic growth to be a bit more weighted to price relative to volume, which isn't entirely surprising. And not to get too granular, but I wasn't sure if you were implying that you were expecting volume growth to kind of fall short of the 2% to 3% growth we typically see or just at the lower end of that range. And I'd just ask that in the kind of 2% unit case volume growth hitting the year. You touched on a lot of these more challenged markets getting better in the quarter. So it would seem that you have some pretty nice momentum exiting the year and 4Q exit rate would be a good place to start. But I'm not sure if there's maybe some offsets or areas of concern that we might not be thinking about.
James Quincey: Yes. Peter, yes, I think you've got what I said to Dara correctly. Yes, I mean, if you just take 2024, we did 2% in the fourth quarter. We did 1% overall for the year. So yes, I mean, what I was saying is implying we're at [ 2, 1 2 ] kind of floating around that sort of range with a compensating factor on the pricing side. So we still get we still get up into the 5% to 6% range. So I think you've got it clearly. And I think -- also, I think John made a comment earlier in terms of the time during the year that is clearly going to be a tougher cycling quarter. But overall for the year, we feel we're coming in with momentum. There are a decent number of unknowns and a dynamic environment '25. We believe we can manage through. And from a volume perspective, I think I like to think it's going to be a little better than '24 overall, but it's in that sort of ballpark.
Operator: Our next question comes from Charli.e. Higgs from Redburn Atlantic. |
3,888 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Charli.e. Higgs from Redburn Atlantic.
Charlie Higgs: I've got a question on India, please, which had a good 2024. And more broadly, it's been a great market for you over the past few years. I saw in Q4 that you refranchised 40% to a local partner. And I was just wondering if you could comment on that and what attributes that local partner brings that perhaps could even accelerate the engine business to the next level?
John Murphy: I just came back from a trip to India. So maybe I'll take this one. The refranchising program that we've had in place continues to move ahead. And India is no different to other parts of the world. We look for a certain profile of partner. Those are ambitious as we are to capture the opportunity, we have the capital who have the ability to build capability over time. And we believe that our new partner there ticks the box very handsomely on all of these attributes. So you can just think of it as another chapter in the refranchising program, not just for India but for those remaining in our portfolio. And the Indian market has got a tremendous amount of runway ahead. The environment there is is pretty vibrant tremendous competitive set. And we believe that the Jubilant group coming in is going to add tremendously to our abilities to continue to step change our execution in the marketplace. And as we continue to work on the refranchising program will advise in the coming months and into next year as to how that shapes out.
Operator: Our next question comes from Bill Chappell from Truist Securities. |
3,889 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | Operator: Our next question comes from Bill Chappell from Truist Securities.
William Chappell: I just want to follow up on kind of the commentary on the hyperinflation environment, you're kind of comment of moderating. And I understand it's moderating, but I believe the pricing -- a lot of the pricing you took was kind of more in the second half, so that will carry through. I don't think you -- these countries have really slowed down in their inflationary environment. So are you saying that you're kind of done with pricing there and -- or that you would be taking price cuts. So I'm -- it seems like I understand you have a general guidance for this year, but it seems like the hyperinflation environment, there's not a real reason for them to moderate, but so much at least for the next couple of quarters. |
3,890 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Bill, yes, absolutely not taking the foot off the pedal in terms of passing through where we have a lot of input costs coming in. So it's not that we are not going to be passing through the input costs in those marketplaces. There are -- it was very concentrated these high inflationary countries, and there has been inflationary moderation. I mean if you look at Argentina for the for the sake of the single dealer example, the monthly inflation rate has dropped markedly through 2024. I think it's down to a few percent a month now or 4% a month. So you definitely see a moderation. Yes, you're right that in a sense, you'll see more of it in the first half and the first quarter than you will in the back end of the year. but inflation has definitively dropped in a lot of these countries because it was very concentrated in a handful Argentina, a couple of the African countries and Turkey. And so the inflation has come down. There's -- but we will continue. If it doesn't moderate, if there's other countries that fall into this category, because its input costs go up, we will pass those through in price. Even though we look to execute all our affordability strategies, we have to pass through the costs in those sorts of environments because it's just too overwhelming.
Operator: [indiscernible] question comes from Robert Moskow from TD Cowen.
Robert Moskow: I wanted to maybe push a little bit more on your commentary that you can -- you change your mix of packaging to react to aluminum tariffs or higher aluminum costs. Is there any way to kind of delineate this, like how much of a mix shift is necessary to go more toward plastic, less towards aluminum cans in the event of a sharp increase in can cost. It may not be a fair question, but is a 1% change in mix big enough to really influence the cost structure? Or does it have to be something much bigger than that? |
3,891 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Look, I think we're in danger of exaggerating the impact of the 25% increase in the aluminum price relative to the total system. It's not insignificant, but it's not going to radically change a multibillion dollar U.S. business. And packaging is only -- is a small component of the total cost structure. So firstly, it's not a multimillion dollar -- billion dollar problem relative to the input cost. It's a much more manageable number. And so between mitigation of supply chain, sourcing, weights of the cans, price increase of the cans at some level potentially switch to the [indiscernible]. It's a manageable problem in the context of the total U.S. business. And I don't think we should -- you should not conclude that this is some huge swing factor in the U.S. business. It's a cost. It will have to be managed. It would be better not to have it [indiscernible] the U.S. business, but we are going to [indiscernible].
Operator: Our next question comes from Michael Lavery from Piper Sandler.
Michael Lavery: Just wanted to unpack Asia Pacific a little bit more. you had price mix down there partially offset by some pricing. But in the full year market share commentary, which I know is a little bit apples and oranges, South Korea and Japan grew or gained share and then Indonesia and Bangladesh declined or lost share that would seem like a positive for mix. So maybe how do you reconcile those? What are some of the moving parts? And just help us understand that a little bit better. |
3,892 | KO | 4 | 2,024 | 2025-02-11 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Sure. I think the biggest factor here in Asia Pacific in Q4 is what we're cycling last year. So I would encourage you, as you look at Asia is true overall, but Asia Pacific, in particular, for the reasons you called out, you've got some very developed markets like Japan and Australia and some very emerging markets like Bangladesh and Indonesia. And their relative volume performances can make a big difference to mix. So what you're seeing is a base effect from 2023 coming over, but I would encourage any analysis of price mix in Asia Pacific to be multi-quarter because it's just very choppy for the very reasons you just called out. Perfect. Thanks very much, everyone. To summarize, we are winning in the marketplace. We're going to continue to maintain our agility and focus on getting better on everything we do. We believe we are well positioned to deliver on our 2025 guidance and create value for our stakeholders over the long term. We look forward to discussing more next week at CAGNY. Thanks for your interest, the investment in our company and for joining us this morning. Thank you very much, everyone.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. |
3,893 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Operator: At this time, I’d like to welcome everyone to The Coca-Cola Company’s Third Quarter 2024 Earnings Results Conference Call. Today’s call is being recorded. [Operator Instructions] I would like to remind everyone that the purpose of this conference is to talk with investors and, therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola’s Media Relations department if they have any questions. I would now like to introduce Ms. Robin Halpern, Vice President and Head of Investor Relations. Ms. Halpern, you may now begin.
Robin Halpern: Good morning, and thank you for joining us. I am here with James Quincey, our Chairman and Chief Executive Officer; and John Murphy, our President and Chief Financial Officer. We’ve posted schedules under Financial Information in the Investors section of our company website. These reconcile certain non-GAAP financial measures that may be referred to this morning to results as reported under generally accepted accounting principles. You can also find schedules in the same section of our website that provide analysis of our growth and operating margins. This call may contain forward-looking statements, including statements concerning long-term earnings objectives, which should be considered in conjunction with cautionary statements contained in our earnings release and in the company’s periodic SEC reports. Following prepared remarks, we will take your questions. Please limit yourself to one question. Reenter the queue to ask any follow-ups. Now, I will turn the call over to James. |
3,894 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | James Quincey: Thanks, Robin, and good morning, everyone. After a good first half of 2024, we navigated through a dynamic external landscape during the third quarter. Our business again proved to be resilient. Volume declined 1% in the quarter driven by a slow start in July. However, our business trends improved each month and, notably, Trademark Coca-Cola volume outperformed during the quarter. Our year-to-date 2024 performance gives us confidence we will deliver at the high end of our previous top line guidance and earnings growth of 5% to 6%, including approximately 9% of currency headwinds. With that as context, I'll start with an update on the global consumer landscape and a review of the third quarter business performance. Then I'll explain how we're delivering on our objectives by staying agile and improving execution of our strategy across each facet of our growth flywheel. John will end by discussing financial details for the quarter, our updated guidance for full year 2024, and some early considerations for 2025. During the quarter, global consumer sentiment and spending in aggregate held up well, and our broader industry continued to expand. In this context, we delivered robust organic revenue growth with value share gains in both at-home and away-from-home channels. We also expanded comparable margins. This led to 5% comparable earnings per share growth despite nearly double-digit currency headwinds and the impact of bottler refranchising. We continue to demonstrate staying power as the beverage industry remains attractive with many strong new and existing players. Our system is well positioned to develop the commercial beverage industry in many markets and capture long-term balanced growth. Across the world, we are leveraging our scale and local expertise to navigate varying local market dynamics. In North America, we generated robust top line growth and won value share. Trademark Coca-Cola and sparkling flavors both grew volume. During the quarter and year-to-date, Trademark Coca-Cola and fairlife |
3,895 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | Coca-Cola and sparkling flavors both grew volume. During the quarter and year-to-date, Trademark Coca-Cola and fairlife were the leaders in the beverage industry in at-home retail sales growth. Consumers are responding well to sharper value messaging in away-from-home channels, and we're continuing to drive affordable and premium packages across our total beverage portfolio to realize positive mix. In Latin America, volume was flat during the quarter as we cycled strong growth in the prior year. We had solid revenue growth led by Coca-Cola Zero Sugar and Powerade. We also benefited from integrating marketing activations across the region. For example, in Brazil, Rock in Rio reached over 70 million people and led to Trademark Coca-Cola being the most mentioned brand on TikTok. Stepped-up execution by increasing cooler placement and investing in digital capabilities is also driving results. In EMEA, we saw improved performance in Europe and strong growth across many parts of Africa. The performance in Eurasia and Middle East and North Africa unfavorably impacted overall results. In Europe, we grew volume during the quarter and benefited from the Olympic and Paralympic Games. Both Fuze Tea and Powerade continued their strong momentum. And we're continuing to focus on affordable price points, value packages, tailored promotions and premium offerings to drive demand. In Eurasia and Middle East, a confluence of headwinds led to a decline in volume. While it's fair to assume pressure will persist in the near-term, we are taking action. Our system is driving affordability and availability, and we're leaning into the local intrinsics of our business. In Africa, volume declined largely due to pressure in some North African markets. Outside of these markets, we grew volume and gained value share. Our system is investing for the long-term by accelerating refillable offerings, cooler placements and increasing manufacturing capacity. Lastly, in Asia Pacific, despite weakness in China and a couple of markets in Southeast Asia, |
3,896 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | manufacturing capacity. Lastly, in Asia Pacific, despite weakness in China and a couple of markets in Southeast Asia, we grew organic revenue and comparable operating income. In ASEAN and South Pacific, we gained value share led by the Philippines and Australia. The Philippines grew affordable transactions with refillable packages and grew premium transactions with single-serve offerings. Australia prioritized affordability initiatives across our sparkling portfolio and successfully activated the Olympic Games with Powerade. In Japan and South Korea, we had solid volume growth and won value share due to good traction on brand relaunches, which leveraged enhanced taste and refreshed packaging and stepped-up performance in e-commerce channels. In China, a challenging operating environment and strategic reprioritization of our portfolio led to a decline in volume. We're continuing to focus on driving affordability across our core portfolio. Our longer-term growth ambition is unchanged, and we're investing to come out ahead when conditions improve. In India, volume declined in states impacted by higher than normal monsoons. In geographic areas that were unaffected, volume grew mid-single-digits. We remain upbeat about progress in integrated execution and our ability to capture long-term growth opportunities. To sum everything up, while our markets continue to move in many different directions and our agility is being put to the test, our all-weather strategy is working. We're continuing to deliver on our strategy through a combination of world-class marketing and innovation and excellence in revenue growth management and execution. Starting with marketing and innovation. Our refreshed marketing model is integrating digital, live and retail experiences to connect with consumers in unique and personalized ways. The Olympic and Paralympic games, is a great example. We featured our total beverage portfolio, launched fan zones and festivals, and leveraged social channels to increase connections with athletes. Many of our |
3,897 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | portfolio, launched fan zones and festivals, and leveraged social channels to increase connections with athletes. Many of our brands offered customized packaging, and our system activated tailored point-of-sale displays with customers around the world. The Olympic and Paralympic Games were activated with customers across over 65 markets, featured nearly 250 influencers, and demonstrated positive engagement scores across our portfolio. Topo Chico is another example. In the U.S., Topo Chico is the number one premium sparkling water brand. We've driven strong consumer demand with a grassroots experiential campaign in 13 cities featuring impactful displays connecting Topo Chico to food, music and art. In Mexico, we're applying a similar playbook. We recently launched Topo Chico's first-ever nationwide experiential activation with the Think Like An Artist campaign. This featured connections with local artists across 69 events in five cities and was amplified through social channels. During the quarter, Topo Chico trademark grew volume nearly 20% globally. Year-to-date volume has increased tenfold compared to pre-acquisition levels in 2016. Our marketing and innovation agenda emphasizes a culture of acting boldly, learning and not being afraid to fail, and scaling successes. Sometimes our innovations don't hit the mark as evidenced by Coca-Cola Spice, which we've discontinued. But our focus on bigger and bolder innovations is paying off. Fuze Tea is a multiyear success and is scaling well across over 80 markets, and Minute Maid Zero Sugars showing promise. Sprite Chill also delivered over $50 million in retail sales after only 21 weeks in the market and has been extended after a successful limited run. We also innovate for different reasons. It can be to generate short-term buzz, such as the third quarter launch of the limited edition product, Coca-Cola Zero Sugar Oreo, which is available in over 35 markets, and Fanta Beetlejuice, which is our first-ever global Halloween activation and is offered in nearly 50 markets. |
3,898 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | 35 markets, and Fanta Beetlejuice, which is our first-ever global Halloween activation and is offered in nearly 50 markets. Or we might invest for the long term such as our announcement of plans to debut Bacardi Mix with Coca-Cola in 2025. So far, in 2024, overall, we've benefited from strong velocities on our innovation and we're continuing to improve our innovation success rates versus prior year. Moving across our flywheel. Our system is step-changing execution by fully integrating our marketing and commercial plans and investing to grow our customers' businesses. Leveraging data and digitally-enabled solutions, including AI, is a huge opportunity. And we are integrating digital advertising with point-of-sale messaging and offering brand price pack architecture geared to customers' individual needs. When executed efficiently, this approach can deliver promising uplifts in retail sales for our customers. While we're focused on taking our capabilities to the next level, we're also working towards mastering the foundations that move the needle. In 2024, our system increased availability by investing in cold drink equipment and boosted our share of visible cold inventory across markets. In the past 12 months, we created $11 billion in incremental retail sales for customers, which is more than double the next five closest beverage companies combined. From 2018 to 2023, we were the leader in customer value creation for the beverage industry every year. To summarize, we feel good about the momentum of our business. And as we look ahead, our external environment will continue to have many moving pieces. We'll continue to prioritize flexibility to navigate market dynamics locally to deliver on our global objectives. Thanks to the power of our portfolio, our system's unique capabilities and the unwavering dedication of our system employees, we're confident we will be able to deliver on our 2024 guidance and longer-term priorities. With that, I'll turn the call over to John. |
3,899 | KO | 3 | 2,024 | 2024-10-23 08:30:00 | The Coca-Cola Company | 26,642 | John Murphy: Thank you, James, and good morning, everyone. Today I'll comment on our third quarter performance, discuss the outlook for the remainder of 2024, and provide some early commentary on 2025. During the third quarter, we grew organic revenues 9%. Unit cases declined 1% having had a poor July, but improving sequentially thereafter during the quarter. Concentrate sales were 1 point behind unit cases for the quarter, driven primarily by the timing of concentrate shipments. Our price/mix growth of 10% was driven by two items. Approximately 7 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations, and approximately 3 points of mix across the markets, which was primarily driven by stronger growth in several developed markets versus developing and emerging markets. Excluding the impact from intense inflationary pricing, organic revenue growth during the quarter continued to be at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 70 basis points and comparable operating margin was up approximately 100 basis points. Both were driven by underlying expansion and the benefit from butter refranchising, partially offset by the impact of currency headwinds. Putting it all together, third quarter comparable EPS of $0.77 was up 5% year-over-year despite higher-than-expected 9% currency headwinds and 2% headwinds from bottler refranchising. During the quarter, we made a $6 billion deposit with the IRS related to our ongoing tax dispute. We've also filed our appeal with the 11th Circuit Court. We're pleased to move forward with the process. We will vigorously defend our position. We believe we will prevail, and we will continue to keep you updated. Free cash flow, excluding the IRS tax litigation deposit, was approximately $7.6 billion, which is down approximately $290 million versus the prior year due to higher other tax payments, higher capital |
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