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3,700 | JPM | 4 | 2,024 | 2025-01-15 08:30:00 | JPMorgan Chase & Co. | 658,776 | Gerard Cassidy: Very good. And then as a follow-up, circling back about the capital levels, you guys have been very clear about where you want them to be. Can you share with us the pros and cons from JPMorgan's perspective, not so much from an investor, but we understand, of course, you can do a share repurchase. Obviously, you can do non-depository acquisitions with the excess capital. But what are the pros and cons of a special dividend to reduce that excess capital? If you continue with these incredible profitability levels of 20% return on tangible common equity, you're growing your income and capital very nicely every year. But what are those pros and cons, again, from JPMorgan's perspective?
Jeremy Barnum: Yes. So we made some public comments on this at a conference sometime back, so, he wants to go.
Jamie Dimon: Sorry, Jeremy, go ahead.
Jamie Dimon: I was just going to say we're not going to do one. We have looked at it. If you all have any great insights for us, let us know, but most people don't want it, doesn't have shareholder value. And I've never thought that having cash in your pocket is a bad thing. I think it's a huge mistake to look at likely, you have to deploy capital. So we want to be very, very patient. But special dividends, if you look at the history of special dividends, they really basically don't work.
Jeremy Barnum: If anyone has a different opinion, well I was interested.
Gerard Cassidy: Sounds good. Thank you, gentlemen.
Jeremy Barnum: Thanks, Gerard.
Operator: Thank you. And we have no further questions at this time.
Jeremy Barnum: Thanks very much.
Jamie Dimon: Thanks very much. See you next quarter.
Operator: Thank you all for participating in today's conference. You may disconnect at this time and have a great rest of your day. |
3,701 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Good morning, ladies and gentlemen. Welcome to JPMorgan Chase’s Third Quarter 2024 Earnings Call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. The presentation is available on JPMorgan Chase's website. Please refer to the disclaimer in the back concerning forward-looking statements. Please stand by. At this time, I would like to turn the call over to JPMorgan Chase's Chairman and CEO, Jamie Dimon and Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead. |
3,702 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Thank you, and good morning, everyone. Starting on page one, the firm reported net income of $12.9 billion, EPS of $4.37 and revenue of $43.3 billion with an ROTCE of 19%. Touching on a couple of highlights. In CCB, we ranked number one in retail deposit share for the fourth straight year. In CIB, both IB fees and markets revenue were notably up year-on-year reflecting strength across the franchise. In AWM, we had record quarterly revenues and record long-term flows. Now turning to page two for the firm wide results. The firm reported revenue of $43.3 billion, up $2.6 billion or 6% year-on-year. NII ex-markets was up $274 million or 1%, driven by the impact of balance sheet mix and securities reinvestment, higher revolving balances in card and higher wholesale deposit balances, predominantly offset by lower deposit balances in banking and wealth management and deposit margin compression. NIR ex-markets was up $1.8 billion or 17%, but excluding the prior year's net investment securities losses, it was up 10% on higher asset management and investment banking fees and markets revenue was up $535 million or 8% year-on-year. Expenses of $22.6 billion were up $808 million or 4% year-on-year, driven by compensation including revenue related compensation and growth in employees, partially offset by lower legal expense. And credit costs were $3.1 billion, reflecting net charge offs of $2.1 billion and a net reserve bill of $1 billion, which included $882 million in consumer, primarily in card and $144 million in wholesale. Net charge offs were up $590 million year-on-year, predominantly driven by card. On to balance sheet and capital on page three. We ended the quarter with the CET1 ratio of 15.3% flat versus the prior quarter as net income and OCI gains were offset by capital distributions and higher RWA. This quarter's RWA reflects higher lending activity, as well as higher client activity and market moves on the trading side. We added $6 billion of net common share repurchases this quarter, which in |
3,703 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | activity and market moves on the trading side. We added $6 billion of net common share repurchases this quarter, which in part reflects the deployment of the proceeds from the share from the sale of Visa shares as we have previously mentioned. Now let's go to our businesses starting with CCB on page four. CCB reported net income of $4 billion on revenue of $17.8 billion, which was down 3% year-on-year. In Banking and Wealth Management, revenue was down 11% year-on-year, reflecting deposit margin compression and lower deposits partially offset by growth in Wealth Management revenue. Average deposits were down 8% year-on-year and 2% sequentially. We are seeing a slowdown in customer yield seeking activity including CD volumes and expect deposits to be relatively flat for the remainder of the year. Client investment assets were up 21% year-on-year, driven by market performance and we continue to see strong referrals of new wealth management clients from our branch network. In home lending, revenue was up 3% year-on-year driven by higher NII partially offset by lower servicing and production revenue. Turning to Card Services and Auto. Revenue was up 11% year-on-year, driven by higher card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10 billion, down 2%, while maintaining strong margins and high quality credit. Expenses of $9.6 billion were up 5% year-on-year, predominantly driven by higher field and technology compensation, as well as growth in marketing. In terms of credit performance this quarter, credit costs were $2.8 billion driven by card and reflected net charge offs of $1.9 billion, up $520 million year-on-year and a net reserve build of $876 million predominantly from higher revolving balances. Next the Commercial and Investment Bank on page five. The CIB reported net income of $5.7 billion on revenue of $17 billion. IB fees were up 31% year-on-year and we ranked number one with |
3,704 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | reported net income of $5.7 billion on revenue of $17 billion. IB fees were up 31% year-on-year and we ranked number one with year-to-date wallet share of 9.1%. In advisory, fees were up 10% benefiting from the closing of a few large deals. Underwriting fees were up meaningfully with debt up 56% and equity up 26%, primarily driven by favorable market conditions. In light of the positive momentum throughout the year, we're optimistic about our pipeline, but the M&A regulatory environment and geopolitical situation are continued sources of uncertainty. Payments revenue was $4.4 billion, up 4% year-on-year, driven by fee growth and higher deposit balances, largely offset by margin compression. Moving to markets, total revenue was $7.2 billion, up 8% year-on-year. Fixed income was flat reflecting outperformance in currencies and emerging markets and lower revenue and rates. Equities was up 27%, reflecting strong performance across regions largely driven by a supportive trading environment in the U.S. and increased late quarter activity in Asia. Securities Services revenue was $1.3 billion, up 9% year-on-year largely driven by fee growth on higher market levels and volumes. Expenses of $8.8 billion were down 1% year-on-year with lower legal expense predominantly offset by higher revenue related compensation, and growth in-place, as well as higher technology spend. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. In the middle market and large corporate client segments, we continue to see softness in both new loan demand and revolver utilization in part due to clients' access to receptive capital markets. In multifamily, while we are seeing encouraging signs in loan originations as long term rates fall, we expect overall growth to remain muted in the near-term as originations are offset by payoff activity. Average client deposits were up 7% year-on-year and 3% sequentially, primarily driven by growth from large corporates in payments and security services. Finally, credit costs |
3,705 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | and 3% sequentially, primarily driven by growth from large corporates in payments and security services. Finally, credit costs were $316 million, driven by higher net lending activity, including in markets and downgrades, partially offset by improved macroeconomic variables. Then to complete our lines of business, AWM on page six. Asset and wealth management reported net income of $1.4 billion with pre-tax margin of 33%. For the quarter, revenue of $5.4 billion was up 9% year-on-year, driven by growth and management fees on higher average market levels and strong net inflows, investment valuation gains, compared to losses in the prior year, and higher brokerage activity, partially offset by deposit margin compression. Expenses of $3.6 billion or up 16% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams, as well as higher distribution fees and legal expense. For the quarter, long-term net inflows were $72 billion, led by fixed income inequities. And in liquidity, we saw net inflows of $34 billion. AUM of $3.9 trillion and client assets of $5.7 trillion were both up 23%, driven by higher market levels and continued net inflows. And finally, loans were up 2% quarter-on-quarter, and deposits were up 4% quarter-on-quarter. Turning to corporate on page seven. Corporate reported net income of $1.8 billion. Revenue was $3.1 billion, up $1.5 billion year-on-year. NII was $2.9 billion, up $932 million year-on-year, predominantly driven by the impact of balance sheet mix and securities reinvestment, including from prior quarters. NIR was a net gain of $155 million, compared with a net loss of $425 million in the prior year, predominantly driven by lower net investment securities losses this quarter. Expenses of $589 million were down $107 million year-on-year. To finish up, let's turn to the outlook on page eight. We now expect 2024 NII ex-markets to be approximately $91.5 billion and total NII to be approximately $92.5 |
3,706 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | on page eight. We now expect 2024 NII ex-markets to be approximately $91.5 billion and total NII to be approximately $92.5 billion. Our outlook for adjusted expense is now about $91.5 billion. And given where we are in the year, we included on the page the implied fourth quarter guidance for NII and adjusted expense. And note that the NII numbers imply about $800 million of markets NII in the fourth quarter. On credit, we continue to expect the 2024 Card net charge-off rate to be approximately 3.4%. So to wrap up, we're pleased with another quarter of strong operating performance. As we look ahead to the next few quarters, we expect results will be somewhat challenged as normalization continues. But we remain upbeat and focused on executing in order to continue delivering excellent returns through the cycle. And with that, let's open the line for Q&A. |
3,707 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Thank you. Please stand by. Our first question will come from the line of Jim Mitchell from Seaport Global Securities. You may proceed.
Jim Mitchell: Hey, good morning. So, Jeremy, as you highlighted, full-year NII guidance implies a sizable drop in Q4 NII ex-markets, about 6%. So can you just maybe discuss what are the largest drivers of the sequential decline, including any initial thoughts on deposit behavior and pricing since the 50 basis point cut? And since it's related, I'll just throw out my follow-up question. I realize the forward curve is moving around a lot, but since Dan brought it up a month ago, can you frame how you're thinking about the NII trajectory for ‘25? Thanks. |
3,708 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes, sure, Jim. I'll try to answer both questions together, the best of my ability. So as we sit here today, the biggest single driver is of the sequential declines is in fact, that we're expecting, is in fact the yield curve. So that yield curve has changed a little bit since Daniel made his comments at the conference earlier in the quarter, but not that significantly. In terms of deposit balances, which is obviously another important factor here in light of the starting the cutting cycle. It feels to us like right now, as I mentioned in my prepared remarks for consumer, we're pretty much in the trough right now as we speak. When you look at yield seeking behavior, that has come down quite a bit. So that's no longer as much of a headwind all else being equal. And then if you look at checking account balances, those have been pretty stable for some time, which we see as an indication that consumers are kind of done spending another cash buffers. So that's kind of supportive for consumer deposit balances. And in that context, the other relevant point is the CD mix, where with the rate cuts coming, we expect CD balances to price down with pretty high betas and probably the CD mix actually peaking around now. And then as you move to wholesale, we've actually already been seeing a little bit of growth there. And when you combine that with the sort of increasing view that many people in the market have that it's likely that the end of Q2 will be announced sometime soon, that's also a little bit supportive for deposit balances. So maybe I'll, well I guess then you also asked me a little bit about next year. So I guess one thing to say, right, is that we did have a sequential increase in NII this quarter. And as you may recall at Investor Day, I said that there was some chance that we would see sequential increases followed by sequential declines and that people should avoid kind of drawing the conclusion that we'd hit the trough when that happened. So that's essentially exactly what we're seeing now. |
3,709 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | of drawing the conclusion that we'd hit the trough when that happened. So that's essentially exactly what we're seeing now. But from where we sit now, given the yield curve, assuming the yield curve materializes, obviously, we do see a pretty clear picture of sequential declines at NII ex-markets. But the trough may be happening sometime in the middle of next year, at which point the combination of balances, card revolve growth, and other factors can return us to sequential growth. Obviously, we're guessing it's pretty far out in the future, and we'll give you formal guidance on all this stuff next quarter, but I think that gives you, you know, a bit of a framework to work with. |
3,710 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jim Mitchell: All right. Thanks a lot.
Jeremy Barnum: Thanks.
Operator: Thank you. Thank you. Next, we will go to the line of Steven Chubak with Wolfe Research. You may proceed.
Steven Chubak: Hi, good morning. So Jeremy. Hi, how are you? So I did want to ask on expenses just in light of some of the comments that Daniel had made recently, just noting that contentious expense forecast for next year looked a little bit too light. I believe at the time it was just below $94 billion. If we adjust for the one-timers this year, that would suggest a core expense base that's just below $90 billion. So a pretty healthy step up in expenses. I know you've always had a strong commitment and discipline around investment. Just want to better understand where those incremental dollars are being deployed and just which investments are being prioritized in particular looking out to next year? |
3,711 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Sure. So, good question and I agree with your numbers. I agree with the way you've normalized this year for the one-time type of significant items, and also where the consensus was when Daniel made his comments. And while we're at it, I would also just remind you on the NII comments at the time, the consensus for this year was $91.5 billion, and for next year it was $90 billion. So that was implying at the time a sequential decline of $1.5 billion. And it was because we thought that decline wasn't big enough that we made the comments that we made. So I'm happy to expand more on that. But anyway, to expenses, yes, so if you start for the sake of argument with a base of $90 billion, obviously inflation is normalizing and obviously we're always trying to generate efficiencies to offset inflation. But, you know, that having been said, if you assume 3% for the sake of argument on that base, that's a few billion dollars right out of the gates that we're working against, so that's one thing. The other thing is that we have continued to execute on our growth strategies this year, so there's a not insignificant amount of annualization. You can't quite see that in the fourth quarter numbers, because of the seasonality of incentive comp, but if you were to strip that out, you would see probably some sequential increases and so there's some manualization as an additional headwind. The other thing that's worth noting is that we do expect fees and volume-related businesses to grow next year. And so all else being equal, that would come with a higher expense loading. So when you assemble all those, that goes a long way to explain why sort of that consensus number that is slightly below $94 billion just seemed light. In terms of priorities and investments, really nothing has changed. Like the strategy hasn't changed. The strategy hasn't changed and the plans haven't changed and we're just kind of executing with the same long-term perspective that we've always had. I would note that relative to NII, obviously |
3,712 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | just kind of executing with the same long-term perspective that we've always had. I would note that relative to NII, obviously we're in the third quarter now and not the fourth quarter. In the old days, we did used to give you the guidance until investor day in late February. So we will give you formal expense guidance next quarter for both well for expenses and NII next quarter, but especially on expenses we are in the middle of the budget cycle right now so we probably have a little less visibility there than we do at the margin on the NII. |
3,713 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: And can you just give you a view of expense a little bit? You call expenses very often. I call investments. And if you actually go back to investor day, that you'll see that we're adding private bankers in asset wealth management. We're adding ETF in asset wealth management. We're adding private bankers in international private banking. We're growing chase wealth management. We've added some branches across the United States of America. We think there are huge opportunities in the innovation economy that takes bankers and certain technologies, stuff like that. Our goal is to gain share, and everything we do, we get really good returns on it. So I look at that, these are opportunities for us. These are not expenses that we have to actually punish ourself on. And we do get, and we show you kind of extensively, you know, the cost and productivity on various things. And also AI is going to go up a little bit. And I would put that as a category that's going to generate great stuff over time.
Steven Chubak: No, thank you both for the color. Just a quick follow-up from me just drilling down into NII. It appears you redeployed a fair amount of cash or excess reserves at the Fed into securities. We saw the yield expand, which was encouraging despite the pressure at both the long end and SOFR contraction in the corridor. I was hoping you could just speak to your appetite to extend duration in this environment? I know that you've had some aversion to that in the past, but do you anticipate redeploying additional access liquidity just amid the expectation for deeper rate cuts? |
3,714 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes, sure. So on extending duration, Steve, you know this obviously, but I just think it's important to say that all SQL, extending duration doesn't change expected NII if you assume that the policy rate follows the forwards, right? So point one. Point two, I think the curve remains inverted and so even if you don't believe that the policy rate follows the forwards, extending right now is actually a headwind to short-term NII. Like, that's not, that wouldn't be a consideration for us either way, but I just think that's worth saying for the broader audience, it's quite different from the situation that you have with the numbers.
Jamie Dimon: More than 6%. So like…
Jeremy Barnum: Yes. Now, so when we think about the question of extending duration and really managing duration right now, a couple of things to say. So obviously a lot of different versions of duration, but one number that we disclose is the EAR. When the 10-Q comes out, you'll see that that number is a little bit lower. It'll come down from 2.8 to about 2.1 if our current estimates are correct. That's for a number of reasons, some of which are passive, but some of those are active choices to extend duration a little bit. And in the end, the choice to manage and extend duration is really about balancing the volatility of NII against protecting the company from extreme scenarios on either side. And so right now, if we wanted to expand as a result of different factors, we certainly could. We have the capacity inside the portfolio. But, you know, for now, we're comfortable with where we are.
Jamie Dimon: And the one thing I can assure you is the forward curve will not be the same forward curve in six months.
Steven Chubak: Well said. Well, thank you so much for taking my questions.
Jeremy Barnum: Thanks, Steve.
Operator: Thank you. Next, we will go to the line of Erika Najarian from UBS. You may proceed. |
3,715 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Thanks, Steve.
Operator: Thank you. Next, we will go to the line of Erika Najarian from UBS. You may proceed.
Erika Najarian: My first question, and thank you very much for answering all the NII questions so far, Jeremy, is just I guess another follow-up. As you can imagine, once Daniel said what he said on stage in September, everyone's trying to figure out the over-under for net interest income next year? So maybe a two-part first question. The second being inspired by what Jamie just said number one, you know, NII is expected to be down 6% sequentially in fourth quarter. I think year-over-year in ‘25, consensus has it down 4% from your new level. So it sounds like consensus still has room to come down and based on the forward curve, Jeremy, it could be a little bit worse year-over-year than the fourth quarter sequential rate. But that being said, as Jamie noted, like we have no idea what the curve is going to look like, right? I mean, it's gyrated so much. And so, as we think about the curve, is it better for JPMorgan to have more cuts in the short end, but steepness or less cuts but a little bit of a flatter curve? |
3,716 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Right, okay. You threw a curveball at the end there, Erika. I wasn't expecting that to be the end of your question. But let me answer the beginning of your question and then I'll also answer the end of your question. So we see the current 2025 consensus for NII ex-markets to be currently at 87%, which is obviously lower than it was at the conference earlier in the quarter. So we're happy to see that move a little bit more in line to us. That still looks a little toppy, but it's definitely in the ballpark. Now, that consists of, I already mentioned previously, that we sort of expect the NII trough sometime in the middle of the year. So you can kind of assemble the parts. You've got a fourth quarter run rate. You've got some sequential declines. You've got a trough in the middle of the year, and you've got a rough ballpark for the full-year. So you can imagine that the trough probably is a little lower than those numbers and then to the extent that growth revolves, resumed in the back half of the year, both deposit balances and the ongoing tailwind of card revolve over that tailwind will be a little bit less than you might have otherwise thought I mean sorry a little bit less than it was this year, but still a tailwind. You know obviously the mix of those things will play out in different ways and as you point out who knows what the yield curve will wind up doing. But on our current assumptions, on the current yield curve, and remembering that we're in the third quarter now, so we're doing this kind of early, that's what we think. Now… |
3,717 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Could I just say some -- next time, we should give you the number. I don't want to spend all time in these calls like going through what they're guessing what NII is going to be next year. And I just -- can I just also point out that NII, all things being equal, is a number, but all things are never equal. And the yield curve -- if you have a recession, the effect of the yield curve will be very different than you have continued growth. And there are decisions that are made non-stop by us and the thing that happened in the marketplace. And I just -- I think we spend too much time on just this relevancy. So you get a model -- a number in your model. And so it's going to be less than 87% next year, probably not a lot, we don't know and we don't know the environment. |
3,718 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Good. Okay. Now, to your question about the EAR. So a few things to say in there. So as I already mentioned, we -- when that comes out, it will show a number of around $2.1 billion. A very important thing to say is, as you know, the experience of this rate cycle has been that our empirical EAR is meaningfully higher than our modeled EAR, which is what we disclosed. And the main reason for that is that retail deposit betas are -- have -- in actuality, even lower than the modeled deposit beta. So as a starting point, you have to kind of adjust that EAR number to be bigger than the reported number for those and a few other reasons actually, there's some nuances around how the dollar, non-dollar sensitivity interact. And then there's your question, which is a little bit about the front end versus the back end. So what you see is that actually the front end EAR has gotten smaller and most of the EAR is now in the back end. So it's definitely the case that, all else being equal, a steeper curve is better for us. But I think what I would also say is that this kind of empirical versus theoretical adjustment is disproportionately in the front end. So therefore, in order to answer your question, I would say, yes we want a steeper curve, but having the Fed cut more than what's currently in the yield curve is definitely at the margin from the context of next year's numbers, a headwind -- would be a headwind for us. We remain asset-sensitive to Fed cuts. |
3,719 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Erika Najarian: And if I can ask my second question, and Jamie, I completely understand your frustration. And to be fair, your long-term shareholders really don't care about whether it's 87% or 85%, right? They care about your return on equity. To that end, I mean, it's insane how much capital you generate each quarter, 72 basis points this quarter. And so beyond the standard boilerplate questions you're going to get on buyback and organic growth, yada, yada, dividend increases, how should we think about JPMorgan deploying this capital? I mean, the world is generally your oyster, right? You're dominant already and you could use this capital to further enhance your business. And again, beyond that boilerplate conversation that you always get every quarter, how should your shareholders think about how you're thinking about the opportunities to deploy this capital? |
3,720 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Okay. So first of all, when you say, dominant I'd be very careful on that. We've got some very tough competition. Different, different countries, different around the world, fintech companies, direct lenders and MSP, I want to give you a very specific comment on direct lending and stuff like that. So our goal is always to serve our clients. And when I talk about some of these expenses, that is a deployment of capital. And it's a deployment in a different way because you open branches, you initially experience an expense, but down the road, you need capital supports, the deposits and same for the innovation economy, same for private bankers, et cetera. If you look at it roughly, we have about a minimum $30 billion of excess capital. And for me, it's not burning a hole in my pocket. I look at it as you own the whole company and you can't properly deploy it now is perfectly reasonable to wait. And I've been quite clear that I think things -- the future could be quite turbulent and asset prices in my view and you -- in life, you've got to take a view sometimes, are inflated. I don't know if they're extremely inflated or a little bit, but I prefer to wait. We will be able to deploy it. Our shareholders will be very well-served by just waiting. And same thing with deploying capital, we can buy -- we can go buy $100 billion, 6% mortgages, increase our net income by a couple of billion tomorrow. We don't make decisions like that. The most important thing we do is serve our clients well, build the technology and do things like that. And we also know what the real excess capital is yet. So we're a little patient. We're going to be a little patient and wait, and it will be fine. And so that's where we are and that's not going to change. And if it changes, we'll let you know, right? And we do talk to a lot of shareholders and they understand buying stock back at more than two times tangible book value is not necessarily the best thing to do, because we think we'll have better opportunities to redeploy it or to |
3,721 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | book value is not necessarily the best thing to do, because we think we'll have better opportunities to redeploy it or to buy back at cheaper prices at one point. Markets do not stay high forever. |
3,722 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Erika Najarian: Thank you.
Jamie Dimon: And one last thing. Cash is a very valuable asset sometimes in a turbulent world. And you see my friend Warren Buffett stockpiling cash right now. I mean, people should be a little more thoughtful about how we're trying to navigate in this world and grow for the long-term for our company.
Operator: Thank you. Our next question comes from Glenn Schorr from Evercore ISI. You may proceed.
Glenn Schorr: Hi, thanks very much. So glad Jamie didn't say what he's about to say because that's the answer to this question. So we've seen a couple more banks entering partnerships with alternative managers. We've seen limited loan growth for a few years now, market-related also. Limited flows into fixed income funds, yet plenty of growth in private credit in general. And you're one of the best asset managers on the planet, but in my view, less dominant in all things private credit. So maybe you could talk about what things you're working on and why that's too narrow, the view of your ability to serve all parts of clients' lending needs, not just the public markets and public lending side. Thanks. |
3,723 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Yes. So let me take time to cover this one because obviously, it is very -- become very important. People are talking about how they're growing and partnering, and things like that. And so first and foremost -- I'm going to talk about very strategic and then very tactical. I think they're both important. First and foremost, we are here to give our clients an agnostic view of the world and what the best products and services are for them. Therefore, when a client comes in, we will offer them both direct lending on ourselves and syndicated lending or other specialized kind of lending. And they all have pluses and minuses. Direct lending could be done faster, maybe simpler covenants, unit tranche. It is more expensive and you're seeing little things go back and forth between syndicated lending and direct lending, but we're going to offer the clients basically what's in their best interest and tell them what those products are across the things. We mentioned before in the past that we allocated $10 billion of capital to make direct loans. We've actually deployed a lot of capital, some of this already been paid-off, some are done. So we are going to do it directly and we are going at $10 billion, could be $20 million or $30 billion, not limited today. I will say today we're extending -- we will do $500 million, we will do $1 billion, we will do more billion, we'll do it sole-handed or do it with partners. Very importantly, we are not going to allocate ourselves to one partner. So we have -- and I think we've announced a bunch of co-lenders, but that just creates more flexibility and more size. We're not going to use that flexibility to slow it down, have to get permission for everybody because like I said, JPMorgan could underwrite it and own it like a bridge loan and syndicate it after the fact. So you could -- and we're going to use our own risk measures and stuff like that. Again, all in the service of the client and making sure what we're offering them are the best thing. And we're going to different |
3,724 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | all in the service of the client and making sure what we're offering them are the best thing. And we're going to different strategy. We're not going to tie ourselves exclusively to one capital provider. I think that would limit what we could offer our clients. Probably we could be more price-competitive. We can do some of the very specific thing and not the solution that fits the third-party capital provider. That's our strategy. We're going to be there, we're going to do it. And we're going to do it in spite of the fact there's capital arbitrage taking place. So if you look at the arbitrage today, where the bank has to hold for things, with the insurance guys, they are dramatically different. That's a disadvantage, but we've had those disadvantages in other business for a long time. We are going to do what's right for the client. Remember, when we do business with the client, we also get other revenues often. So it isn't just the loan, we look at the whole relationship. So we're quite comfortable we can compete. I just announced much bigger lending platforms and sizes and stuff like that. So I hope if any of the press is on, they heard this too. |
3,725 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Glenn Schorr: All right, thanks for all that.
Operator: Thank you. Our next question comes from the line of Gerard Cassidy from RBC Capital Markets. Your line is open.
Gerard Cassidy: Good morning, Jeremy, and good morning, Jamie. Jeremy when you guys look at your current capital ratios, they're obviously very healthy. Can you guys give us some color on the new Basel III? We don't know what the specifics are, but as Vice Chair Barr touched on some of the specifics, it looks like capital requirements for yourself and your peers will come down a fair amount from the original proposal. How are you guys thinking about that? Do you have any insights on how much it may fall from the original proposal to where you are today?
Jamie Dimon: Yes. When I said we're at $30 billion excess, that is assuming Barr speech that the $20 billion goes $12 billion wherever it is more. But it will be more than that because there are other factors involved. Now I would just give you the minimum excess capital. In my view, it would be more, but it is what it is, and we'll wait to see the final numbers. |
3,726 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: But Gerard, maybe to give you a bit of color. So yes, obviously, everyone paid a lot of attention to that speech. It was an important speech. But in the end, we actually just really need to see the proposal, because the details matter a lot for this stuff. And so our focus is on hoping to see the proposal, so that we can process the detail and continue advocating as appropriate. I note that you talk about requirements coming down relative to what was originally proposed, which is obviously true, part of the speech. But I do think we need to be a little bit careful not to fall into the trap of saying that, that's like progress just because the original proposal was so dramatically higher than what anyone thought was reasonable. And I would remind you, what you obviously know that before this proposal came out, it was our position strongly felt that our then prevailing capital requirements were, if anything, already more than we needed. So we've got a long way to go here. And I think our position, which Jamie has been articulating very consistently, is that they need to get it right, the right amount of work and importantly, do it holistically. So it's not just RWA, it's RWA, it's G-SIB, it's SCB, it's CCAR. So that's really what we feel strong.
Jamie Dimon: We just want the numbers to be done right and justified. If they had to go up, we'll be fine with that, too. I just think they should be done with real diligence and real thought and a little bit of thought about cost benefit, what it does to the economy, where it pushes lending and things like that. So we're anxiously waiting to see the actual detail because that's what's going to make all the difference. |
3,727 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Gerard Cassidy: Very good. And then as a follow-up, in view of this excess capital in your comments a moment ago about direct lending, you look at your current cash and marketable securities on a risk-weighted asset basis, you put it in your presentation, of course, $1.5 trillion. Average loan is $1.3 trillion. When everything -- when the dust settles, you know what your capital requirements are. Can you frame now for us, can you -- levering up the excess capital with more loans, is that an asset might be considered over the next two or three years relative to where you are on a mix basis? I know you're going to grow your loans, but I'm talking about the mix.
Jamie Dimon: Absolutely positively not. Loans are an outcome of doing good business. We want to do good business. If it grows our balance sheet, we're fine.
Jeremy Barnum: And I do think, Gerard, it depends a lot on what type of loans you're talking about, right? So I think in the end, as Jamie says, like it's capital, we're going to deploy it ideally to grow the franchise organically. And that could include loans that are almost good loans on a standalone basis, as well as loans that are part of an overall relationship where we're getting other revenue as part of that. So it's the same strategy that we've always had. But I wouldn't think of it as like excess capital to be deployed against a particular product. I would think of it as it's there for a rainy day. Let's hope the environment doesn't deteriorate a lot. But if it does, we'll be ready. And there'll be opportunities hopefully to deploy it against the client franchise or against the stock and if not, we'll return it.
Gerard Cassidy: Very good. Appreciate the color and candor as always. Thank you.
Operator: Thank you. Our next question comes from the line of Matt O'Connor with Deutsche Bank. You may proceed. |
3,728 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Thank you. Our next question comes from the line of Matt O'Connor with Deutsche Bank. You may proceed.
Matt O'Connor: Good morning. So lower rates was supposed to drive a pickup in loan growth and conversion of some of these investment banking pipelines. I mean, obviously, we just had one cut and it's early, but any beginning signs of this in terms of the interest in borrowing more and again, conversion of the banking pipelines?
Jeremy Barnum: I would say, Matt, generally no, frankly, with a couple of minor exceptions. So I think it's probably fair to say that the outperformance late in the quarter in Investment Banking fees was to a meaningful degree, as I mentioned, driven by DCM as well as, to some degree, driven by the acceleration of the closing of some M&A transactions. And I do think that some of that DCM outperformance is in the types of deals that are opportunistic deals that aren't in our pipeline. And those are often driven by treasurers and CFOs sort of seeing improvement in market levels and jumping on those. So it's possible that, that's a little of a consequence of the cuts. But I think I mentioned we did see, for example, a pickup in mortgage applications, tiny bit of pickup in refi and our multi-family lending business, there might be some hints of more activity there. But these cuts were very heavily priced, right? The curve has been inverted for a long time. So to a large degree, this is expected. So I'm not -- it's not obvious to me that you should expect immediate dramatic reactions, and that's not really what we're seeing.
Jamie Dimon: I noticed in the debt markets, rates came down, spreads are quite low and markets are wide open. So it kind of makes sense to people taking advantage of that today. Those conditions may not prevail, ongoing conditions late next year. |
3,729 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Matt O'Connor: And then specifically in the debit and credit card spend that you guys break out, you had nice growth year-over-year, up 6%, flat Q-Q. I know there's a lot of seasonality 2Q to 3Q. I think last year, it was up about 1%. But are you seeing any kind of changes in the consumer spend, either the mix or some signs of a slowdown later in the quarter? Thank you.
Jeremy Barnum: So I think what there is to say about consumer spend is a little bit boring in a sense, because what's happened is that it's become normal. So meaning -- I mean, I think we're getting to the point where it no longer makes sense to talk about the pandemic. But maybe one last time. One of the things that you had was that heavy rotation into T&E as people did a lot of traveling, and they booked cruises that they hadn't done before, and everyone was going out to dinner a lot, whatever. So you had the big spike in T&E, the big rotation into discretionary spending, and that's now normalized. And you would normally think that rotation out of discretionary into non-discretionary would be a sign of consumers battening down the hatches and getting ready for a much worse environment. But given the levels that it started from, what we see it as is actually like normalization. And inside that data, we're not seeing weakening, for example, in retail spending. So overall, we see the spending patterns as being sort of solid and consistent with the narrative that the consumer is on solid footing and consistent with the strong labor market and the current central case of a kind of new landing scenario economically. But obviously, as we always point out, that's one scenario, and there are many other scenarios.
Matt O'Connor: Got it. Thank you.
Operator: Our next question comes from the line of Mike Mayo from Wells Fargo Securities. You may proceed. |
3,730 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Our next question comes from the line of Mike Mayo from Wells Fargo Securities. You may proceed.
Mike Mayo: Hey. Jamie, I think I've seen you comment on government this year more than any other time in your career. And August 2, op-ed, Washington Post, Davos, you're talking about government. I think it was this week or last week on Bloomberg, you're saying bank merger should be allowed. Your bus tour in August, you were asked, which is my question now, under what circumstances would you leave for government service? And your answer then was, I love what I do. We get it. You love what you do, but on what circumstances would you consider government service? It seems like you'd be more likely to go now than in the past just based on the numerous comments that you've made. Is that right, wrong? What's your thinking?
Jamie Dimon: I think it's wrong. I've always been a American patriot. And my country is more important to me then my company, and I think that the government is very important to get this and if you look at the world today, Mike, it is so important that we get things right for the whole geopolitical world. So I'm not just talking about the American economy. So -- and we try to participate in policy at the local level, at the state level, at the federal level, at the international level to try to help -- that's our job. We try to grow economies and things like that. So nothing has changed in my view, in my opinion, or my interest. I just think it's very, very important that we try to help government do a good job.
Mike Mayo: So if you were asked by the next administration to serve the country, would you be open to considering it?
Jamie Dimon: I think the chance of that is almost nil, and I probably I’m not going to do it. But I've always reserved the right, I don't make promise to people. We don't have to. But now, I mean, I love what I do. I intend to be doing what we're doing. I almost guarantee I'll be doing this for a long period of time or at least until the Board kicks me out. |
3,731 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Mike Mayo: Let me take the flip side of that question, for those who are worried about you leaving. The other side of the question is, we're on these calls the last couple of years, you're saying the stock is overvalued. And I think part -- I think that's what you're saying. You're saying the stock market is overvalued, and therefore, all stocks are overvalued. And on the one hand, you highlighted on this call, AI, tech, market share gains, high returns, high capital. So do you think in some way, when you think about the value, your price and your ability to do buybacks, you're thinking more about an old school model for valuing your stock as opposed to a new school model that might put you in the category more tech-oriented firms, especially as it relates to your progress with AI?
Jamie Dimon: Well, listen, you're making a very good point, which is I think we have an exceptional company, exceptional franchises and the price point when you might buy the stock, but I'm not that exuberant about thinking even tech valuations or any valuations will stay at these very inflated values. And so I'm just -- we're just quite patient in that. And I think you're going to have to judge us over time about we've done the right thing enough. And remember, we can always do it. We haven't lost the money. It didn't go away. It's sitting in store. The only time we'll wrong if the stock runs way up, you've got to buy at much higher prices. And I just -- I would be real skeptic about that happening.
Operator: Thank you. Our next question comes from Ebrahim Poonawala from Bank of America. Your line is open. |
3,732 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Thank you. Our next question comes from Ebrahim Poonawala from Bank of America. Your line is open.
Ebrahim Poonawala: Hey, good morning. I guess I just wanted to follow-up. You talked about private credit and the disruption to bank lending. Another area I would appreciate if you can address is we've been hearing a lot about the likes of Jane Street and other market makers potentially disrupting fixed income trading? Is that a real risk? And is there an opportunity for a firm like JPMorgan to actually compete on the private venue side on market making beyond traditional sort of FIC activity? |
3,733 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes, Ebrahim, the way I would frame that is not as a risk, but as a reality like we've always emphasized in all of our businesses that we operate in an extremely competitive environment. And that applies to -- and that competitive environment isn't limited to competing against banks or traditional financial institutions. It extends in the consumer space to Fintech’s. And in the market-making space, it obviously increasingly is extending to some of the types of firms that you're referring to. Now those firms are many cases, also clients. And that's the same type of dynamic that you see, for example, in the private credit space that we've discussed before. So there's no question that the ecosystem is changing. You've got new competitors. You've got changes in market structure, new dynamics. And as with any business, we are innovating and adjusting and making sure that we compete in all the traditional ways and all the new ways. Of course, there are some ways in which being a bank hinders our ability to do that. And one of the arguments that we've made going back to the capital liquidity regulations is that when you come to the impact on the kind of U.S. capital markets ecosystem, which is the end view of the world, it's worked well in its current contract for a long time where some activities were inside the regulatory perimeter. And there was robust participation from unregulated capital of various sorts. And a world where more and more of that activity gets pushed outside of bank market makers is a meaningful change to that structure that is untested, and it's unclear why you would want that. And we've cautioned that if that's the intent of the regulations, it should be intentional and well-studied. But in the meantime, we're going to adjust and compete to the best of our ability, given the constraints of the current rule set. |
3,734 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Can I just add, so in the private markets, that remains to be seen how that develops. There is a little bit of that, and some people are talking about making more active things in private markets. In some ways, we're well positioned with that, too, because for that, you need liquidity, market making, valuation, buyers and sellers in both sides to create liquidity. So that hasn't developed yet. But we're not -- we may have competition, but we'll be there when the time comes. And the second one is the public markets. You have seen reports about dealer inventories, both corporate and treasuries. And I do think that's hampered a little bit. But again, we do it -- remember for clients, so we are a large market makers in both sides of the markets for clients, both credit and treasuries. And a little different than some of the other people just trading for their own account. And so they're both competition from our standpoint, but we're there. We're going to do it. We're going to deploy more capital we want. And we would even deploy more capital at lower returns if we really had to do it to service clients. So we're very conscious of it with the competition on both sides. As Jeremy said, we sat here 10-years ago, talking about the electronification of the business and can we keep up with that. And so far, we have.
Ebrahim Poonawala: Got it. And just one quick one. And Jeremy, you mentioned QT stopping at some point. We saw the repo sort of market spike at the end of September. Just give us your perspective on the risk of market liquidity shock as we move into year-end. How -- and do you have a view on how quickly Fed should recalibrate QT or actually stop QT to prevent some [Technical Difficulty]? Thanks. |
3,735 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes, it's a good question, Ebrahim. But I think you've kind of answered your own question in other words, like the argument out there is that the repo spike that we saw at the end of this quarter was an indication that maybe the market is approaching that lowest comfortable level of reserves that's been heavily speculated about and recognizing that, that number is probably higher and driven by the evolution of firms' liquidity requirements as opposed to some of the more traditional measures. And side point is just another reason why it's important to look at the whole frame more holistically when we think about the regulatory response in the events of two springs ago. You don't want those types of hikes, and it raises some questions about why there isn't more readiness to deploy into those types of disruptions, albeit this one was relatively minor. But in any case, when you put all that together, it would seem to add some weight to the notion that maybe QT should be wound down. And that seems to be increasingly the consensus that, that's going to get announced at some point in the fourth quarter. So final point was if you play that view through, it's a residual headwind for a system-wide deposit growth, which gets removed. And that's one of the reasons that we feel that we're probably in the trough of our deposit balances at the level. |
3,736 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Yeah. So I just want to add a couple of policy things here. I'm not actually sure they can actually do that because you have inflationary factors out there, partially driven by QE. And also look at the volatility, it's not a risk to JPMorgan. It's a risk to the system. And what banks have -- I've already mentioned the constrained balance sheet a little bit. So the banks will have trillions of dollars of cash and unable to deploy to the repo markets. And is it a good policy to think that every time that happens because you can do it very safely, fully collateralize all things like that, providing what I call flexible financing in the marketplace that, that happens, the Fed has to step in every time. I think that becomes a policy issue that every time there comes some kind of fluctuation in the market, people panic and the Feds got to stump in and provide stuff. And can they always do that if you have a slightly more inflationary environment going forward? So I think you have to be very thoughtful about this. That's why we do think they should look at calibrating SLR and ECLR and CET1 and all these things, particularly for this. So my view is, it is going to happen again. I can't tell you exactly when, but I'd be -- when, but I'd be surprised if it doesn't happen again.
Ebrahim Poonawala: Got it. Thank you, both.
Operator: Thank you. Our next question comes from the line of Betsy Graseck from Morgan Stanley. Your line is open.
Betsy Graseck: Hello, hi, good morning.
Jeremy Barnum: Hey, Betsy.
Betsy Graseck: Can you hear me? Hello?
Jamie Dimon: Yes, we can hear you. Yes.
Betsy Graseck: Can you hear me okay?
Jeremy Barnum: Yes, we can hear you. Can you hear us? |
3,737 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Betsy Graseck: Can you hear me okay?
Jeremy Barnum: Yes, we can hear you. Can you hear us?
Betsy Graseck: Oh, yes. Thank you. So, one for Jeremy, one for Jamie. Jeremy and Jamie, sorry about the NII question I'm going to have, but it is more than half your revenue, so I kind of care about it. But when I'm thinking about the trough and then the buildup, QT ending deposit growth, I mean that's part of the calculation for improvement as we go into 2025, right? I should embed that outlook. Is that right? And that's embedded in how you're thinking about it. I know we don't have a number from you for NII for 2025, but it is in there, right? |
3,738 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes. In other words, it goes back to my prior point and to the point that I had in the prepared remarks about the consumer deposit balances in particular that there's a bunch of different offsetting factors right now, right? You've got the yield curve, you've got Card revolve and you've got balances, and balances have been a headwind. We now see it as neutral and they could potentially become a tailwind later in the year. And one of the potential reasons for that is one of the potential tailwind -- one of the potential reasons for that is the potential end of QT, but emphasize the word potential to Jamie's point. You also obviously have a little bit of the fixed asset -- fixed rate asset reprice dynamics starting to flow through a little bit. While we're on NII, just to annoy Jamie a little bit more, I do want to make a point that I didn't get a chance to make previously, which is there is a reason that we emphasized the implied fourth quarter run rate for the Markets NII in the presentation, which is that if you take that and you annualize it, it gives you a launch point run rate, which is significantly higher than what's currently in the consensus and obviously what we've seen this year. And I'll give you the concise version of my usual speech. The changes in Markets NII are almost always bottom-line neutral and offset in NIR. But for the [Technical Difficulty] I'm trying to help you guys with your models, I would just encourage you to recognize what that launch point is, the number of cuts that are in the curve, the fact that, that number has historically and in the recent past been quite liability sensitive. So you can draw your own conclusions about what that should mean. Again, shouldn't change the overall revenue expectation. It's just a balance sheet and income statement geography issue, but just for the sake of helping you tidy up models, I wanted to make that point.
Betsy Graseck: And so Daniel's comments in September were on NII in total or NII ex-Markets, could you... |
3,739 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Betsy Graseck: And so Daniel's comments in September were on NII in total or NII ex-Markets, could you...
Jeremy Barnum: Those were core NII or NII ex. So again, reiterating at the time, the '24 consensus was $91.5 billion, the '25 consensus was $90 billion on NII ex. And our point was that, that number, which remains an asset-sensitive number, indicated an insufficient amount of sequential decline year-on-year. The current consensus as we see it for NII ex-Markets is $87 billion. And as we've noted, that's closer, albeit maybe still a little bit toppy.
Betsy Graseck: Okay. And then one for Jamie. Jamie, we did talk already quite a bit about the capital that you have, capital in store. Just wanted to understand how you're thinking about that opportunity set that's in front of you with regard to using it for potentially portfolio acquisitions. I realize that depositories are not on the docket, but we all know there's portfolios out there that might be looking for a home. And could you give us a sense as to how interested you might be in acquiring assets at this stage?
Jamie Dimon: Yes. So I mean always say, assets acquisitions. I mean, I always want our people to be looking at those things and thinking about those things and being -- but if you listen to what I'm saying about my question about the world, I'm not -- it's hard for me to say that we're going to be in the market to buy credit assets.
Betsy Graseck: What about... |
3,740 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Betsy Graseck: What about...
Jamie Dimon: [Multiple Speakers] Creating credit assets to help clients, that's a whole different matter because when it comes to clients, we earn credit asset spread and we usually have other stuff. That -- if our bankers can deploy capital that way, of course, we want to do more. And our CIO could deploy capital in multiple ways, we would probably do more. And we ask all the time, can we do more in affordable housing? Can we do more in things we're actually quite comfortable? And yes, if we can find ways to deploy capital, we would be happy to do that. But put us in a [Multiple Speakers] stretch.
Betsy Graseck: I'm just wondering about the private label credit card, for example. Is that something that would help clients?
Jamie Dimon: Almost no chance. But having -- it's very important. Why I say that, I always tell the management team second guess me. I mean, we've done private label. I know what it is. We've been there. I have a lot of issues with it. But is it possible that something is different one day and a different thing? Yeah, it's possible. So I don't want to cut it off. If Marianne Lake says to me, Jamie, you're not thinking clearly, the world's changed, we're going to change. But right now, I would say, no chance.
Betsy Graseck: Thank you so much.
Operator: Thank you. Our final question will come from Saul Martinez with HSBC. Your line is open. |
3,741 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Thank you. Our final question will come from Saul Martinez with HSBC. Your line is open.
Saul Martinez: Hey, good morning. I'm not going to ask about a specific NII in '25, but I did want to delve into the -- how to think about your deposit margin in volume dynamics in the CCB over the next few years? You have seen a decent amount of pressure in the deposit margin, 2.6%, down about 30 basis points as deposit balances have come down, so put some pressure on deposit NII. But deposit margins are still well above where they were when rates were at levels that are consistent with where the forward curve is now has been going. So I guess, how do we think about both volumes and margin dynamics if rates do come down, say to level that are consistent with the forward curve? I know the forward curve is likely going to be wrong, but that's the reference point we have. And conversely, volume offsets, you mentioned, Jeremy, the retail deposits becoming a tailwind. I guess how much of a tailwind could they be especially as you are expecting to gain quite a bit of market share in retail deposits? So just give us a sense of sort of the push and pulls of these dynamics that really help drive the deposit -- the value of the deposit franchise. |
3,742 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Sure. Yes. Thanks for the question, Saul. And I think you've laid out your -- the building blocks there already. Just for simplicity, I'm going to try to answer your question without referring to the disclosed CC deposit margin number just because that number is obviously the combination of the rate paid on the CCB deposits and the internal FTP into that. And that is a complicated thing that evolves as a function of the modeling of the betas and other things. So I think it's actually more helpful to look at this simply from a firm-wide perspective and look at the evolution of the rate paid in the context of the policy rates roughly and just set aside duration management and all those other factors. And I think when you do that, what you see is we've been saying for a while that the deposit margin defined for these purposes is simply the difference between the policy rate and the weighted average rate paid of the consumer deposits was unsustainably high. And that was going to have to correct one way or the other. Either deposits were going to reprice at the product level through checking and savings and/or we were going to see a ton of internal migration, i.e., growth in the CD mix and/or we would see a lower policy rate. So as we sit here right now, of course, we make pricing decisions in the context of market competition at any given moment, looking at what the environment is for deposits. But it -- we have not needed to reprice in order to retain bank relationships, which was also our core strategy. We were never going to chase sort of the hot money at the margin. We've leaned in heavily to CDs and gotten to the current level of CD mix, and that's been a good strategy. And from where we sit now, we now have the margin coming down as a result of the policy rate coming down. It seems that, that puts us in a pretty comfortable position from a pricing perspective. We think the CD mix has probably peaked. Now on the way down, it's not going to go back down to zero where it was at the beginning of the |
3,743 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | CD mix has probably peaked. Now on the way down, it's not going to go back down to zero where it was at the beginning of the cycle. That's an important thing to realize. So all else equal, that creates a little bit of margin compression. And then through all of that, obviously, a lower yield environment should mean that there's a little bit less outflow from consumer deposits. As I mentioned, we're seeing a lot less yield-seeking behavior. So then when you overlay onto that what you mentioned, which is our long-term share growth in CCB deposits in no small part as a function of the brand strategy and the build-out and the fact that only about a quarter of our top 125 markets in CCB are at that 15% share number. So we believe there's a big opportunity to grow the rest of it and be on track at the type of like average annual share growth of the order of 30 or 40 basis points that we've seen historically, that's how you kind of assemble a tailwind from normalized deposit margin and balance growth in consumer. |
3,744 | JPM | 3 | 2,024 | 2024-10-11 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jamie Dimon: Jeremy, correct me if you think I'm wrong. The abnormal time period was in was in race were between 0% and 1% or 2%. Other than that, if you look at -- if you were going to say what are normal deposit margins in the normal banking business, forget people going after really hot money, that happens. It's 2% to 2.5%.
Jeremy Barnum: Absolutely. Agree.
Saul Martinez: Okay. That's helpful. So it sounds like you're a little bit above that, but there's still some pressure, but you're not dramatically above those levels.
Jamie Dimon: Very good returns in business in Banking & Wealth Management. We're growing market share. And when we build branches and stuff like that, we don't necessarily assume current margins. We look at what could be normal margins over time. We're very comfortable, very nice business for you all.
Jeremy Barnum: Got it. Okay, that's helpful. Thanks a lot. That's all I got.
Jamie Dimon: Thanks, Saul.
Jeremy Barnum: Thanks, everyone. Thank you.
Operator: Thank you all for participating in today's conference. You may disconnect at this time, and have a great rest of your day. |
3,745 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Good morning ladies and gentlemen. Welcome to JPMorgan Chase's Second Quarter 2024 Earnings Call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. The presentation is available on JPMorgan Chase's website and please refer to the disclaimer in the back concerning forward-looking statements. Please stand by. At this time I would like to turn the call over to JPMorgan Chase's Chief Financial Officer Jeremy Barnum. Mr. Barnum, please go ahead. |
3,746 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum : Thank you and good morning everyone. Starting on Page one, the firm reported net income of $18.1 billion, EPS of $6.12 on revenue of $51 billion with an ROTCE of 28%. These results included the $7.9 billion net gain related to Visa shares and the $1 billion foundation contribution of the appreciated Visa stock. Also included is $546 million of net investment securities losses in corporate. Excluding these items, the firm had net income of $13.1 billion, EPS of $4.40, and an ROTCE of 20%. Touching on a couple of highlights, in the CIB, IB fees were up 50% year-on-year and 17% quarter-on-quarter, and market revenue was up 10% year-on-year. In CCB, we had a record number of first-time investors and strong customer acquisition across checking accounts and card and we've continued to see strong net inflows across AWM. Now before I get more detail on the results I just want to mention that starting this quarter we are no longer explicitly calling out the First Republic contribution in the presentation. Going forward, we'll only specifically call it out if it is a meaningful driver in the year-on-year comparison. As a reminder, we acquired First Republic in May of last year, so the prior year quarter only has two months of First Republic results compared to the full three months this quarter. Also in the prior year quarter most of the expenses were in corporate whereas now they are primarily in the relevant line-of-business. Now turning to Page 2 for the firm-wide results. The firm reported revenue of $51 billion, up $8.6 billion, or 20% year-on-year. Excluding both the Visa gain that I mentioned earlier, as well as last year's First Republic bargain purchase gain of $2.7 billion, revenue of $43.1 billion was up $3.4 billion or 9%. NII ex-Markets was up $568 million or 3%, driven by the impact of balance sheet mix and higher rates, higher revolving balances in card, and the additional month of First Republic related NII, partially offset by deposit margin compression and lower deposit balances. NIR |
3,747 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | additional month of First Republic related NII, partially offset by deposit margin compression and lower deposit balances. NIR ex-Markets was up $7.3 billion or 56%. Excluding the items I just mentioned, it was up $2.1 billion or 21%, largely driven by higher investment banking revenue and asset management fees. Both periods included net investment securities losses. And markets revenue was up $731 million or 10% year-on-year. Expenses of $23.7 billion were up $2.9 billion or 14% year-on-year. Excluding the foundation contribution I previously mentioned, expenses were up 9% primarily driven by compensation including revenue related compensation and growth in employees. And credit costs were $3.1 billion reflecting net charge-offs of $2.2 billion and a net reserve build of $821 million. Net charge-offs were up $820 million year-on-year, predominantly driven by Card. The net reserve build included $609 million in consumer and $189 million in wholesale. Onto balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15.3% up 30 basis points versus the prior quarter, primarily driven by net income, largely offset by capital distributions and higher RWA. As you know, we completed CCAR a couple of weeks ago and have already disclosed a number of the key points. Let me summarize them again here. Our preliminary SCB is 3.3%, although the final SCB could be higher. The preliminary SCB, which is up from the current requirement of 2.9%, results in a 12.3% standardized CET1 ratio requirement, which goes into effect in the fourth quarter of 2024. And finally the firm announced that the Board intends to increase the quarterly common stock dividend from $1.15 to $1.25 per share in the third quarter of 2024. Now, let's go to our businesses, starting with CCB on Page 4. CCB reported net income of $4.2 billion on revenue of $17.7 billion, which was up 3% year-on-year. In banking and wealth management, revenue was down 5% year-on-year, reflecting lower deposits and deposit margin compression, partially offset |
3,748 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | wealth management, revenue was down 5% year-on-year, reflecting lower deposits and deposit margin compression, partially offset by growth and wealth management revenue. Average deposits were down 7% year-on-year and 1% quarter-on-quarter. Client investment assets were up 14% year-on-year, predominantly driven by market performance. In home lending, revenue of $1.3 billion was up 31% year-on-year, predominantly driven by higher NII, including one additional month of the First Republic portfolio. Turning to Card services and Auto, revenue was up 14% year-on-year, predominantly driven by higher Card NII and higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10.8 billion, down 10% coming off strong originations from a year ago, while continuing to maintain healthy margins. Expenses of $9.4 billion were up 13% year-on-year, predominantly driven by First Republic expenses now reflected in the lines-of-business, as I mentioned earlier, as well as field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $2.6 billion reflecting net charge-offs of $2.1 billion up $813 million year-on-year, predominantly driven by Card, as newer vintages season and credit normalization continues. The net reserve build was $579 million, also driven by Card, due to loan growth and updates to certain macroeconomic variables. Next, the Commercial and Investment Bank on Page 5. Our new Commercial and Investment Bank reported net income of $5.9 billion on revenue of $17.9 billion. You'll note that we are disclosing revenue by business, as well as breaking down the banking and payments revenue by client coverage segment in order to best highlight the relevant trends in both important dimensions of the wholesale franchise. This quarter, IB fees were up 50% year-on-year, and we Ranked Number #1 with year-to-date wallet share of 9.5%. And advisory, fees were up |
3,749 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | IB fees were up 50% year-on-year, and we Ranked Number #1 with year-to-date wallet share of 9.5%. And advisory, fees were up 45%, primarily driven by the closing of a few large deals in a week prior year quarter. Underwriting fees were up meaningfully with equity up 56% and debt up 51%, benefiting from favorable market conditions. In terms of the outlook, we're pleased with both the year-on-year and sequential improvement in the quarter. We remain cautiously optimistic about the pipeline, although many of the same headwinds are still in effect. It's also worth noting that pull-forward refinancing activity was a meaningful contributor to the strong performance in the first half of the year. Payments revenue was $4.5 billion, down 4% year-on-year, as deposit margin compression and higher deposit related client credits were largely offset by fee growth. Moving to markets, total revenue was $7.8 billion, up 10% year-on-year. Fixed income was up 5% with continued strength in securitized products. And equity markets was up 21%, with equity derivatives up on improved client activity. We saw record revenue in Prime on growth and client balances amid supportive equity market levels. Security services revenue of $1.3 billion was up 3% year-on-year, driven by higher volumes and market levels, largely offset by deposit margin compression. Expenses of $9.2 billion were up 12% year-on-year, largely driven by higher revenue related compensation, legal expense, and volume related non-compensation expense. In banking and payments, average loans were up 2% year-on-year due to the impact of the First Republic acquisition and flat sequentially. Demand for new loans remains muted as middle market and large corporate clients remain somewhat cautious due to the economic environment, and revolver utilization continues to be below pre-pandemic levels. Also, capital markets are open and are providing an alternative to traditional bank lending for these clients. In CRE, higher rates continue to suppress both loan origination and payoff |
3,750 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | to traditional bank lending for these clients. In CRE, higher rates continue to suppress both loan origination and payoff activity. Average client deposits were up 2% year-on-year and relatively flat sequentially. Finally, credit costs were $384 million. The net reserve build of $220 million was primarily driven by incorporating the First Republic portfolio in the Firm's modeled approach. Net charge-offs were $164 million, of which about half was in office. Then to complete our lines-of-business, AWM on Page 6. Asset and wealth management reported net income of $1.3 billion with pre-tax margin of 32%. Revenue of $5.3 billion was up 6% year-on-year, driven by growth in management fees on higher average market levels and strong net inflows, as well as higher brokerage activity, largely offset by deposit margin compression. Expenses of $3.5 billion were up 12% year-on-year, largely driven by higher compensation, primarily revenue-related compensation, and continued growth in our private banking advisor teams. For the quarter, long-term net inflows were $52 billion, led by equities and fixed income. And in liquidity, we saw net inflows of $16 billion. AUM of $3.7 trillion was up 15% year-on-year. And client assets of $5.4 trillion were up 18% year-on-year, driven by higher market levels and continued net inflows. And finally, loans and deposits were both flat quarter-on-quarter. Turning to corporate on Page 7. Corporate reported net income of $6.8 billion on revenue of $10.1 billion. Excluding this quarter's Visa-related gain and the First Republic bargain purchase gain in the prior year, NIR was up approximately $450 million year-on-year. NII was up $626 million year-on-year, driven by the impact of balance sheet mix and higher rates. Expenses of $1.6 billion were up $427 million year-on-year, excluding foundation contribution expenses were down $573 million year-on-year, largely as a result of moving First Republic related expense out of corporate into the relevant segments. To finish up, we have the outlook on |
3,751 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | of moving First Republic related expense out of corporate into the relevant segments. To finish up, we have the outlook on Page 8. Our 2024 guidance, including the drivers, remains unchanged from what we said at Investor Day. We continue to expect NII and NII ex-markets of approximately $91 billion, adjusted expense of about $92 billion, and on credit, Card net charge-off rate of approximately 3.4%. So to wrap up, the reported performance for the quarter was exceptional and actually represents record revenue and net income. But more importantly, after excluding the significant items, the underlying performance continues to be quite strong. And as always, we remain focused on continuing to execute with discipline. And with that, let's open the line for Q&A. |
3,752 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: For our first question, we'll go to the line of Steven Chubak from Wolfe Research. Please go ahead.
Steven Chubak: Hi. Good morning, Jeremy.
Jeremy Barnum: Good morning Steve.
Steven Chubak: So, I wanted to start off with a question on capital. Just given some indications that the Fed is considering favorable revisions to both Basel III endgame and the GSIB surcharge calculations, which I know you've been pushing for some time. As you evaluate just different capital scenarios, are these revisions material enough where they could support a higher normalized ROTCE at the Firm versus a 17% target? And if so, just how that might impact or inform your appetite for buybacks going forward? |
3,753 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Right, okay. Thanks Steve. And actually before answering the question, I just want to remind everyone that Jamie is not able to join because he has a travel conflict overseas, so it's just going to be me today. Okay. Good question on the capital and the ROTCE. So let me start with the ROTCE point first. In short, my answer to that question would be no. It's hard to imagine a scenario coming out of the whole potential range of outcomes on capital that involves an upward revision on ROTCE. If you think about the way we've been talking about this, we've said that you know before the Basel III endgame proposal, we had a 17% through cycle target and that while you can imagine a range of different outcomes, the vast majority of them involve expansions of the denominator. And while we had ideas about changing the perimeter and repricing, all of which are still sort of in effect, most of those would be thought of as mitigants rather than things that would actually increase the ROTCE. And I don't really think that answer has particularly changed. So as of now, that's what I would say, which is a good pivot to the next point, which is yeah, we've been reading the same press coverage you've been reading and you know, it's fun and interesting to speculate about the potential outcomes here, but in reality, we don't know anything -- you don't know. We don't know how reliable the press coverage is. And so in that sense, I feel like on the overall capital return and buyback trajectory, not much has actually changed relative to what I laid out at Investor Day, the comments that I made then, the comments that Jamie made then, as well as the comments that Jamie made subsequent week at an industry conference. So maybe I'll just briefly summarize for everyone's benefit what we think that is, which is one, we do recognize that our current practice on capital return and buybacks does lead to an ever-expanding CET1 ratio. But obviously we're going to run the company over the cycle over time at a reasonable CET1 ratio |
3,754 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | an ever-expanding CET1 ratio. But obviously we're going to run the company over the cycle over time at a reasonable CET1 ratio with reasonable buffers relative to our requirements. So after all the uncertainty is sorted out, the question of the deployment of the Capital one way or another is a matter of when, not if. On the capital hierarchy, it's also worth noting that's another thing that remains unchanged, so I'll review it quickly. You know, growing the business organically and inorganically, sustainable dividend, and in that context it's worth noting that the Board's announced intention to increase it to a $1.25 is a 19% increase prior to last year, so that's a testament for our performance and that is a return of capital. And then finally buyback, but that hierarchy does not commit us to return 100% of the capital generation in any given quarter. And so, as we said here today, when you look at the relationship between the opportunity cost of not deploying the capital and the opportunities to deploy the capital outside the Firm, it is kind of hard to imagine an environment where that relationship argues more strongly for patients. So given all that, putting it all together I'm sorry for the long answer, we remain comfortable with the current amount of excess capital. And as Jamie has said, we really continue to think about it as earnings in store, as much as anything else. |
3,755 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Steven Chubak: No need to apologize, Jeremy. That was a really helpful perspective. Maybe just for my follow-up on NII. You've been very consistent just in flagging the risk related to NII over earning, especially in light of potential deposit attrition, as well as repricing headwinds. In the second quarter, we did see at least some moderation in repricing pressures. Deposit balances were also more resilient in what's a seasonally weak quarter for deposit growth. So just given the evidence that some deposit pressures appear to be abating. Do you see the potential for NII normalizing higher? And where do you think that level could ultimately be in terms of stabilization? |
3,756 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes. Interesting question, Steve. So let's talk about deposit balances. So yes I see your point about how balance pressures are slightly abating. When you look at the system as a whole, just to go through it, Q2 is still a bit of a headwind. Loan growth is modest and not enough to offset that. And RRP seems to have settled in roughly at its current levels, and there are reasons to believe that it might not go down that much more, although that could always change and that could supply extra reserves into the system. But on balance, net across all those various effects, we still think that there are net headwinds to deposit balances. So when we think of our balance outlook, we see it as flat to slightly down maybe, with our sort of market share and growth ambitions offsetting those system-wide headwinds. So in terms of normalizing higher, I guess it depends on relative to what. But I think it is definitely too early to be sort of calling the end of the over earning narrative or the normalization narrative. Clearly, the main difference in our current guidance relative to what we had earlier in the year, which implied a lot more sequential decline, is just the change in the Fed outlook. So two cuts versus six cuts is the main difference there. But obviously, based on the latest completion data and so on, you could usually get back to a situation with a lot more cuts in the yield curve. So we'll see how it goes. And in the end, we are kind of focused on just running the place, recognizing and trying not to be distracted by what remains some amount of over earning, whatever it is.
Steven Chubak: Understood, Jeremy. Thanks so much for taking my questions.
Jeremy Barnum: Thanks Steve.
Operator: Next, we'll go to the line of Saul Martinez from HSBC. Please go ahead. |
3,757 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Thanks Steve.
Operator: Next, we'll go to the line of Saul Martinez from HSBC. Please go ahead.
Saul Martinez: Hi, good morning. Thanks for taking my question. Jeremy, can you give an update on the stress capital buffer? You noted, obviously, that you think there is an error in the Fed’s calculation due to OCI. Can you just give us a sense of what the dialogue with the Fed looks like? Is there a process to modify the SCB higher? And if you could give us a sense of what that process looks like.
Jeremy Barnum: Yes. So I'm not going to comment about any conversations with the Fed. Not to confirm or deny that they even exist, that stuff is private. And so -- and then if you talk about like the timing here, right? So you know that the stress capital buffer that's been released 3.3%, is a preliminary number. By rule, the Fed has to release that by August 31, it may come sooner. You talked about an error in the calculation, we haven't used that word. What we know -- what we believe, rather, is that the amount of OCI gain that came through the Fed’s disclosed results looked non-intuitively high to us. And if you adjust that in ways that we think are reasonable, you would get a slightly higher stress capital buffer. Whether the Fed agrees and whether they decide to make that change or not is up to them, and we'll see what happens. I think the larger point is that if you look at the industry as a whole and if you sort of put us into that with some higher pro forma SCB, whatever it might conceivably be, you actually see once again, quite a bit of volatility in the year-on-year change in the stress capital buffer for many firms. And just sort of reiterating and -- another example of what we've said a lot over the years, that it's volatile, it's untransparent, it makes it very hard to manage capital of a bank. It leads to excessively high management buffers, and we think it's really not a great way to do things. So I'll leave it at that. |
3,758 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Saul Martinez: Okay. Got it. That's helpful. Just following up on capital returns on Steve's question. I think you highlighted in response as a matter of when not if. And obviously, Jamie is not there. You can't speak for Jamie. But seems to have shown limited enthusiasm for a special dividend or buybacks at current valuations. Can you just give us a sense of how you're thinking about the various options? Any updated thoughts on your special dividend? And can you do other things like for example, have a material increase in your dividend payout sort of a step function increase, where -- keep that flat and grow into that grow your earnings into that over time? Can you just maybe give us a sense of how you're thinking about what options you have available to deploy that capital. |
3,759 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes. I mean I would direct you to read -- actually, I have Jamie's comments at the industry conference where you participated the week after Investor Day, because he wanted just a good amount of detail on this stuff addressing some of these points. And I think his comment there about the special dividend was that it's not really a preference. We hear from people that many of our investors wouldn't find that particularly appealing, and he said as much that it wouldn't be sort of our first choice. So I think the larger point is just that -- a little bit to your question, there are a number of tools in the toolkit, and they're really the same tools that are part of our capital hierarchy. So first and foremost, we're looking to deploy the capital into organic or inorganic growth. And then the dividend, I think, we are always going to want to keep it in that like sustainable, and also sustainable in a stress environment. So that continues to be the way we think about that. And then at the end of it, it is buybacks. And Jamie has been on the record for over a decade, I think over many shareholder letters, talking about how he thinks about price and buybacks and valuation, and price is a factor. So that's sort of the totality of the sort of options, I guess.
Saul Martinez: Okay, great. Thanks a lot.
Jeremy Barnum : Thanks Saul.
Operator: Next, we'll go to the line of Ken Usdin from Jefferies. Please go ahead. |
3,760 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum : Thanks Saul.
Operator: Next, we'll go to the line of Ken Usdin from Jefferies. Please go ahead.
Ken Usdin: Thanks a lot. Good morning Jeremy. Jeremy, great to see the progress on investment banking fees, up sequentially and 50% year-over-year. And I saw you on the tape earlier just talking about still regulatory concerns a little bit in the advisory space. And we clearly didn't see the debt pull-forward play through, because DCM was great again. I'm just wondering just where you feel the environment is relative to the potential. And just where the dialogue is across the three main bucket areas in terms of like how does this feel in terms of current environment versus a potential environment that we could still see ahead? Thanks. |
3,761 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes. Thanks, Ken. It's progress, right? I mean we are happy to see the progress. People have been talking about [depressed] (ph) banking fee wallet for some time, and it's nice to see not only the year-on-year pop on the low base, but also a nice sequential improvement. So that's the first thing to say. In terms of dialogue and engagement, it's definitely elevated. So as the dialogue on ECM is elevated and the dialogue on M&A is quite robust as well. So all of those are good things that encourage us and make us hopeful that we could be seeing sort of a better trend in this space. But there are some important caveats. So on the DCM side, yes, we made pull-forward comments in the first quarter, but we still feel that this second quarter still reflects a bunch of pull forward, and therefore we are reasonably cautious about the second half of the year. Importantly, a lot of the activity is refinancing activity as opposed to for example, acquisition finance. So the fact that M&A remains still relatively muted in terms of actual deals has knock-on effects on DCM as well. And when a higher percentage of the wallet is refi, then the pull-forward risk becomes a little bit higher. On ECM, if you look at it kind of at [remove] (ph), you might ask the question, given the performance of the overall indices, you would think it would be a really booming environment for IPOs, for example. And while it's improving, it's not quite as good as you would otherwise expect. And that's driven by a variety of factors, including the fact that as has been widely discussed, that extent to which the performance of the large industries is driven by like a few stocks, the sort of mid-cap tech growth space and other spaces that would typically be driving IPOs have had much more muted performance. Also, a lot of the private capital that was raised a couple of years ago was raised at pretty high valuations. And so in some cases, people looking at IPOs could be looking at down rounds, that's an issue. And while secondary market |
3,762 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | And so in some cases, people looking at IPOs could be looking at down rounds, that's an issue. And while secondary market performance of IPOs has improved meaningfully, in some cases, people still have concerns about that. So those are a little bit of overhang on that space. I think we can hope that, over time that fades away and the trend gets a bit more robust. And yes, on the advisory side, the regulatory overhang is there, remains there. And so we'll just have to see how that plays out. |
3,763 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Ken Usdin: Great. Thank you for all that Jeremy. And just one on the consumer side. Just anything you're noticing in terms of people who just have been waiting for this delinquency stabilization on the credit card side. Obviously, your loss rates are coming in as you expected, and we did see 30 days pretty flat and 90 days come down a little bit. Any -- is that seasonal? Is it just a good rate of change trend? Any thoughts there? Thanks.
Jeremy Barnum: Yes. I still feel like when it comes to Card charge-offs and delinquencies, there's just not much to see there. It's still -- it's normalization, not deterioration. It's in-line with expectations. As I say, we always look quite closely inside the cohort, inside the income cohorts. And when you look in there, specifically, for example on spend patterns, you can see a little bit of evidence of behavior that's consistent with a little bit of weakness in the lower income segments, where you see a little bit of rotation of the spend out of discretionary into non-discretionary. But the effects are really quite subtle, and in my mind definitely entirely consistent with the type of economic environment that we are seeing, which, while very strong and certainly a lot stronger than anyone would have thought given the tightness of monetary conditions, say, like they've been predicting it a couple of years ago or whatever, you are seeing slightly higher unemployment, you are seeing moderating GDP growth. And so it is not entirely surprising that you're seeing a tiny bit of weakness in some pockets of spend. So it all kind of hangs together in what is sometimes actually not a very interesting story.
Ken Usdin: Thank you.
Jeremy Barnum: Thanks Ken.
Operator: Next, we'll go to the line of Glenn Schorr from Evercore ISI. Please go ahead. |
3,764 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Thanks Ken.
Operator: Next, we'll go to the line of Glenn Schorr from Evercore ISI. Please go ahead.
Glenn Schorr: Hi, thanks very much. So Jeremy, the discussions so far around private credit and you all, your recent comments have been the ability to add on balance sheet and compete when you need to compete on the private credit front. I do think that most of the discussion has been about the direct-lending component. So I'm curious if you are showing more progress and activity on that front. And then very importantly, do you see the same trend happening on the asset-backed finance side, because that's a bigger part of the world, and it is a bigger part of your business? So I'd appreciate your thoughts there. Thanks. |
3,765 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes. Thanks, Glenn. So on private credit, so nothing really new to say there. I think -- I guess one way the environment is evolving a little bit is that as you know, a lot of money has been raised in private credit funds looking for deals. And sort of a little bit to my prior comment, in a relatively muted acquisition finance environment, at this point you've got a lot of money chasing kind of like not that many deals. So the space is a little bit quieter than it was at the margin. Another interesting thing to note is some of this discussion about kind of lender protections that were typical in the syndicated lender finance market making their way into the private market as well, is sort of people realize that even in the private market, you probably need some of those protections in some cases. Which is sort of supportive of the theme that we've been talking about, about convergence between the direct lending space and the syndicated lending space, which is kind of our core thesis here, which is that we can offer best-in-class service across the entire continuum, including secondary market trading and so on. So we feel optimistic about our offering there. I think the current environment is maybe a little bit quieter than it was. So it is maybe not a great moment to like kind of test whether we are doing a lot more or less in the space, so to speak. And then on asset-backed financing, you actually asked me that question before. And at the time, my answer was that I haven't heard much about that trend, and that continues to be the case. But clearly, there must be something I'm missing. So I can follow up on that and maybe we can have a chat about it. |
3,766 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Glenn Schorr: That's great for you if you are not hearing much about it, so we can leave it at that. Maybe just one quick follow-up in terms of your just overall posturing on -- you were patient and smart when rates were low, waited to deploy, worked out great. We know that story. Now it seems like you have tons of excess liquidity and you are being patient and rates are high. And I'm curious on how you think about what kind of triggers, what kind of things you're looking for in the market to know if and when you would extend duration?
Jeremy Barnum: Right. I mean on duration, in truth we have actually added a little bit of duration over the last couple of quarters. So that's one thing to say, that was more last quarter than this quarter. But I guess I would just caution you from -- a little bit away from looking at kind of our reported cash balances and our balance sheet, and concluding that when you look at the duration concept holistically, that there is a lot to be done differently on the duration front. So clearly, it is true that empirically, we've behaved like very asset sensitively in this rate hiking cycle, and that has resulted in a lot of excess NII generation sort of on the way up in the near-term. But when we look at the fund's overall sensitivity to rates, we look at it through both like the [EAR type lens] (ph), the short-term NIR sensitivity, but also a variety of other lenses, including various types of scenario analysis, including impacts on capital from higher rates. And as I think Jamie has said a couple of times, we actually aim to be relatively balanced on that front. Also, given like the inverted yield curve, it's not as if extending duration from these levels means that you're walking in 5.5% rate. In fact, the forwards are not sort of that compelling given our views about some sort of structural upward pressures on inflation and so on. So I think when you put that all together, I don't think that kind of a big change in duration posture is a thing that's front in mind for us. |
3,767 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Glenn Schorr : Super, helpful. Thanks so much for that.
Jeremy Barnum: Thanks Glenn.
Operator: Next, we'll go to the line of Matt O'Connor from Deutsche Bank. Please go ahead.
Matt O'Connor: Good morning. I was just wondering if you can elaborate on essentially the math behind the ROTCE being too high at 20% and normalized at 17%. Obviously, you've pointed to over-[earning NII] (ph). And I guess the question is, is that all of it to go from 20% to 17%? And if so, is that all consumer deposit costs? Or are there a few other components that you could help frame for us? |
3,768 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Sure. Good question, Matt. I mean, I guess the way I think about it is a couple of things. Like our returns tend to be a bit seasonal, right? So if you kind of build yourself out a full year forecast and make reasonable space on your own, or analyst consensus or whatever, and you think about the fourth quarter, better look at this on a full year basis when you think about the returns than the quarterly numbers, and you obviously have to strip out kind of the onetime items. And so if you do that, like whatever you get for this year is still clearly a number that's higher than 17%. So yes, one source of headwinds is normalization of the NII, primarily as a result of the expected higher deposit costs. That's -- we've talked about that. Part of it is also the yield curve effects. Some cuts will come into the curve at some point. And in the normal course, if you kind of do a very, very, very supplemental model of the company, you would have like expenses grow -- revenue is growing at some organic GDP like rate, maybe higher, and expenses growing at a similar slightly lower rate, producing a sort of relatively stable overhead ratio. But even if the amount of NII normalization winds up being less than we might have thought at some prior point, you still have some background -- you still have some normalization of the overhead ratio that needs to happen. So as much as our discipline on expense management is, as tight as it always has been, the inflation is still non-zero. There are still investments that we're executing. There is still higher expense to come in a slightly flatter revenue environment as a result of in part, the normalization of NII. And then the final point is that whatever winds up being the answer on Basel III endgame and all the other pieces, you have to assume some amount of expansion of the denominator, at least based on what we know so far. So of course, any of those pieces could be wrong, but that's kind of how we get to our 17%. And if you look at the various scenarios that we |
3,769 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | any of those pieces could be wrong, but that's kind of how we get to our 17%. And if you look at the various scenarios that we showed on the last page of my Investor Day presentation, it illustrates those dynamics and also how much the range could actually vary as a function of the economic environment and other factors. |
3,770 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Matt O'Connor: Yes. That was a really helpful chart. Just one follow-up. On the yield curve effects, I guess, what do you mean by that? Because right now, the yield curve is inverted, maybe you're still leaving any impact of that. But kind of longer-term, you'd expect a little bit of steepness of the curve, which I would think would help. But what does you mean by that? Thank you.
Jeremy Barnum: Yes. I mean you and I talked about this before. I guess I sort of -- I guess I don't really agree fundamentally with the notion that the way to think about things is that sort of yield curve steepness above and beyond what's priced in by the forwards is a source of structural NII or NIM for banks, if you know what I mean. Like I mean people have different views about the so-called term premium. And obviously, in a moment of inverted curve and different types of treasury supply dynamics, people thinking on that may be changing. But I think we saw, when rates were at Zero and the 10-year note was below 2%, everyone sort of -- many people were kind of tempted to try to get extra NIM and extra NII by extending duration a lot. But when the steepness of the curve implies -- is driven by the expectation of actually aggressive Fed tightening, it's just a timing issue and you can wind up kind of pretty offside from the capital and other perspectives. So there are some interesting questions about whether fiscal dynamics might result in a structurally steeper yield curve down the road and whether that could be sort of -- earning the term premium, so to speak, could be a source of NII, but that feels a bit speculative to me at this point.
Matt O'Connor: Got it. Okay, thank you for the details.
Jeremy Barnum : Thanks Matt.
Operator: Next, we'll go to the line of Mike Mayo from Wells Fargo Securities. Please go ahead. |
3,771 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum : Thanks Matt.
Operator: Next, we'll go to the line of Mike Mayo from Wells Fargo Securities. Please go ahead.
Mike Mayo: Hi. Jeremy, you said it's too early to end the over earning narrative, and you highlighted higher deposit costs and the impact of lower rates and lower NII and DCM pull-forward and credit cost going higher. Anything I'm missing on that list? And what would cause you to end the over earning narrative?
Jeremy Barnum: No. Actually, I think that is the right list Mike. I mean, frankly, I think one thing that would end to be over earning narrative is if our annual returns were closer to 17%. I mean to the extent that, that is the through-the-cycle number that we believe and that we are currently producing more than that, that's one very simple way to look at that. But the pieces of that or the pieces that you talked about and the single most important piece is the deposit margin. Our deposit margins are well above historical norms, and that is a big part of the reason that we still are emphasizing the over earning narrative.
Mike Mayo: You're 17% through-the-cycle ROTCE kind of expectation, what is the CET1 ratio that you assumed for that? |
3,772 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Mike Mayo: You're 17% through-the-cycle ROTCE kind of expectation, what is the CET1 ratio that you assumed for that?
Jeremy Barnum: I mean we would generally assume requirements plus a reasonable buffer, which depending on the shape of rules, could be a little bit smaller or a little bit bigger. And the small part as a function of the volatility of those pools, which goes back to my prior comments on SCB and CCAR. But obviously, as you well know, what actually matters is less the ratio and more of the dollars. And at this point, the dollars are very much a function of where rules land and where the RWA lands, and obviously things like GSIB recalibration and so on. So we've done a bunch of scenario analysis along the lines of what I did at Investor Day that informs those numbers, but that is obviously one big element of uncertainty behind that 17%. Which is why at Investor Day, when we talked about it, both Daniel and I were quite specific about saying that we thought 17% was still achievable, assuming a reasonable outcome on the Basel III endgame.
Mike Mayo: Let me just zoom out for one more question on the return target. I mean when I asked Jamie at the [2013] (ph) Investor Day would it make sense to have 13.5% capital, he was basically telling you take a hike, right? And now you have 15.3% capital and you're saying, well, we might want to have a lot more capital here. I mean at some point, if you're spending $17 billion a year to improve the company, if you're gaining share with digital banking, if you're automating the back office, if you're moving ahead with AI, if you're doing all these things that I think you say others aren't doing, why wouldn't those returns go higher over time? Or do you just assume you'll be competing those benefits away? Thanks. |
3,773 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes. I mean, I think in short, Mike, and we've talked about this a lot and Jamie has talked about this a lot, it is a very, very, very competitive market. And we are very happy with our performance. We are very happy with the share we've taken. And 17% is like an amazing number actually. And like to be able to do that, given how robust the competition is from banks, from non-banks, from US banks, from foreign banks and all of the different businesses that we compete in, is something that we're really proud of. So the number has a range around it, obviously. So it's not a promise, it's not a guarantee and it can fluctuate. But we are very proud to be in the ballpark of being able to think that we can deliver it, again assuming a reasonable outcome on Basel III endgame. But it's a very, very, very competitive market across all of our products and services and regions and [line] (ph) segments.
Mike Mayo: All right. Thank you.
Operator: Next, we'll go to the line of Betsy Graseck from Morgan Stanley. Please go ahead.
Betsy Graseck: Hi, Jeremy.
Jeremy Barnum: Hi, Betsy. |
3,774 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Betsy Graseck: Hi, Jeremy.
Jeremy Barnum: Hi, Betsy.
Betsy Graseck: So I did want to ask one drill-down question on 2Q, and it is related to the dollar amount of buybacks that you did do. I think in the press release, right and the slide deck, it's $4.9 billion common stock net repurchases. So the question here is what's the governor for you on how much to do every quarter? And I mean I understand it is a function of okay, how much do we organically grow. But even with that, so you get the organic growth which you had some nice movement there. But you do the organic growth and then is it how much do we earn and we want to buy back our earnings? Or how should we be thinking about what that repurchase volume should be looking like over time? And I remember at Investor Day, the whole debate around I don't want to buy back my stock, but we are right? So I get this question from investors quite a bit of how should we be thinking about how you think about what the right amount is to be doing here? |
3,775 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes. That's a very good and fair question, Betsy. So let me try to unpack it to the best of my abilities. So -- in no particular order. One thing that we've really tried to emphasize in a number of different settings, including in our recent 10-Qs actually, is that we don't want to get into the business of guiding on buybacks. So we're going to buy back whatever we think makes sense in the current moment sort of -- and we prefer the right to sort of change that at any time. So I recognize that not everyone loves that, but that is kind of a philosophical belief. And so I might as well say it explicitly. It was pretty clear in the [Q] (ph) also, but I'm just going to say that again. So that's point one. But having said that, let me nonetheless try to address your point on framework and governors. So generally speaking, we think it doesn't make sense to sort of exit the market entirely unless the conditions are much more unusual than they are right now, let's say. Obviously, when for whatever reason, if we ever need to build capital in a hurry, we've done it before and we are always comfortable suspending buybacks entirely. But I think some modest amount of buybacks, is a reasonable thing to do when you are generating your kind of capital. And so we were talking before about this $2 billion pace, we're kind of trying to move away from this notion of a pace, but that's where that idea comes from, let's put it that way. You talked about the $4.9 million, which I recognize may seem like a little bit of a random number. But where that actually comes from is the other statement that we made, that we have these significant item gains from Visa. And if you think about what that means, it means that we have, post the acceptance of the exchange offer, a meaningful long position and liquid large cap financial stock, i.e. Visa, which realistically is highly correlated to our own stock. And so in some sense, why carry that instead of just buying back JPMorgan stock. So we talked about, Jamie talked about as we |
3,776 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | And so in some sense, why carry that instead of just buying back JPMorgan stock. So we talked about, Jamie talked about as we liquidate the Visa, deploying those proceeds into JPM, and that's what we did this quarter. So that is why the 4.9% is a little higher. And it's consistent with my comments at our Investor Day around having slightly increased the amount of buybacks. And beyond that what you are left with is answer to Steve's question, which is that, to your point about buying back earnings or whatever, when we are generating these types of earnings and there is this much organic capital being generated, in the absence of opportunities to deploy it organically or inorganically and while continuing to maintain our healthy but sustainable dividend, if we don't return the capital, we are going to keep growing the CET1 ratio, the levels of which -- if you think about the long strategic outlook of the company, are not reasonable. They're just artificially high and unnecessary. So one way or the other, that will need to be addressed at some point. It's just that we don't feel now is the right time. |
3,777 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Betsy Graseck: Great. Thank you Jeremy. Appreciate it.
Jeremy Barnum: Thanks Betsy.
Operator: Next, we'll go to the line of Gerard Cassidy from RBC Capital Markets. Please go ahead.
Gerard Cassidy: Hi, Jeremy, how are you?
Jeremy Barnum: Hi, Gerard.
Gerard Cassidy: Jeremy, can you -- I know you touched on deposits earlier in the call in response to a question. I noticed on the average balances, the non-interest bearing deposits were relatively stable quarter-to-quarter versus prior quarters when they have steadily declined. And this is one of the areas, of course investors are focused on in terms of the future of the net interest margin for you and your peers. Can you elaborate, if you can, what you're seeing in that non-interest-bearing deposit account? I know this is average and not period end, the period end number may actually be lower. But what are you guys seeing here? |
3,778 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Yes. Good question, Gerard. I have to be honest, I haven't focused on that particular sequential explain i.e., quarter-on-quarter change and average non-interest-bearing deposits. But I think the more important question is the big picture question, which is what do we expect? I mean how are we thinking about ongoing migration of non-interest-bearing into interest-bearing in the current environment, and how that affects our NII outlook and our expectation for weighted average rate paid on deposits. And the answer to that question is that we do continue to expect that migration to happen. So if you think about it in the wholesale space, you have a bunch of clients with some balances in non-interest-bearing accounts, and over time for a variety of reasons, we do see them moving those balances into interest-bearing. So we do continue to expect that migration to happen, and therefore, that will be a source of headwinds. And that migration sometimes happens internally, i.e., out of non-interest-bearing into interest-bearing or into CDs. Sometimes it goes into money markets or into investments, which is what we see happening in our Wealth Management business. And some of it does leave the company. But one of the things that we are encouraged by is the extent to which we are actually capturing a large portion of that yield-seeking flow through CDs and money market offerings, et cetera, across our various franchises. So big picture. I do think that migration out of non-interest-bearing into interest-bearing will continue to be a thing, and that is a contributor to the modest headwinds that we expect for NII right now. But yes I'll leave it at that, I guess. |
3,779 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Gerard Cassidy: Very good. And as a follow-up, you've been very clear about the consumer credit card charge-offs and delinquency levels. And we all know about the commercial real estate office, and you always talk about over-earning on net interest income of course. One of the great credit quality stories for everyone, including yourselves, is the C&I portfolio, how strong it's been for -- in this elevated rate environment. And I know your numbers are still quite low, but in the Corporate and Investment Bank, you had about a $500 million pickup in non-accrual loans. Can you share with us what are you seeing in C&I? Are there any signs of cracks or anything? And again, I know your numbers are still good, but I'm just trying to look forward to see if there's something here over the next 12 months or so.
Jeremy Barnum: Yes, it's a good question. I think the short answer is no, we are not really seeing early signs of cracks in C&I. I mean, yes, I agree with you, like the C&I charge-off rate has been very, very low for a long time. I think we emphasized that at last year's Investor Day, if I remember correctly. I think the C&I charge-off rate we are seeing 10 years was something like literally zero. So that is clearly very low by historical standards. And while we take a lot of pride in that number, I think it reflects the discipline in our underwriting process and the strength of our credit culture across bankers and the risk team, that's not -- we don't actually run that franchise to like a zero loss expectation. So you have to assume there will be some upward pressure on that. But in any given quarter, the C&I numbers tend to be quite lumpy and quite idiosyncratic. So I don't think, that anything in the current quarter results is indicative of anything broader, and I haven't heard anyone internally talk that way, I would say.
Gerard Cassidy: Great, appreciate the insights as always. Thank you.
Jeremy Barnum: Thanks Gerard.
Operator: Next, we'll go to the line of Erika Najarian from UBS. Please go ahead. |
3,780 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Thanks Gerard.
Operator: Next, we'll go to the line of Erika Najarian from UBS. Please go ahead.
Erika Najarian: Hi, good morning. I just had one cleanup question, Jeremy. The consensus provision for 2024 is $10.7 billion. Could you maybe clarify for once and for all sort of Jamie's comments at an industry conference earlier and try to sort of triangulate if that $10.7 billion provision is appropriate for the growth level that you are planning for in Card?
Jeremy Barnum: Yes. Happy to clarify that. So Jamie's comments were that the allowance to build and the Card allowance, so we are talking about Card specifically, we expected something like $2 billion for the full year. As I sit here today, our expectation for that number is actually slightly higher, but it is in the ballpark. And I think in terms of what that means for the consensus on the overall allowance change for the year, last time I checked, it still looked a little low on that front. So who knows what it will actually wind up being, but that remains our view. One question that we've gotten is how to reconcile that build to the 12% growth in OS that we've talked about because it seems like a little bit high relative to what you would have otherwise assumed if you apply some sort of a standard coverage ratio to that growth. But the reason that's the case is essentially a combination of higher revolving mix as we continue to see some normalization revolve in that 12%, as well as seasoning of earlier vintages, which comes with slightly higher allowance per unit of OS growth.
Erika Najarian: Great. Thank you.
Jeremy Barnum: Thanks Erika.
Operator: And for our final question, we'll go to the line of Jim Mitchell from Seaport Global Securities. Please go ahead. |
3,781 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: And for our final question, we'll go to the line of Jim Mitchell from Seaport Global Securities. Please go ahead.
Jim Mitchell: Hi, good morning. Maybe just one last question on sort of deploying excess capital. It seems like the two primary ways to do that organically would be through the trading book or the loan book. So maybe two questions there. One, trading assets were up 20% year-over-year. Is that you leaning into it or just a function of demand? And is there further opportunities to grow that? And then secondly outside of Cards, loan demand has been quite weak. And any thoughts from you on if you're seeing any change in demand or how you're thinking about loan demand going forward? Thanks. |
3,782 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jeremy Barnum: Thanks, Jim. Good question. So yes, trading assets have been up. That is basically client activity primarily secured financing related sort of matchbook repo type stuff and similar things that are -- grows up the balance sheet quite a bit, but are quite low risk and therefore quite low RWA intensity. So while our ability the supply that financing to clients is something that we're happy about and it's very much represents us leaning into the franchise to serve our clients. It's not really particularly RWA, and therefore capital intensive, and therefore it doesn't really reflect an aggressive choice on our part to deploy capital, so to speak. On the loan demand front, yes, I mean, unfortunately, I just don't have much new to say there on loan demand. Meaning, to your point, loan demand remains quite muted everywhere except Card. Our Card business is, of course, in no way capital constrained. So whatever growth makes sense there in terms of our customer franchise and our ability to acquire accounts and retain accounts, and what fits inside our credit risk appetite is growth that's going to make sense. And so we're very happy to deploy capital to that. But it's not constrained by our willingness or ability to deploy capital to that. And of course, for the rest of the loan space, the last thing that we are going to do is have the excess capital mean that we lean in to lending that is not inside our risk appetite or inside our credit box, especially in a world where spreads are quite compressed and terms are under pressure. So there is always a balance between capital deployment and assessing economic risk rationally. And frankly, that is in some sense, a microcosm of the larger challenge that we have right now. When I talked about if there was ever a moment where the opportunity cost of not deploying the capital relative to how attractive the opportunities outside the walls of the company are, now would be it in terms of being patient. That's a little bit one example of what I was referring to. |
3,783 | JPM | 2 | 2,024 | 2024-07-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Jim Mitchell: All right. Okay, great. Thanks.
Jeremy Barnum: Thanks Jim.
Operator: And we have no further questions.
Jeremy Barnum: Very good. Thank you, everyone. See you next quarter.
Operator: Thank you all for participating in today's conference. You may disconnect your line and enjoy the rest of your day. |
3,784 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's First Quarter 2024 Earnings Call. This call is being recorded. [Operator Instructions] We will now go live to the presentation. Please stand by.
At this time, I would like to turn the call over to JPMorgan Chase's Chairman and CEO, Jamie Dimon; and Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead.
Jeremy Barnum: Thank you very much, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back.
Starting on Page 1. The firm reported net income of $13.4 billion, EPS of $4.44 on revenue of $42.5 billion and delivered an ROTCE of 21%. These results included a $725 million increase to the special assessment resulting from the FDIC's updated estimate of expected losses from the closures of Silicon Valley Bank and Signature Bank.
Touching on a couple of highlights. Firm-wide IB fees were up 18% year-on-year, reflecting particular strength in underwriting fees. And we have seen strong net inflows across AWM as well as in the CCB and Wealth Management business.
On Page 2, we have some more detail. This is the last quarter we'll discuss results excluding First Republic, given that going forward, First Republic results will naturally be included in the prior period, making year-on-year results comparable. For this quarter, First Republic contributed $1.7 billion of revenue, $806 million of expense and $668 million of net income. |
3,785 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Now focusing on the firm-wide results excluding First Republic. Revenue of $40.9 billion was up $1.5 billion or 4% year-on-year. NII ex Markets was up $736 million or 4% driven by the impact of balance sheet mix and higher rates as well as higher revolving balances in card, largely offset by deposit margin compression and lower deposit balances in CCB. NIR ex Markets was up $1.2 billion or 12% driven by higher firm-wide asset management and Investment Banking fees as well as lower net investment securities losses. And Markets revenue was down $400 million or 5% year-on-year.
Expenses of $22 billion were up $1.8 billion or 9% year-on-year driven by higher compensation, including growth in employees and the increase to the FDIC special assessment. And credit costs were $1.9 billion, reflecting net charge-offs of $2 billion and a net reserve release of $38 million. Net charge-offs were up $116 million predominantly driven by Card.
On to balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15%, relatively flat versus the prior quarter, reflecting net income which was predominantly offset by higher RWA and capital distribution. This quarter's higher RWA is largely due to seasonal effects, including higher client activity in Markets and higher risk weights on deferred tax assets, partially offset by lower Card loans.
Now let's go to our businesses, starting with CCB on Page 4. Consumers remain financially healthy, supported by a resilient labor market. While cash buffers have largely normalized, balances were still above pre-pandemic levels, and wages are keeping pace with inflation. When looking at a stable cohort of customers, overall spend is in line with the prior year. |
3,786 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Turning now to the financial results excluding First Republic. CCB reported net income of $4.4 billion on revenue of $16.6 billion, which was up 1% year-on-year. In Banking & Wealth Management, revenue was down 4% year-on-year, reflecting lower NII on lower deposits with average balances down 7% as our CD mix increased. Client investment assets were up 25% year-on-year driven by market performance and strong net inflows.
In Home Lending, revenue was up 10% year-on-year, predominantly driven by higher NII and production revenue. Originations, while still modest, were up 10%.
Moving to Card Services & Auto. Revenue was up 8% year-on-year driven by higher Card Services NII on higher revolving balances, partially offset by higher card acquisition costs from new account growth and lower auto lease income. Card outstandings were up 13% due to strong account acquisition and the continued normalization of revolve. And in auto, originations were $8.9 billion, down 3%, while we maintained healthy margins and market share. Expenses of $8.8 billion were up 9% year-on-year, largely driven by field compensation and continued growth in technology and marketing.
In terms of credit performance this quarter, credit costs were $1.9 billion, driven by net charge-offs, which were up $825 million year-on-year predominantly due to continued normalization in Card. The net reserve build was $45 million, reflecting the build in Card largely offset by a release in Home Lending.
Next, the Corporate & Investment Bank on Page 5. Before reporting CIB's results, I want to note that this will also be the last quarter we will be -- we will report earnings for the CIB and CB as standalone segments. Between now and Investor Day, we will furnish an 8-K with historical results, including 5 quarters and 2 full years of history consistent with the structure of the new Commercial and Investment Bank segment, in line with the reorganization that was announced in January. |
3,787 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Turning back to this quarter. CIB reported net income of $4.8 billion on revenue of $13.6 billion. Investment Banking revenue of $2 billion was up 27% year-on-year. IB fees were up 21% year-on-year, and we ranked #1 with year-to-date wallet share of 9.1%. In Advisory, fees were down 21% driven by fewer large completed deals. Underwriting fees were up significantly, benefiting from improved market conditions with debt up 58% and equity up 51%.
In terms of the outlook. While we are encouraged by the level of capital markets activity we saw this quarter, we need to be mindful that some meaningful portion of that is likely pulling forward from later in the year. Similarly, while it was encouraging to see some positive momentum in announced M&A in the quarter, it remains to be seen whether that will continue, and the Advisory business still faces structural headwinds from the regulatory environment. Payments revenue was $2.4 billion, down 1% year-on-year, as deposit margin normalization and deposit-related client credits were largely offset by higher fee-based revenue and deposit balances.
Moving to Markets. Total revenue was $8 billion, down 5% year-on-year. Fixed income was down 7% driven by lower activity in rates and commodities compared to a strong prior year quarter, partially offset by strong results in Securitized Products. Equity Markets was flat. Securities Services revenue of $1.2 billion was up 3% year-on-year. Expenses of $7.2 billion were down 4% year-on-year predominantly driven by lower legal expense. |
3,788 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Moving to the Commercial Bank on Page 6. Commercial Banking reported net income of $1.6 billion. Revenue of $3.6 billion was up 3% year-on-year driven by higher noninterest revenue. Gross Investment Banking and Markets revenue of $913 million was up 4% year-on-year with increased IB fees, largely offset by lower Markets revenue compared to a strong prior year quarter. Payments revenue of $1.9 billion was down 2% year-on-year driven by lower deposit margins and balances, largely offset by fee growth, net of higher deposit-related client credits. Expenses of $1.5 billion were up 13% year-on-year predominantly driven by higher compensation, reflecting an increase in employees, including for office and technology investments, as well as higher volume-related expenses.
Average deposits were down 3% year-on-year, primarily driven by lower nonoperating deposits and down 1% quarter-on-quarter, reflecting seasonally lower balances. Loans were flat quarter-on-quarter. C&I loans were down 1%, reflecting muted demand for new loans as clients remain cautious. And CRE loans were flat as higher rates continue to have an impact on originations and sales activity. Finally, credit costs were a net benefit of $35 million, including a net reserve release of $101 million and net charge-offs of $66 million.
Then to complete our lines of business, AWM on Page 7. Asset & Wealth Management reported net income of $1 billion with pretax margin of 28%. Revenue of $4.7 billion was down 1% year-on-year. Excluding net investment valuation gains in the prior year, revenue was up 5% driven by higher management fees on strong net inflows and higher average market levels, partially offset by lower NII due to deposit margin compression.
Expenses of $3.4 billion were up 11% year-on-year largely driven by higher compensation, including revenue-related compensation; continued growth in our private banking advisor teams; and the impact of the JPMorgan Asset Management China acquisition; as well as higher distribution fees. |
3,789 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | For the quarter, long-term net inflows were $34 billion, led by equities and fixed income. AUM of $3.6 trillion was up 19% year-on-year. And client assets of $5.2 trillion were up 20% year-on-year driven by higher market levels and continued net inflow. And finally, loans were down 1% quarter-on-quarter and deposits were flat.
Turning to Corporate on Page 8. Corporate reported net income of $918 million. Revenue was $2.3 billion, up $1.3 billion year-on-year. NII was $2.5 billion, up $737 million year-on-year driven by the impact of the balance sheet mix and higher rates. NIR was a net loss of $188 million. The current quarter included net investment securities losses of $366 million compared with net securities losses of $868 million in the prior year quarter. Expenses of $1 billion were up $889 million year-on-year predominantly driven by the increase to the FDIC special assessment.
To finish up, we have the outlook on Page 9. We now expect NII ex Markets to be approximately $89 billion based on a forward curve that contained 3 rate cuts at quarter end. Our total NII guidance remains approximately $90 billion, which implies a decrease in our Markets NII guidance from around $2 billion to around $1 billion. The primary driver of that reduction is balance sheet growth and mix shift in the Markets business. And as a reminder, changes in Markets NII are generally revenue-neutral. Our outlook for adjusted expense is now about $91 billion, reflecting the increase to the FDIC special assessment I mentioned upfront. And on credit, we continue to expect the 2024 Card net charge-off rate to be below 3.5%.
Finally, you may have noticed that our effective tax rate has increased this quarter, and it will likely stay around 23% this year, absent discrete items, which can vary quite a bit. The driver of this change is the firm's adoption of the proportional amortization method for certain tax equity investments. |
3,790 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Our managed rate is unchanged, and it should average about 3.5% above the effective tax rate. This is a smaller gap than we've previously observed, and we expect this approximate relationship to persist going forward, although the difference will continue to fluctuate as it has in the past. For the avoidance of doubt, these changes have no meaningful impact on expected annual net income. We're just mentioning this to help with your models.
So to wrap up. We're pleased with another quarter of strong operating results even as the journey towards NII normalization begins. While we remain confident in our ability to produce strong returns and manage risk across a range of scenarios, the economic, geopolitical and regulatory uncertainties that we have been talking about for some time remain prominent, and we are focused on being prepared to navigate those challenges as well as any others that may come our way.
And with that, let's open up the line for Q&A.
Operator: The first question is coming from the line of Betsy Graseck from Morgan Stanley.
Betsy Graseck: So a couple of questions here. Just one, Jamie, could you talk through the decision to raise the dividend kind of mid-cycle, it felt like, pre-CCAR? And also help us understand how you're thinking about where that payout ratio, that dividend payout ratio range should be. Because over the past several years, it's been somewhere between 24% and 32%. And so is this suggesting we could be towards the higher end of that range or even expanding above that?
And then I also just wanted to understand the buyback and the keeping of the CET1 at 15% here. The minimum is 11.9%. I know it's -- we have to wait for Basel III endgame reproposal to come through and all that. But are we -- should we be expecting that, hey, we're going to hold 15% CET1 until we know all these rules?
James Dimon: Yes. So Betsy, before I answer the question, I want to say something on behalf of all of us at JPMorgan and me personally. I'm thrilled to have you on this call. |
3,791 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | For those who don't know, Betsy has been through a terrible medical episode. And to remind all of us how lucky we are to be here, but Betsy in particular, the amount of respect we have, not just in your work, but in your character over the last 20-plus years have been exceptional. So on behalf of all of us, I just want to welcome you back. I'm thrilled to have you here.
And so you're asking a pertinent question. So we're earning a lot of money. Our capital cup runneth over, and that's why we increased the dividend. And if you ask me what we'd like to do is to pay out something like 1/3 of normalized earnings. Of course, it's hard to calculate always what normalized earnings are, but we don't mind being a little bit ahead of that sometimes, a little bit behind that sometimes. If I could give people kind of consistent dividend guidance, et cetera.
I think the far more important question is the 15%. So look at the 15%, I'm going to oversimplify it. That basically will prepare us for the total Basel endgame today roughly. The specifics don't matter that much.
Remember, we can do a lot of things to change that in the short run or the long run. But -- and it looks like Basel III endgame may not be the worst case, it will be something less than that. So obviously, when and if that happens, it would free up a lot of capital, and I'm going to say on the order of $20 billion or something like that.
And yes, we're -- we've always had the capital hierarchy the same way, which is we're going to use capital to build our business first. And we pay the dividend, the steady dividend. Build the business. And if we think it's appropriate, to buy back stock. We're continuing to buy back stock at $2 billion a year. I personally do not want to buy back a lot more than that at these current prices.
I think you've all heard me talk about the world and things like that. So waiting in preparation for Basel. Hopefully, we'll know something later, and then we can be much more specific with you all. |
3,792 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | But in the meantime, there's also -- it's very important to put in mind, there are short-term uses for capital that are good for shareholders that could reduce our CET1, too. So you may see us do things in the short run that will increase earnings, increase capital -- that are using up that capital. Jeremy mentioned on the -- on one of the things that we know, the balance sheet and how we use the balance sheet for credit and trading, we could do things now.
So it's a great position to be in. We're going to be very, very patient. I urge all the analysts to keep in mind, excess capital is not wasted capital, it's earnings in store. We will deploy it in a very good way for our shareholders in due course.
Jeremy Barnum: Betsy, I just wanted to add my welcome back thoughts as well. And just a very minor edit to Jamie's answer. I think he just misspoke when he said $2 billion a year in buybacks, the trajectory. It's $2 billion a quarter.
James Dimon: I'm sorry, $2 billion a quarter.
Jeremy Barnum: Otherwise, I have nothing to add to Jamie's very complete answer. But welcome back, Betsy.
Betsy Graseck: Okay. Thank you so much, and I appreciate it. Looking forward to seeing you at Investor Day on May 20.
Jeremy Barnum: Excellent. Us too.
Operator: Our next question comes from Jim Mitchell with Seaport Global.
James Mitchell: Jeremy, can you speak to the trends you're seeing with respect to deposit migration in the quarter, if there's been any change? Have you seen that migration start to slow or not?
Jeremy Barnum: Yes, a good question, Jim. I think the simplest and best answer to that is not really. So as we've been saying for a while, migration from checking and savings to CDs is sort of the dominant trend that is driving the increase in weighted average rate paid in the consumer deposit franchise. That continues. We continue to capture that money in motion at a very high rate. So we're very happy about what that means about the consumer franchise and the level of engagement that we're seeing. |
3,793 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | I'm aware that there's a little bit of a narrative out there about are we seeing the end of what people sometimes refer to as cash-sorting? We've looked at that data. We see some evidence that maybe it's slowing a little bit. We're quite cautious on that. We really sort of don't think it makes sense to assume they're in a world where checking and savings is paying effectively 0 and the policy rate is above 5%, that you're not going to see ongoing migration.
And frankly, we expect to see that even in a world where -- even if the current yield curve environment were to change and meaningful cuts were to get reintroduced and we would actually start to see those, we would still expect to see ongoing migration and yield-seeking behavior. So it's quite conceivable.
And this is actually on the yield curve that we had in the fourth quarter that had 6 cuts in it, we were still nonetheless expecting an increase in weighted average rate paid as that migration continues. So I would say no meaningful change in the trends, and the expectation for ongoing migration is very much still there.
James Mitchell: Okay. And just a follow-up on that and just sort of bigger picture on NII. Is that sort of the biggest driver of your outlook? Is it migration? Is it the forward curve? Is it balances? It sounds like it's migration, but just be curious to hear your thoughts on the biggest drivers of upside or downside.
Jeremy Barnum: Yes. So I mean, I think the drivers of, let's say, what's embedded in the current guidance is actually not meaningfully different from what it was in the fourth quarter, meaning it's the current yield curve, which is a little bit stale now, but the snap from quarter end had roughly 3 cuts in it. |
3,794 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | So it's the current yield curve. It's what I just said, the expectation of ongoing internal migration. There is some meaningful offset from card revolve growth, which, while it's a little bit less than it was in prior years, is still a tailwind there. We expect deposit balances to be sort of flat to modestly down. So that's a little bit of a headwind at the margin.
And then there's obviously the wildcard of potential product-level reprice, which we always say we're going to make those decisions situationally as a function of competitive conditions in the marketplace.
And you know this, obviously. But in a world where we've got something like $900 billion of deposits paying effectively 0, relatively small changes in the product-level reprice can change the NII run rate by a lot. So the error bands here are pretty wide. And we're always going to stick with our mantra, which has been not losing primary bank relationships and thinking about the long-term health of the franchise when we think about deposit pricing.
Operator: Our next question comes from John McDonald with Autonomous Research.
John McDonald: Jeremy, you had mentioned at a conference earlier this year that The Street might need to build in more reserve growth for the Card growth. You've had more reserve build. We didn't see that this quarter. Is that just kind of seasonal? And would you still expect the kind of growth math to play out in terms of Card growth and reserve build needs?
Jeremy Barnum: Yes, John. So in short, yes to both questions. So yes, the relative lack of build this quarter is a function of the normal seasonal patterns of Card. Yes, we still expect 12% card loan growth for the full year. And yes, that still means that all else equal, we think the consensus for the allowance build for the back 3 quarters is still a little too low if you map it to that expected card loan growth. |
3,795 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Obviously, there's the wildcard of what happens with our probabilities and our parameters and the output of our internal process of assessing the SKU and the CECL distribution and so on. And we're not speaking to that one way or the other. So if you guys have your own opinions about that, that's fine. But we're narrowly just saying that, based on the card loan growth, that we expect and normal coverage ratios for that, we do expect build in the back half of the year.
John McDonald: Okay. Got it. And then just a follow-up to make it super clear on the idea of the Markets NII, that outlook being revised down by $1 billion, but revenue-neutral. I guess the obvious thing is there, there's typically an offset in fee income, and you don't guide to that. But the idea would be, the way you're structuring trades, the way the balance sheet is evolving, there's some offset that you'd expect in Markets fees from the lower Markets NII, correct?
Jeremy Barnum: That is exactly right. And specifically, what's going on here is this shift between the on-balance sheet and off-balance sheet in the financing businesses and prime and so on within Markets. And you can actually see a little bit of a pop of the Markets balance sheet in the supplement, and these things are all related.
So fundamentally, you can think of it as like we either hold equities on the balance sheet, non-interest bearing, high funding expense, negative for NII; or we receive that in total return form through derivatives, exactly the same economics, no impact on NII.
So that shifts as a function of the sort of borrower relationships in the marketplace in ways that are bottom line effectively neutral. It's second order effects, but they change the geography quite a bit, and that's what happened this quarter. And that's why we've been emphasizing for some time that the NII ex Markets is the better number to focus on in terms of an indicator of how the core banking franchise is performing. |
3,796 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Our next question comes from Ebrahim Poonawala with Bank of America.
Ebrahim Poonawala: I guess just in terms of, Jamie, when you think about the outlook for the economy, would appreciate your thoughts on the health of the customer base, both commercial and consumer.
And when we think about higher for longer, maybe the economy is too strong so don't get any rate cuts. Are you seeing that when you talk to your customers and the feedback you're getting from your bankers, where the momentum is picking up?
And I appreciate all the macro risks Jamie's pointed out, but I'm just getting -- trying to get to a sense of what your view is in terms of the most likely outcome based on what you're seeing today from the customers.
James Dimon: So I would say consumer customers are fine. The unemployment is very low. Home price dropped, stock price dropped. The amount of income they need to service their debt is still kind of low. But the extra money of the lower-income folks is running out -- not running out, but normalizing. And you see credit normalizing a little bit.
And of course, higher-income folks still have more money. They're still spending it. So whatever happens, the customer's in pretty good shape. And they're -- if you go into a recession, they'd be in pretty good shape. Businesses are in good shape. If you look at it today, their confidence is up, their order books drop, their profits are up.
But what I caution people, these are all the same results of a lot of fiscal spending, a lot of QE, et cetera. And so we don't really know what's going to happen. And I also want to look at the year, look at 2 years or 3 years, all the geopolitical effects and oil and gas and how much fiscal spending will actually take place, our elections, et cetera. |
3,797 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | So we're in good -- we're okay right now. It does not mean we're okay down the road. And if you look at any inflection point, being okay in the current time is always true. That was true in '72, it was true in any time you've had it. So I'm just on the more cautious side that how people feel, the confidence levels and all that, that doesn't necessarily stop you from having an inflection point. And so everything is okay today, but you've got to be prepared for a range of outcomes, which we are.
And the other thing I want to point out because all of these questions about interest rates and yield curves and NII and credit losses, one thing you projected today based on what -- not what we think in economic scenarios, but the generally accepted economic scenario, which is the generally accepted rate cuts of the Fed. But these numbers have always been wrong. You have to ask the question, what if other things happen? Like higher rates with this modest recession, et cetera, then all these numbers change. I just don't think any of us should be surprised if and when that happens.
And I just think the chance of that happen is higher than other people. I don't know the outcome. We don't want to guess the outcome. I've never seen anyone actually positively predict a big inflection point in the economy literally in my life or in history.
Ebrahim Poonawala: That's helpful. And just tied to that, as we look at commercial real estate, both for JP and for the economy overall, is higher rates alone enough to create more vulnerabilities and issues beyond office CRE? How would you characterize the health of the CRE market?
James Dimon: Yes. So I'll put it into 2 buckets. First of all, we're fine. We've got good reserves against office. We think the multifamily is fine. Jeremy can give you more detail on that if you want. |
3,798 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | But if you think of real estate, there's 2 pieces. If rates go up, think of the yield curve, the whole yield curve, not Fed funds, but the 10-year bond rate, it goes up 2%. All assets, all assets, every asset on the planet, including real estate, is worth 20% less. Well obviously, that creates a little bit of stress and strain, and people have to roll those over and finance it more. But it's not just true for real estate, it's true for everybody. And that happens, leveraged loans, real estate will have some effect.
The second thing is the why does that happen? If that happens because we have a strong economy, well, that's not so bad for real estate because people will be hiring and filling things out. And other financial assets.
If that happens because we have stagflation, well, that's the worst case. All of a sudden, you are going to have more vacancies. You are going to have more companies cutting back. You are going to have less leases. It will affect -- including multifamily, that will filter through the whole economy in a way that people haven't really experienced since 2010.
So I'd just put in the back of your mind, the why is important, the interest rates are important, the recession is important. If things stay where they are today, we have kind of the soft landing that seems to be embedded in the marketplace, everyone -- the real estate will muddle through.
Obviously, it'd be idiosyncratic if you're in different cities and different types and B versus A buildings and all that, but people will muddle through. They won't muddle through under higher rates with the recession. That would be tougher on a lot of folks, and not just real estate, if in fact that happens.
Operator: Our next question comes from Erika Najarian with UBS. |
3,799 | JPM | 1 | 2,024 | 2024-04-12 08:30:00 | JPMorgan Chase & Co. | 658,776 | Operator: Our next question comes from Erika Najarian with UBS.
L. Erika Penala: Given that your response to Betsy's question is that 15% CET1 today prepares you for Basel III endgame as written. You earn 22% on -- without the FDIC assessment. Ahead of Investor Day, I guess, 6 weeks from now or 5 weeks from now, as we think about that 17% through-the-cycle target, if you're at the right capital level per you guys, where are you overearning today?
Jeremy Barnum: Right. So interesting framing of the question, Erika. So I think we've been pretty consistent about where we're overearning, right? So obviously, one major area is that we're overearning in deposit margins, especially in consumer. And that's sort of why we're expecting sequential declines in NII, why we've talked about compressing deposit margins and increases in weighted average rate paid.
So I think that's probably the single biggest source of, let's call it, excess earnings currently. You also heard Jamie say that we're overearning in credit. I mean, wholesale charge-offs have been particularly low, but we have built for that. So in the current run rate, a bit less clear, the extent of what we're earning.
And in Card, of course, while charge-offs are now close to normalized, essentially, we did go through an extended period of charge-offs being very low by historical standards, although that was coupled with NII also being low by historical standards. So from a bottom line perspective, it's not entirely clear what the net of that was. But broadly, it's really deposit margin that's the biggest single factor in the overearning narrative. |
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