Third Quarter Takes a Toll on JPMorgan

JPMorgan's capital ratios have improved significantly in the last six months. Common equity Tier 1 capital now stands at 11.5% via advanced transition approach, versus 10.7% as of March 31. Similarly, its supplementary leverage ratio has improved from 5.7% to 6.4% as the bank cut leverage exposure by $183 billion, or 5.5%, while boosting Tier 1 capital by $10.2 billion, or 5.4%. However, JPMorgan's current dividend payout represents approximately 28% of our 2016 earnings per share forecast, so we expect next year's dividend boost to be in the 10% range, similar to this year.

Notably, CFO Marianne Lake handled most of the third-quarter earnings call. We previously expressed concern over management succession, as the bank experienced significant turnover in the top ranks in recent years as other companies wooed successful JPMorgan bankers. For example, former investment bank head Jes Staley appears set to take over at Barclays and ex-COO Frank Bisignano is about to preside over the IPO of First Data. We think the increasing importance of other managers bodes well for JPMorgan in a post-Dimon era, but note that few global peers survived the last crisis intact and that Dimon's shoes will remain hard to fill.

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