Adam Galica | CNBC
Jamie Dimon, CEO of JP Morgan, released his much-anticipated annual letter on Thursday.
It’s probably the second-most popular annual letter on Wall Street behind Warren Buffett’s yearly missive to Berkshire Hathaway shareholders.
Check out the full letter below:
Jamie Dimon, Chairman and Chief Executive Oﬃcer
Dear Fellow Shareholders,
Once again, I begin this letter with a sense of pride about JPMorgan Chase. As I look back on last year — in fact, the last decade — it is remarkable how well our company has performed. And I’m not only talking about our strong ﬁnancial performance — but also about how much we have accomplished to help our clients, customers and communities all around the world. Ours is an exceptional company with an extraordinary heritage and a promising future. We continue to make excellent progress around technology, risk and controls, innovation, diversity and reduced bureaucracy. We’ve helped communities large and small — by doing what we do best (lending, investing and serving our clients); by creatively expanding certain ﬂagship Corporate Responsibility programs, including the Entrepreneurs of Color Fund, The Fellowship Initiative and our Service Corps; and by applying our successful Detroit investment model to neighborhood revitalization eﬀorts in the Bronx in New York City, Chicago and Washington, D.C. Throughout a period of profound political and economic change around the world, our company has been steadfast in our dedication to the clients, communities and countries we serve while earning a fair return for our shareholders.
Represents managed revenue
Earnings, Diluted Earnings per Share and Return on Tangible Common Equity2004–2017
($ in billions, except per share and ratio data)
Diluted earnings per share
Return on tangible common equity (ROTCE)
$4.5$8.5$15.4$11.7$17.4$19.0$21.3$17.9$21.7$24.4$14.4$1.52$2.35$4.00$4.33$1.35$2.26$3.96$4.48$5.19 $4.34 $5.29 $6.00
Diluted earnings per share
Return on tangible common equity
$1.52$4.00$4.33$1.35$2.26$3.96$4.48$5.19 $4.34 $5.29 $6.00 $6.31$6.19$2.35
10%15%24%22%6%10% 15% 15%15%11%13%13%12%13%$5.6$11.7
Adjusted net income
13.6% Adjusted ROTCE
Reported net income
Adjusted results exclude a $2.4 billion decrease to net income as a result of the enactment of the Tax Cuts and Jobs Act (TCJA)
Tangible Book Value and Average Stock Price per Share2004–2017
Tangible book value
Average stock price
$15.35 $16.45$21.96$27.09 $30.12 $33.62$38.68 $40.72
$38.70 $36.07 $43.93 $47.75 $39.83 $35.49 $40.36 $39.36 $39.22 $51.88 $58.17 $63.83 $65.62 $92.01
High: $ 108.46Low: $ 81.64
2017 was another record year across many measures for our company as we added clients and customers and delivered record earnings per share. We earned $24.4 billion in net income on revenue of $103.6 billion (if we exclude the tax charge at year-end, 2017 net income would have been a record $26.9 billion), reﬂecting strong underlying performance across our businesses. We now have delivered record results in seven of the last eight years, and we have conﬁdence that we will continue to deliver in the future.
Bank One/JPMorgan Chase & Co. tangible book value per share performance vs. S&P 500
Bank One(A)S&P 500 (B)Relative Results(A) — (B)
Performance since becoming CEO of Bank One (3/27/2000—12/31/2017)
Compounded annual gain11.8% 5.2% 6.6%Overall gain566.3%147.3%419.0%
JPMorgan Chase & Co.(A)S&P 500(B)Relative Results(A) — (B)
Performance since the Bank One and JPMorgan Chase & Co. merger(7/1/2004—12/31/2017)
Compounded annual gain12.7%8.8%3.9%Overall gain403.5%210.4%193.1%
Tangible book value over time captures the company’s use of capital, balance sheet and profitability. In this chart, we are looking at heritage Bank One shareholders and JPMorgan Chase & Co. shareholders. The chart shows the increase in tangible book value per share; it is an after-tax number assuming all dividends were retained vs. the Standard & Poor’s 500 Index (S&P 500), which is a pre-tax number with dividends reinvested.
On March 27, 2000, Jamie Dimon was hired as CEO of Bank One.
In the last ﬁve years, we have bought back nearly $40 billion in stock. In prior years, I explained why buying back our stock at tangible book value per share was a no-brainer. Six years ago, we oﬀered an example of this, with earnings per share and tangible book value per share being substantially higher than they otherwise would have been just four years later. While we prefer buying back our stock at tangible book value, we think it makes sense to do so even at or above two times tangible book value for reasons similar to those we’ve expressed in the past. If we buy back a big block of stock this year, we would expect (using analyst earnings estimates for the next ﬁve years) earnings per share in ﬁve years to be 2% —3% higher and tangible book value to be virtually unchanged.As you know, we believe tangible book value per share is a good measure of the value we have created for our shareholders. If our asset and liability values are appropriate — and we believe they are — and if we can continue to deploy this capital proﬁtably, we now think that it can earn approximately 17% return on tangible equity for the foreseeable future. Then, in our view, our company should ultimately be worth considerably more than tangible book value. The chart on the bottom of page 3 shows that tangible book value “anchors” the stock price.
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You can download the full letter here, too.