Jamie Dimon’s annual letter to JPMorgan shareholders for the year ended December 31, 2015.
Dear Fellow Shareholders,
Last year — in fact, the last decade — was an extraordinary time for our company. We managed through the financial crisis and its turbulent aftermath while never losing sight of the reason we are here: to serve our clients, our communities and countries across the globe and, of course, to earn a fair profit for our shareholders. All the while, we have been successfully executing our control and regulatory agenda and continuing to invest in technology, infrastructure and talent — critical to the future of the company. And each year, our company has been getting safer and stronger. We continue to see exciting opportunities to invest for the future and to do more for our clients and our communities — as well as continue to support the growth of economies around the world.
I feel enormously blessed to work for this great company and with such talented employees. Our management team and employees have built an exceptional organization that is one of the most trusted and respected financial institutions in the world. It has been their dedication, fortitude and perseverance that made this possible. And it fills me with tremendous pride.
JPMorgan earned a record $24.4 billion in net income on revenue of $96.6 billion in 2015. In fact, we have delivered record results in the last five out of six years, and we hope to continue to deliver in the future. Our financial results reflected strong underlying performance across our businesses, and, importantly, we exceeded all our major financial commitments — balance sheet optimization, capital deployment, global systemically important bank (GSIB) surcharge reduction and expense cuts.
While we did produce record profits last year, our returns on tangible common equity have been coming down, mostly due to higher capital requirements, higher control costs and low interest rates. Our return on tangible common equity was 13% last year, though we still believe that we will be able to achieve, over time, returns of approximately 15%. We still don’t know the final capital rules, which could have additional negative effects, but we do believe that the capital requirements eventually will be offset by optimizing our use of capital and other precious resources, by realizing market share gains due to some competitors leaving certain businesses, and by implementing extensive cost efficiencies created by streamlining and digitizing our processes. I will discuss some of these efforts later on in this letter.
We continued to deliver for our shareholders in 2015. The table above shows the growth in tangible book value per share, which we believe is a conservative measure of value. You can see that our tangible book value per share has grown far more than that of the Standard & Poor’s 500 Index (S&P 500) in both time periods. For Bank One shareholders since March 27, 2000, the stock has performed far better than most financial companies and the S&P 500. We are not proud of the fact that our stock performance has only equaled the S&P 500 since the JPMorgan Chase & Co. merger with Bank One on July 1, 2004 and essentially over the last five to 10 years. On a relative basis, though, JPMorgan Chase stock has far outperformed the S&P Financials Index and, in fact, has been one of the best performers of all banks during this difficult period. The details are shown on the table on the following page.
Many of the legal and regulatory issues that our company and the industry have faced since the Great Recession have been resolved or are receding, which will allow the strength and quality of our underlying business to more fully shine through.
In this letter, I will discuss the issues highlighted below — which describe many of our successes and opportunities, as well as our challenges and responses. The main sections are listed below, and, unlike prior years, we have organized much of this letter around some of the key questions we have received from shareholders and other interested parties.
JPMorgan’s Franchises Are Strong – And Getting Stronger
When I travel around the world, and we do business in over 100 countries, our clients – who are big companies to small businesses, investors and individuals, as well as countries and their sovereign institutions – are almost uniformly pleased with us. In fact, most cities, states and countries want more of JPMorgan Chase. They want us to bring more of our resources – our financial capabilities and technology, as well as our human capital and expertise – to their communities. While we do not know what the next few years may bring, we are confident that the needs of our clients around the world will continue to grow and that our consistent strategy of building for the future and being there for our clients in good times and bad has put us in very good stead. Whatever the future brings, we will face it from a position of strength and stability.
Because our business leaders do such a good job describing their businesses (and I strongly urge you to read their letters on pages 52–72 in this Annual Report), it is unnecessary for me to cover each in detail here, other than to answer the following critical questions.
How do you compare your franchises with your peers? What makes you believe your businesses are strong?
Virtually all of our businesses are close to best in class, in overhead ratios and, more important, in return on equity (ROE), as shown on the chart on page 8. Of even more relevance, we have these strong ratios while making sizable investments for the future (which we have reported on extensively in the past and you can read more about in the CEO letters). It is easy to meet short-term targets by skimping on investments for the future, but that is not our approach for building the business for the long term.
We are deeply aware that our clients choose who they want to do business with each and every day, and we are gratified that we continue to earn our clients’ business and their trust. If you are gaining customers and market share, you have to be doing something right. The chart below shows that we have been meeting this goal fairly consistently for 10 years.
Good businesses also deeply care about improving customer satisfaction. As shown above, you can see that our Chase customer satisfaction score continues to rise. In addition, our Commercial Banking satisfaction score is among the highest in the industry in terms of customer loyalty. In Asset Management, where customers vote with their wallet, JPMorgan Funds finished second in long-term net flows among all fund complexes.