Morningstar DBRS Confirms JPMorgan Chase & Co. at AA (low), Trend Remains Stable

DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings of JPMorgan Chase & Co. (JPM or the Company), including the Company's Long-Term Issuer Rating of AA (low). At the same time, Morningstar DBRS confirmed the credit ratings of its primary banking subsidiary, JPMorgan Chase Bank, N.A. (the Bank). The trend for all ratings is Stable. The Intrinsic Assessment (IA) for the Bank is AA, while its Support Assessment remains SA1. The Company's Support Assessment is SA3 and its Long-Term Issuer Rating is positioned one notch below the Bank's IA.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings confirmation and Stable trend reflects JPM's highly diversified and scaled universal banking franchise, its strong and resilient earnings generation across businesses, as well as its robust balance sheet fundamentals. Overall, Morningstar DBRS views JPM as having the top banking franchise globally. The credit ratings also consider JPM's exposure to a wide range of capital markets activities, which support the franchise value, but elevate risk levels. Morningstar DBRS sees JPM's franchise as expansive, which adds complexity to managing risks across the organization, as well as across numerous jurisdictions. While JPM has proven its ability to manage these risks over time, Morningstar DBRS sees the need to effectively manage operational risk as an ongoing critical challenge for the Company.

CREDIT RATING DRIVERS
Given JPM's high credit rating level and current risk profile, an upgrade of the credit ratings is unlikely. Conversely, a sustained deterioration of earnings or balance sheet fundamentals, or any indications of significant weakening in JPM's franchise due to risk management deficiencies or reputational issues would result in a credit ratings downgrade.

CREDIT RATING RATIONALE

Franchise Combined Building Block (BB) Assessment: Very Strong
JPM's powerful franchise encompasses strong, diverse businesses that contribute to robust and consistent earnings. Overall, JPM is the largest bank in the U.S., with $4.2 trillion in assets. The U.S. banking franchise combines an extensive branch banking franchise, with a nationwide reach, a leading credit card business, along with other scaled nationwide lending businesses, including residential mortgage and auto lending. Supporting its global reach, JPM operates a formidable commercial and investment banking franchise, where it maintains leading market shares across most businesses. Additionally, the Company is the fifth largest asset manager globally, with $3.9 trillion in assets under management (AUM).

Earnings Combined Building Block (BB) Assessment: Very Strong/Strong
The Company's consistent, global-peer-leading profitability metrics support the credit ratings. In 9M 2024, JPM reported $44.5 billion of net income, representing a very strong 19% return on equity (ROE). Excluding the benefit of the gain related to Visa shares, the Company would have generated a ROE in the mid-teens, which still would have led the global peer group. Revenues were strong across businesses, benefiting from higher net interest income, continued strength in trading and improved investment banking results.

Risk Combined Building Block (BB) Assessment: Strong
Morningstar DBRS views JPM as having effective risk management capabilities, recognizing the Company's extensive exposure to market risk and risks related to its involvement in capital markets activities. As expected, asset quality metrics continue to normalize, but overall credit performance remains sound in Morningstar DBRS's view. Importantly, reserve coverage remains ample, as the allowance for credit losses was $26.5 billion at the end of Q3 2024, representing 1.86% of total retained loans.

Funding and Liquidity Combined Building Block (BB) Assessment: Very Strong
JPM is the largest U.S. bank by deposits (domestic and foreign) with $2.4 trillion in total deposits. This large deposit base, including $1.1 trillion deposits sourced through the Consumer & Community Banking segment, anchors the Company's sound funding profile. JPM's reliance on wholesale funds comprises approximately one-third of total funding and primarily reflects its capital markets businesses. We view JPM's wholesale funding as appropriately diversified by instrument, maturity and investor type and view the Company as having ready access to capital markets globally.

Capitalization Combined Building Block (BB) Assessment: Strong
JPM has strong capitalization and robust internal capital generation that provides a substantial cushion to absorb unexpected losses. During the past year, the Company's capital levels have improved in anticipation of higher capital requirements. JPM's CET1 ratio stood at 15.3% at the end of Q3 2024, up 100 basis points from a year ago.

Further details on the Scorecard Indicators and Building Block Assessments can be found at https://dbrs.morningstar.com/research/444202.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in US dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (June 04, 2024) https://dbrs.morningstar.com/research/433881. In addition Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The primary sources of information used for these credit ratings include Morningstar Inc. and company documents. Other sources include Company documents. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings was of satisfactory quality.

The credit rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the credit rating process for this credit rating action.

Morningstar DBRS did not have access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is an unsolicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS's trends and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit dbrs.morningstar.com.

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