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Dear Fellow Shareholders,
I begin this letter with a sense of gratitude and pride about JPMorgan Chase that
has only grown stronger over the course of the last decade. Ours is an exceptional
company with an extraordinary heritage and a promising future.
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.
2016 was another breakthrough year for our company. We earned a record $24.7 billion
in net income on revenue1 of $99.1 billion, refecting strong underlying performance
across our businesses. We have delivered record results in six out of the last seven
years, and we hope to continue to deliver in the future.
Our stock price is a measure of the progress we have made over the years. This
progress is a function of continually making important investments, in good times and
not so good times, to build our capabilities — people, systems and products. These
Jamie Dimon,
Chairman and
Chief Executive Ofcer
1 Represents
managed revenue
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investments drive the future prospects of our company and position it to grow and
prosper for decades. Whether looking back over fve years, 10 years or since the Bank
One/JPMorgan Chase merger (approximately 12 years ago), our stock has signifcantly
outperformed the Standard & Poor’s (S&P) 500 and the S&P Financials Index. And this
is during a time of unprecedented challenges for banks — both the Great Recession and
Stock total return analysis
Bank OneS&P 500S&P Financials Index
Performance since becoming CEO of Bank One
(3/27/2000—12/31/2016)1
Compounded annual gain11.5%4.3% 3.1%
Overall gain524.6%103.0%65.9%
JPMorgan Chase & Co.S&P 500S&P Financials Index
Performance since the Bank One
and JPMorgan Chase & Co. merger
(7/1/2004—12/31/2016)
Compounded annual gain9.5%7.8%2.3%
Overall gain211.0%154.8%32.3%
Performance for the period ended
December 31, 2016
Compounded annual gain/(loss)
One year34.6% 12.0%22.7%
Five years24.4%14.7%19.4%
Ten years8.6%6.9%(0.4)%
These charts show actual returns of the stock, with dividends included, for heritage shareholders of Bank One and JPMorgan Chase & Co.
vs. the Standard & Poor’s 500 Index (S&P 500) and the Standard & Poor’s Financials Index (S&P Financials Index).
1 On March 27, 2000, Jamie Dimon was hired as CEO of Bank One.
Earnings, Diluted Earnings per Share and Return on Tangible Common Equity
2004–2016
($ in billions, except per share and ratio data)
2016201520142013201220112010200920082007200620052004
$4.5
$8.5
$15.4
$11.7
$17.4
$19.0
$21.3
$17.9
$21.7
$24.4
$14.4
$24.7
$1.52
$2.35
$4.00$4.33
$1.35
$2.26
$3.96
$4.48
$5.19
$4.34
$5.29
$6.00 $6.19
10%
15%
24%22%
6%
10%15%15%
15%
11%13%
13%
13%
$5.6
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the extraordinarily difcult legal, regulatory and political environments that followed.
We have long contended that these factors explained why bank stock price/earnings
ratios were appropriately depressed. And we believe the anticipated reversal of many
negatives and the expectation of a more business-friendly environment, coupled with
our sustained, strong business results, are among the reasons our stock price has done
so well this past year.
As you know, we believe tangible book value per share is a good measure of the value
we have created for our shareholders. If we believe our asset and liability values are
appropriate — and we do — and if we believe we can continue to deploy this capital at
an approximate 15% return on tangible equity, which we do, then our company should
ultimately be worth considerably more than tangible book value. If you look at the
chart below, you’ll see that tangible book value “anchors” the stock price.
In the last fve years, we have bought back $25.7 billion in stock. In prior years, I have
explained why buying back our stock at tangible book value per share was a no-
brainer. While the frst and most important use of capital is to invest in growth, buying
back stock should also be considered when you are generating excess capital. We do
Tangible Book Value and Average Stock Price per Share
2004–2016
2016201520142013201220112010200920082007200620052004
$15.35$16.45
$18.88
$21.96$22.52
$27.09$30.12
$33.62
$38.68$40.72
$44.60
$48.13
$51.44
$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
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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—12/31/2016)1
Compounded annual gain12.2% 4.3% 7.9%
Overall gain528.1%103.0%425.1%
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—12/31/2016)
Compounded annual gain13.2%7.8%5.4%
Overall gain373.6%154.8%218.8%
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.
1 On March 27, 2000, Jamie Dimon was hired as CEO of Bank One.
currently have excess capital. Five years ago, we ofered the example of our buying
back stock at tangible book value and having earnings per share and tangible book
value per share substantially higher than they otherwise would have been just four
years later. While we prefer buying our stock at tangible book value, we think it makes
sense to do so at or around 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 (using analyst
earnings estimates for the next fve years), we would expect earnings per share in fve
years to be 3%—4% higher, and tangible book value would be virtually unchanged.
In this letter, I discuss the issues highlighted on the next page — which describe many
of our successes and opportunities, as well as our challenges and responses. Like last
year’s letter, we have organized much of the content around some of the key questions
we have received from shareholders and other interested parties.
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