Q2 2021 JPMorgan Chase & Co Earnings Call

July 13, 2021

[music].

The Jpmorgan Chase and co earnings conference call will begin shortly.

Good morning, ladies and gentlemen, and welcome to Jpmorgan Chase's second quarter 2021 earnings call. This call is being recorded your line will be muted for the duration of the call, but we'll now go live to the presentation. Please standby at this time I would like to turn the call over to Jpmorgan, Chase's Chairman and CEO Jamie.

And then and Chief Financial Officer, Jeremy Barnum Mr. Barnum. Please go ahead.

Thanks, operator, and good morning, everyone before.

Before we got going and I, just like to say how honored I am to be on my first earnings call. Following the footsteps of Marianne and John and both of them taught me. So much joining my time working for them and his shoes will be very difficult to fill but I'm going to try it.

So with that this presentation is available on our website and please refer to the disclaimer and the back.

Starting on page 1.

But from reported net income of $11.9 billion EPS of $3.78 on revenue of $31.4 billion and delivered a return on tangible common equity of 23%.

These results include $3 billion from credit reserve releases, which I'll cover in more detail shortly.

Yeah.

Touching on a few highlights combined debit and credit spend was up 45 per cent year on year, and more importantly up 22% versus the more normal pre COVID-19 second quarter of 2019.

It was an all time record for IV fees up 25 per cent year on year, driven by advisory and debt underwriting.

We saw particularly strong growth and EW on with record long term flows as well as record revenue.

And finally credit continues to be quite healthy as evidenced by our exceptionally low net charge offs across the board.

Regarding our balance sheet the trends from recent quarters have largely continued.

<unk> are up 23% year on year, and 4% sequentially and loan growth remains low and flat year on year and up 1% quarter on quarter.

Although we have bright spots and certain pockets and the consumer spend trends are encouraging.

So now turning to page 2.

And more detail.

As I go through on this page I'm going to provide you some context about the prior year quarter, because the year on year comparisons are a bit noisy.

So with respect to revenue.

And second quarter 2020 was an all time record from markets with revenue of over $9.7 billion and.

And we recorded approximately $700 million of games and on bridge book.

With that and mines revenue of $31.4 billion was down $2.4 billion or 7% year on year.

Non interest revenue was down $1.3 billion or 7%.

Due to the prior year items I, just mentioned, partially offset by strong fee generation and investment banking and AWS as well as from card related fees on higher spend.

And net interest income was down $1.1 billion or 8% driven by lower markets on NII and lower balances and card.

Expenses of $17.7 billion were up 4% year on year largely on continued investments.

And then on credit cost going back to last year again, you will recall and last year's second quarter, we built $8.9 billion and credit reserves during the height of the pandemic, whereas this year, we released 3 billion.

So and this quarter and credit costs were a net benefit of $2.3 billion and setting aside the reserve release, and it's also worth noting and net charge offs of just over $700 million or half of last year's second quarter number and continued to trend near historical lows.

On the next page, let's go over the reserves.

We released $3 billion this quarter as we grow increasingly confident about the economy and light of continued improvement and COVID-19, especially in the U S.

And consumer we released $2.6 billion, including $1.8 billion and card and 600 million and home lending and in wholesale we released nearly $450 million.

So this leaves us with reserves of $22.6 billion, which as a result of elevated remaining uncertainty about COVID-19 and the shape of the economic recovery are higher than would otherwise be implied by our central economic forecasts.

Now moving to balance sheet and capital on page 4.

We ended the quarter with a CET 1 ratio of 13% down slightly versus the prior quarter as not growth and retained earnings was more than offset by higher RW lay across both the retail and wholesale lending.

This quarter also reflects the exploration of the temporary as the large students and as we anticipated leverage is now our binding constraint.

As you know we finished CCAR a couple of weeks ago, and our SCB. It will be 3.2%, which reflects the board's intention to increase the dividend to $1 per share and third quarter.

Okay and now let's go to our businesses, starting with consumer and community banking on page 5.

<unk> reported net income of $5.6 billion, including reserve releases of $2.6 billion on revenue of $12.8 billion up 3% year on year.

Of particular note. This quarter is the acceleration of card spend and so while card outstandings remain lower than pre pandemic levels. This quarter's trends make us optimistic.

Total debit and credit spend was up 45% year on year, and more importantly up 22% versus the second quarter of 19.

And within that compared to 2019 June total spend was up 24%, indicating some healthy acceleration throughout the quarter.

And travel and entertainment has really turned the corner with spend flat versus the second quarter of 19 accelerating from down 11% and April to actually up 13% in June.

The rest of the CCP story remains consistent with prior quarters.

Consumer and small business cash balances remain elevated resulting from depressed loan growth overall.

Overall loans were down 3% year on year from continued elevated prepayments and mortgage and a lower card outstandings, partially offset by strong growth and auto and the impact of PPP.

On lending and auto continued to have strong originations with homeland and up 64% to $40 billion, the highest quarterly figure since the third quarter of 2013.

And auto up 61% to a record $12.4 billion.

Deposits were up 25% year on year on approximately 200 billion and client investment assets were up 36% driven by market appreciation and positive net flows across our advisor and digital channels.

And our omni channel strategy continues to deliver.

We are more than halfway through our initial market expansion and commitment as we have opened more than 200, new branches out of our goal of 400, which have exceeded our expectations by generating $7 billion and deposits and investments and we are planning to be and all 48 contiguous states by the end of the summer.

Digital trends continued to be strong as retail mobility recovers at a faster pace and branch transactions, which are still down more than 20% versus 2019.

Active mobile users grew 10% year on year to over 42 million and total digital transactions per engaged customer were up 12%.

Expenses of $7.1 billion 4 per cent year on year, driven by continued investments and higher volume and revenue and related expenses.

Looking forward. The obvious question is the outlook for loan growth, especially in card and.

And we are quite optimistic that the current spend friends will convert into resumption of loan growth through the end of this year and into next and while we wait the exceptionally low level of net charge offs provides substantial offset the NII headwind.

Next the corporate and investment bank on page 6.

CIB reported net income of $5 billion and an ROE of 23% on revenue of $13.2 billion.

On the fees of $3.6 billion were up 25% year on year and up 20% quarter on quarter, and all time record driven by advisory and debt underwriting leading to a year to date global IV wallet share of 9.4% and our number 1 ranking.

And advisory we were up 52% year on year benefiting from the surge and announcement activity that has continued into the second quarter.

Debt underwriting fees were up 26% driven by an active acquisition finance market offset by lower investment grade issuance.

And in equity underwriting fees were up 9%, primarily driven by a strong performance and ipos.

And the resulting investment banking revenue of $3.4 billion was roughly flat year on year due to the headwinds of the prior year's markup and the bridge book.

Looking ahead to the third quarter and the pipeline remains very strong we expect M&A activity and the IPO markets remain active and well IV fees are likely to be down sequentially, we still expect them to be up year on year.

Moving to markets total revenue was $6.8 billion down 30% compared to an all time record quarter last year.

And I'll normalization has been more prevalent and macro overall, we ran above 2019 levels throughout the quarter on the back of strong client activity and are performing our own expectations from earlier on the year.

Fixed income was down 44% compared to last year's exceptional results.

11% compared to the second quarter of 19.

Equity markets was up 13% driven by record balances and prime as well as strong performance and cash and equity derivatives, where we matched last year's great results.

Looking forward, while we expect normalization to continue across both investment banking and markets and most notably and fixed income the timing and the extent of the normalization is obviously hard to predict.

Wholesale payments revenue was $1.5 billion up 5% driven by higher deposits and fees largely offset by deposit margin compression.

And security services revenue was $1.1 billion down 1% as deposit margin compression was predominantly offset by growth in deposits and fees.

Expenses of $6.5 billion were down 4% year on year, driven by lower performance related compensation, partially offset by higher volume related expense.

Moving to commercial banking unchanged stuff.

Yeah.

Commercial banking reported net income of $1.4 billion, and and ROE 23 per cent.

Revenue of 2 and a half billion was up 3% year on year with higher investment banking lending and wholesale payments revenue largely offset by lower deposit revenue and the absence of a prior year equity investment gain.

Record gross investment banking revenue of $1.2 billion was up 37% on increased M&A and acquisition related financing activity compared to prior year loves.

Expenses of $981 million were up 10% year on year, driven by higher volume and revenue related expenses and investments.

Deposits of $290 billion were up 22% year on year as client balances remain elevated.

Loans of $2.5 billion were down 12% year on year, driven by lower revolver utilization compared to the prior prior year quarter and down 1% sequentially C&I.

C&I loans were down 1% quarter on quarter with lower utilization, partially offset by new loan activity and middle market and CRE loans were down 1%, but we saw pockets of growth and affordable housing activity.

And finally credit costs were a net benefit of $377 million driven by reserve releases with net charge offs of only 1 basis point.

And to complete our lines of business on the asset and wealth management on page 8.

Asset and wealth management reported net income of $1.2 billion with pre tax margin of 37% and and the ROE of 32 per cent.

Record revenue of $4.1 billion was up 20% year on year as higher management fees and growth and deposit and loan balances were partially offset by deposit margin compression.

Expenses of $2.6 billion were up 11% year on year, driven by higher performance related compensation and distribution expenses for the quarter net long term inflows of $49 billion continued to be positive across all channels with notable strength in equities and fixed income and alternatives.

And was $3 billion and for the first time overall client assets were over 4 trillion dollars.

<unk> 21 per cent and 25 per cent year on year, respectively, driven by higher market levels and strong net inflows.

And finally loans were up 21% year on year with continued strength and securities based lending custom Monday and mortgages, while deposits were up 37 per cent.

Turning to corporate on page 9.

Corporate reported a net loss of $1.2 billion revenue was a loss of $1.2 billion down 415 million year on year NII was down 274 million, primarily unlimited deployment opportunities as deposit growth continued and we realized a 155 million of net.

Securities losses and quarter.

And expenses of $515 million were up $368 million year on year.

So with that on page 10, and the outlook.

Our 2020, 1 NII outlook of around 52, and a half billion remains in line with the updated guidance, we provided last month.

And as you'll note. We've also lowered our outlook for the card net charge off rate to less than 260 basis points, which as I mentioned and CCD provides a meaningful offset to the NII headwind.

And it's worth mentioning that the current environment makes forecasting NII, even in the near term unusually challenging.

While 52 and a half billion remains our current and Central case, you should expect some elevated uncertainty around that number not only because of the ongoing impact of stimulus on consumer balance sheets, but also due to volatility coming from markets among other things.

And as a reminder, most of any fluctuation and markets NII, whether up or down is likely to be offset and and I are.

On expenses, we've increased our guidance to approximately $71 billion driven by higher volume and revenue related expenses.

So to wrap up.

We are encouraged by the continued progress against the virus and the economic recovery that is underway, especially in the United States, Although we want to acknowledge the challenges and much of the rest of the world is facing and we're hopeful that a global recovery will follow closely behind.

Our performance this quarter once again showcases the power of our diversified business model as headwinds and NII from consumer Delevering are offset by strong fee generation across AWS on it and CIB and exceptionally low net charge offs across the board.

While we're proud of the performance of the company and of our people through the crisis the competition and every business from banks and Fintech and others is oftentimes as ever.

So as we look forward to and increasingly normal environment, where and enthusiastically focused on competing for every piece of share and every market product and business, where we operate and making the necessary investments to land.

With that operator, please open the line for Q&A.

Okay.

And our first question is coming from the line of glass shore from Evercore ISI. Please go ahead. Your line is open now.

Hi, Glenn Hi, Darren Hi, Jeremie well welcome welcome to the party.

On a question on Humira and asked if I could.

And I apologize that take a little multifaceted, but so you know even though we're getting some inflationary got it and Europe.

Are you, possibly and climate and the economy.

So I'm not sure you want to opine on why that let's talk about.

And you kept the NII guide I'm, assuming because deposit growth is strong.

Curious your thoughts on keeping their payment rates staying at this elevated level of deposit growth staying at this elevated level and then most importantly.

Managing the balance sheet and differently, meaning you you had been slow playing.

On the money to work rates are even lower now are you still slow pay and putting money to work.

And I appreciate it thanks.

Yeah, Thanks, Glenn Alright, so, let's well it shouldn't take that and parts. So in terms of our RNA guide guidance. So yeah. So we're reiterating at 52 and a half for the full year. So just to take your deployment 0.1st obviously rates are a little bit lower long end rates are a bit lower the curve has flattened a little.

Since our since we provided that guidance, but when we provided that guidance, we were reasonably conservative and on deployment assumptions to us a year or so as a result of that it's not really meaningful factor sort of at the level of precision that we're talking about here and.

In terms of the consumer side as you say, obviously, it's really card is really going to be the big driver. So you heard us talking about payment rates and you see the sequential growth and card loans. So we do believe that the sort of acceleration and the pickup and spend is going to translate.

On to 2 you know as I say, a resumption of loan growth and card, but we do think that pay rates are going to remain quite elevated.

At a minimum through the end of this year. So as a result, we don't really see revolving interest bearing balances increasing meaningfully this year and so as a result that remains a headwind for the overall NII for this year, which is incorporated and the outlook.

Okay, and then in terms of managing balance sheet any differently and tend to put money to work at it.

They're getting on that.

On.

Yeah look I mean I.

You know you've heard us talk about this before right so our central case.

From an economic perspective is for a very robust recovery and that's pretty much the consensus here between us our research team the fab et cetera.

And that view is associated with higher inflation are along the lines of the fabs on targets for higher inflation and all of those things together.

You know.

It's an outlook that's associated with with higher rates all else equal and so in light of all that we do remain happy to stay patient here and you know if you look at our EIA artist scores how would you obviously won't see until you get the Q.

But some of you guys have written about this recently on our overall sensitivity share are kind of in line with the industry. So when you consider kind of a tale type things that Jamie always talks about the convexity and the balance sheet.

And various other factors, we do still feel that being patient and here makes sense.

Okay, and just 1 quickie on on the recent acquisitions.

Acquisitions and and investment.

Well Jamie.

Take it.

And I'm curious on a big picture.

And it just is it just coincident and 5 things and very short period of time.

And maybe if you want to expand on maybe not makes it specifically and.

Why the change in terms of.

Shying away from international expansion and had passed and now.

A little bit bigger move in.

I appreciate it thanks.

Sure. So let me start with the international expansion point on the consumer side, because Thats interesting you heard Jamie over the years talk about why it wouldn't really make sense to do international expansion and consumer when you think about that through the lens of a branch based strategy. So if you imagine going outside of the U S and opening.

<unk> and other countries and competing with.

The incumbents just from a branding perspective from an operating leverage perspective, we've never felt that that was likely to be a successful strategy for us and that hasn't really changed the difference right now is the ability to do that digitally.

So what's really particularly exciting about the international expansion a narrative both on the U K and now with our recent investment and see sex and Brazil.

<unk> is the ability to kind of experiment a little bit.

Obviously, it's a strategically compelling opportunity Brazil as you probably know is like the third biggest consumer banking market and the world.

But it's kind of fun to be the disruptor and.

And so I think for us given our position and consumer banking and the United States.

Being in a place where we are actually the outsider disrupting through.

And through these kind of digital channels are we see it among other things and mission's been compelling financially as a really good opportunity to learn and to challenge ourselves a little bit from the inside so we're quite excited about that stuff.

Alright, thanks very much.

Thanks Glenn.

Our next question is coming from the line of John Mcdonald from Autonomous Research. Please go ahead. Your line is open now.

Hi, Good morning, Jeremy wanted to wanted to ask you about capital you mentioned leverage is now the binding constraint and Jan as previously talked about a 12% and CE tier 1 target I guess could you talk about the multiple variables that you're balancing as you guys decide what capital levels to run at you've got a rising G SIB score.

Sure and <unk>.

<unk> cushion that shrinking, but maybe the rules get revised and obviously and FCB that came down a little bit, but and maybe youre hoping for more.

Are you wrapping it all together into and what kind of capital levels to target.

Yeah. It's a good question John and yes, there are a lot of variables. So let me start by saying that in terms of the 12% target.

It's not off the table is what I'll say about that meaning 12% and it's not necessarily doesn't necessarily need to be higher so for now it's not off the table.

But the element of time I E. When are we bound by what matters quite a bit as we think about this so I'm.

Just to go through some of the pieces.

You've noted the G. SIB point, so we're in the 4% bucket now and as of the end of last year that comes into play and 2023, we're currently operating and 4 and a half as you know that's quite a seasonal number so it's still possible to get under 4 and a half for the end of this year.

But you know we have to acknowledge and elevated probability I would say of lending and 4 and a half bucket this year, but the 4 and a half bucket would be binding and 2024 and as we noted in the meantime, we're bound by SLR.

And we've been quite public about our views about these things about the extent to which increasingly our capital requirements are driven by non risk sensitive size based measures, which were really designed especially in the case of SLR and as Backstops on which side has acknowledged.

So our priority right now and.

And the fed has talked about potentially addressing some of these things we know we're waiting for and N P or on a so Laura but also they have said that a potential juice and fix could come as part of the holistic implementation of the Basel III and game. So theres a lot of things that are going to play out between now and some of those minimums, becoming binding and realists.

Simply right now none of the operating above 12% anyway in light of the leverage bound and in all likelihood. So we're managing a variety of different factors near term and short term.

<unk> com and et cetera.

And we're just going to probably be nimble about it as more information comes out over the next few quarters Casuals and make it as reported point, we had tons of capital tier $1 billion of CET, 1 and 5 day preferred unit.

And have long and that only a trillion dollars of wall and which is the riskiest asset we have and 1.5 trillion of cash and marketable securities on.

On the long term.

And on the capital and the system and I think 1 day, and we'll look at and say why so much particularly on the liquid side.

And then a quick follow up Jeremy on unexpected as you revise the fiscal year 'twenty 1 outlook upward a few times now can you give a little more detail on the business volumes and revenues that are driving this and and also we hear a lot about inflation across the economy are we seeing broader inflation play a role and your companies.

Expenses and outlook.

Yes so.

Couple of things there so yeah.

As you know we have revised up from 70 to 71 and the biggest single driver there is volume and revenue related expense.

And where would you have interest comp.

And but it's almost up to its strength.

Comp, we're going to be competitive and comp no matter, what it takes and how to keep them back to you Mark It is a little bit of comp. It's also our transaction related volumes and social marketing expense and certain pockets. So it's.

All the stuff that fits and the category of volume and revenue related and I think the point is obviously, we're all a little bit focused on on the NII headwinds right now, but from a non Arab perspective.

Across markets AWS.

And in general.

And even pockets of wealth management and CCD, we're actually outperforming.

The revenue expectations that were built in from our prior expense guide and so that's kind of the dynamic there in terms of inflation and I would say that we're not seeing inflation and our actuals, but obviously you know your guess is as good as mine in terms of.

The future.

It would be reasonable to assume that that's going to be a little bit of a challenge or greater and lesser degree.

And if the economy as a whole isn't necessarily higher inflationary environment and we did probably include a little bit of that expectation and the and the 71 for this year.

Got it thanks.

Okay.

Our next question is coming from the line of Ken Austin from Jefferies. Please go ahead. Your line is open now.

Thanks, Good morning, Jeremy if I could just follow up on your points about capital and just how we should be thinking about.

And you gave us clarity on the dividend and we know there's the 30 billion open authorization on the buyback you know again, just kind of fit.

Waiting for the middle there how do you balance just the magnitude of buyback you do from here versus the ongoing growth that we have and the balance sheet vis vis what you just talked about as far as the limitations. Thanks.

Yeah. So I mean, the answer to how we balance that as we talk about a lot and we had a lot of smart people looking at and trying to balance all the different constraints that we're managing and I think you know John.

John talked before especially when it comes to you know the balance between our risk based minimums and the SLR constraint, which as you know we can address with price about kind of the mixture of props and common.

So we're looking at that I think RFP is helping a little bit.

On the deposit growth side, which helps a little bit with the management of SLR, but you know as I've said previously we're gonna stay nimble there and use the tools our disposal to try to strike the right balance between buybacks.

Buybacks and prep issuance recognizing.

And that did over issuing price.

And potentially locks us in 2.

Hi cost, perhaps that would flow flexibility because of the 5 year lockout. So theres a lot of balancing there and we're just.

And while as information potentially trickles out on the evolution of the rules.

And then just so then as far as how you guys will communicate well just find out about the buyback on a quarterly basis as opposed to giving a more broad outlook up your expectations around buybacks.

It happened more in the past is that fair.

Yeah, I think that's right, especially and the new environment that we're operating and from a buyback perspective now that it's not.

That's sort of and approved plan through CCAR, where it is rather just the overall $30 billion board authorization, given what I just talked about in terms of the need to stay nimble across multiple constraints.

And you wouldn't want a box ourselves and bye Bye speaking publicly ahead of time in terms of what we're going to do so.

And you know obviously on normal capital hierarchy at the end of the day, we're always going to invest first and looking at interesting acquisitions and past sustainable dividend and at the end of that you know, we'll look at buybacks and the context of all the other factors and we can probably give you a more definitive and after they finish Basel III and reaching back 10 years, and the making and.

And SLR and all the updates and Indian.

More certainty about obviously operating going forward.

Okay. Thanks, a lot guys I appreciate it.

Thanks, Sean.

I mean, Ken sorry.

Our next question is coming from the line of Jim Mitchell from Seaport Global Securities. Please go ahead. Your line is open now.

Hey, good morning.

Maybe just a follow up on the card business, you had 7% quarter over quarter gross and balances, but I think your guidance was still a little cautious is that just being conservative and youre still not sure about the relationship between spending and balance growth or how do we think about the good quarter and sort of that cautious outlook.

Yeah, So I wouldn't use the word conservative we've tried very hard and our outlook to give your central case numbers. So we're gonna be long, but hopefully it will be wrong symmetrically. So we really want and probably hard to give you a central case numbers that don't have you know.

Baseless optimism or unnecessary conservatives on that.

So the point that you highlight that the sort of apparent disconnect between the sequential increase and card loans and the relatively muted on and I outlook is really just about pay rates. So we continue to see very elevated pay rates by historical standards really highly unusual as a result of some of the things that we called out and.

Terms of the strength of the consumer balance sheet. So as long as that's true and we're seeing sort of unusually low conversion of spend into revolving balances that's going to be a little bit of and NII headwind until the consumer starts to relive or which we do think will happen.

We just don't think it's likely to be a meaningful effect this year.

Okay, that's fair.

And then on the charge offs, that's obviously been a big benefit I think if we look at delinquencies both early stage and.

And later stage they kept falling throughout the quarter.

Is there anything unusual this quarter and where we saw a pretty big drop should we expect further declines and Ncos.

As the year progresses, given delinquency trends.

Yeah, So I think on charge offs.

Just stick to the updated card guidance that we gave.

Which is lower and just saying theres going to be below 2 and a half but again, it's the same themes right like you know.

Our weighted cash buffers and consumers are resulting and exceptionally strong and see outperformance and sort of upside surprises in terms of people paying so that there's sort of 2 sides of the same coin right now lower evolving balances better M C o's and non as we continue returning to normal.

Presumably in 2022, we should see both of those come back slightly on the historical trends.

Alright fair enough. Thanks.

<unk>.

And welcome Jim and Gary Welcome.

My question I wanted to follow up I think Glen asked Jamie for the answer this question and some related to try again on these acquisitions that you've done and I I count 8 since December and the question is Jamie and what is that the strategy is the strategy I guess and some cases, it's to disrupt and new markets as Jeremy said.

And it's to avoid cost maybe it's the scale cross tens of millions of customers or and this is the real question are you looking to connect some of these acquisitions like nutmeg, whereas that can't even read on these craft analytics Max X T..6 bank opened and deaths by 5 IP is the goal to Sun.

And how you know.

And 1 plus 1 plus 1 to equal more than 3 as you introduce these acquisitions. These companies and these people to each other.

And kind of like a 20 <unk> century digital banking storefront or is that too much of a reach what's the grand plan here.

Little bit too much from me, but there's a very smart analysts etcetera and your barrels per day.

Category and asset management Campbell is if they.

And imagine lumber assets.

Timber assets is going to be great interest and management 55, IP as tax.

Tax efficient management to it they're obviously nutmeg and we're already doing the UK will be linked together.

Offering consumer digital product, both deposits and small business eventually lending and investment global investing et cetera makes sense C..6 and another 1 and again, that's a huge market so well.

Looking at anything which has adjacencies.

It could be data it could be management lobbies and you're going to fill in and some a little bit more of a skunk works.

How do we look at retail and digital overseas and we've got we've got patience and time and we're going to spend a lot of time to see if we can build something very different and we have and the United States and so it's all been vetted and CX loyalty on the <unk>.

And with company again, if you look at that we are only so large new travel business. So think of this as enhanced services and our products and capabilities to help our clients travel packages et cetera, which we've already got the member and the second largest travel company United States and that doesn't include all the travelers going to force it.

Credit card debit card if travel, but we arent the travel affecting the travel agent and so it's a little bit of all of that I'm thrilled and doing it.

We're looking all the time and accurate and up a lot of wasted assets and suddenly things may not work that'll be okay, yeah, and Mike the only thing I would add is there's a couple of themes that to me come through some of the things that we've done recently 1 of them is ESG.

And especially in the and the Liberty on deals.

Deals and the other is just improving the customer experience, whether it's through various fintech.

Fintech deals or CX and loyalty customer experience is a key priority for us and we want to have all the tools necessary to deliver that and.

Equally and core liquidity a lot of money building and we have we have like every quarter for the next 2 years, you can add on products and new services being rolled out across the company.

I think it's exciting and very good interest and.

More and more integrated more and more simple to use more and more cut.

Customer friendly et cetera, and so on.

On.

And we're doing a little bit of all of that.

And then 1 day.

Yeah right.

God Mike.

And I.

Just Scott my follow up as you talked about disrupting and I thought that was interesting disrupting and the U K.

But essentially right your CEO letter, Jamie I mean, it's only gotten more competitive from the Fintech from Big Tech and big retail and everybody else and that's a question that comes up probably to everyone. On this call are you going to be disintermediation dis intermediate it over the next 5 years.

Whether it's you know all of the company, but it just seems like they are ramping up that.

And that much more you have and executive order.

From the White House, maybe you have to share data.

Your current mark to market of the threat.

From outside of banking to your business.

I don't feel any different thing and I wrote the chairman's letter I think we have huge competition and banking and shadow banking, Fintech and big Tech and non Walmart and in.

Obviously, there's always a changing landscape, but we also have a huge and we've got brand and capability and products and services and market share and profitability I think some of these competitors argue do quite well I think a lot of them succeed over time, but that's that's called good old American capitalism, and I'm quite comfortable we'll be fine.

And I do think there's going be a lot of people programs and banking business I'm, sorry, and I'm turning over 5 to 10 or 15 years I think 1 day during our call. There's been a couple of shadow banker and into banks.

Who were shadow it will be shadows and themselves.

Yeah. Thanks, Jamie.

We're we're working hard to make sure that we're offering services that are not disruptive all because they are good some of our clients are happy and we're providing them a great experience and there was nothing to disrupt.

Alright, Thanks, Jeremy Thanks, Jamie.

Our next question is coming from the line of Ebrahim point of Allah from Bank of America Merrill Lynch. Please go ahead. Your line is open now.

Good morning, and thanks for taking my question I guess, just sticking with the digital strategy.

And you heard Jamie talk about multiple times and on the lack of imagination that cost of the banking industry in terms of EJ experiments or buy and update later on.

And when you talked about your international expansion, but again going back to Mike's point as shareholders.

Banks and the U S should the expectation be that banks will be fast followers of luxury and that comes up with and replicating that.

Given the risk of cannibalizing your own sort of revenue share or do we expect or do you think we should expect.

More disruptive innovation coming from banks and the United States on consumer banking.

I think it's both I mean its not.

Either or question and.

And remember lot of these banks have done quite well, including bank of America, and quite wealthy and digital products and stuff like that so and I sort of a lack of imagination and the whole company and then when you look at some of these things is we could've imagined more why they become a competitor down the road. So some of your competitors are quite good I called bobbing and weaving and they start with 1 little thing to add product and service.

And the bad eyeball their customers and they find ways to monetize it. So we got to be a little more forward looking and how theyre looking at the updated guidance and stuff like that but and our case there'll be a little get a little bit of everything and I would just say the whole like cannibalization and fast following thing.

I think we've moved a little bit would be on that like there will be times, where we have the first idea and we're eager to lean in and innovate that way.

Times when someone else has the first idea and we're eagerly copied but the whole Oh, we don't want to do this thing that makes sense for the customer because we might be cannibalizing our own revenues, that's a recipe to.

Become shadow of your ownership of your forehead.

No problem catalog and our revenue.

And we will be the right thing and the time comes and sometimes daily and the golf show up and we'll do the right way.

And then and just got it and you look at the company I mean, when you look at what we've talked about SLR and I always getting into that system SLR, but look at the flows across this company.

And the debit card the credit card the trading flow the market share there and that's why I looked at much more than you know what are the ups and downs. The earnings this quarter because of seasonal I don't think that means anything from the future of the company and they are bankers or traders or credit card or debit card and merchant services, our auto business, our digital day, it's doing pretty good.

I mean, we.

We just reported and my God, the company's doing quite volume.

And we'd like to be a little critical of ourselves and companies are that's part of their failure.

Look at what they didn't do well and what other people have done well and and.

And so and be prepared and they have.

Fair assessment of the competition is very large and it can be.

Very tough.

And the Jpmorgan more weighted either either open.

And I agree and I think banks don't talk enough about client acquisition and market share. So I agree with you there just as a follow up Jamie very quickly.

Some questions around Lake peak inflation fee growth I know you guys are very bullish compare and contrast, how the world looks to you today versus back in 2011, leading became out of the financial crisis and the risk of GDP growth disappointing over the next few years.

I think it's I think they're completely different fundamentally coming out of the 1 on the crisis and the world was massively overleveraged you had investment banks at 40 times leveraged at Jpmorgan, We did not meet talk and didn't need help and Lehman and bear Goldman and Morgan you had banks overseas dexia to land and banks or I can't remember.

From all went bankrupt.

Net hedge fund deleveraging and quantify the deleveraging.

Have a tree and to a tribute to all the moving volume margin.

That we're going to be recognized actual losses spread around and balance sheets and regulators.

And stuff like that so the wall and massive deleveraging mode and consumers over Levered company to Overleverage and putting.

The big book and more feet with $400 million.

Today, it's I think 60.

Have you got to look at it today today everything you talked about loans being down is the consumer is and puppies prime and the consumer how size up the stack buys up their income dropped the savings are up their comp and as they are up and pandemic is kind of in the rearview mirror hopefully it gets worse with it and and they're they're raring to go and you see and home prices.

And you see it.

Auto purchases you see.

And they'd be much higher but from a supply constraints right now and so and businesses equally you're in good shape and not over leveraged today. They do have a lot of chart show that corporate debt is like higher than.

Corporate so it with corporate cash and look at middle market losses is almost zero.

Almost zero and huge unutilized evolve and stuff like that so secondly, ekati start to grow.

And I mean do they see most go up because inventory receivables and capital expenditures and stuff like that so it is completely different and you've got physical policy on autopilot, meaning theres a lot that has been spent yet there's a lot more and is going to be passed and you're a QE. So far is <unk> $220 million per month.

And I, just think you're going to see hopefully see a very strong economy. We don't know how long. Obviously this is what I just said that is in.

Inflationary effect on that and and we don't know the future active a goldilocks Goldilocks me is and I'm hopeful and are predicting.

<unk> debt and place it goes off the 10 year bond goes up the growth is still quite strong you may have growth and second half this year and stronger than it's ever been and United States and America.

And Europe is probably 6 months behind America, and so growth and go into next year and and.

And the 10 year bond goes to 3% and lot of growth and short rates go from it won't make any difference.

As always had a strong growth and consumer their jobs are plentiful wages are going up these are all good things and so.

Yeah, obviously and place it can be worse and people think I think it will be a little bit worse and you've got things I don't think it's only temporary but that's that doesn't matter. If we have very strong growth.

Yeah, there are always risks in any environment, but the risks and this 1 I think are quite different from the ones that we had coming out of the global financial crisis.

Got it thank you.

Okay.

Our next question is coming from the line of Steven <unk> from Wolfe Research. Please go ahead. Your line is open now.

Hey, good morning.

And so I wanted to start off with just a follow up question on card NII, Jeremy you did strike and optimistic tone on the higher spend trends and the potential for future NII tailwind as payment rates start to normalize and just looking at the card revenue rate given there are another of inputs and that metric I was hoping you could just help us isolate.

The potential NII benefit versus the current baseline from a normalization and payment rates. So just the payment rate and normalizing what would be the incremental step up in the quarterly NII run rate.

Okay. So there's a lot of pieces and our questions. Even so first let's talk about the revenue rates. So a couple of things. So in terms of the NII, we don't really see.

Meaningful uptick and card NII happening this year like you might may be see a tiny bit of it sequentially fourth quarter versus third corner, but I think there's going to be pretty hard to see it. So I think you ought to be thinking about that as the 2020.2 effect.

I'm not going to get into guiding on revenue rate for 2022.

And I will actually point out that were and the market right now.

Competing aggressively with some great offers and I'm happy to say actually the client acquisition and cars going great and we're seeing great uptake on the offers.

But that comes with a bit of elevated marketing expense so as.

As I look out to next quarter, and you might actually see a bit of a dip and the revenue rate just because of the way the accounting works.

Okay and from my for my follow up Jeremy I, just wanted to ask or at least honed in on 1 comment you made where you said you could potentially still manage to a 12% capital target and I was just trying to better understand how much capital cushion you are looking to manage to under the SCB and if the G SIB surcharge.

Just not Recalibrated, where do you think you'll have to run on a steady state basis, just because it feels like waiting for godot or we haven't seen any changes on the recalibration front and specifically with the G SIB surcharge.

Yes, Okay. So basically that's a question about the management buffer and.

A question about you know, what we would do and a world where she said doesn't get recalibrated and a world where juice it doesn't get recalibrated and there's a world where our capital minimums are quite a bit higher you know starting in 2020.3.

We obviously disagree with that and we don't think and makes any sense at all.

Given that a big part of the driver of that increase and the amount of capital that we would have and as Jamie pointed out earlier, both we and the system are really flush with capital and the regulators have been pretty clear that there's.

Enough capital and our system right now and that growth would increase increase that amount and quite a bit for us and for everyone else. So that's a big part of the reason why we've been so vocal for so long without the need to recalibrate that and I think we see some of our competitors, making those points to as they start to creep up into higher buckets and you know.

To be fair the photos and acknowledge that this is a thing that needs to get fixed it's just that they're kind of busy.

And to get the Basel III and gain.

<unk> put in place and the U S rules, which brings particular complexities and why with the Collins floor.

And so I've always north of the Juicy calculations on the stupid as I've ever seen and my whole life and then we doubled it here.

So.

European banks and a lot of disadvantages in terms of when they don't they can't comment.

Common regulators they cant expand across Europe, and what are your advantages they have pretty much have the G City and I, just don't think that in the longer and that's right for America.

But I can consider based on artificial number and so.

Let's just wait and see revenue rules are and then we'll answer that question and you don't have to sit there and guess what's going to happen and I think it's due to the important players but in the near term, we're actually bound by leverage so that's where we're focused on right now that's on our biggest single.

Thing that we'd like to see effects because that is affecting.

On the management of the balance sheet right now and ways that we think really don't make sense and eventually.

Result in higher costs that they will get passed on and to the real economy just to touch on your buffer point and briefly.

And you know when all is said and done and the framework is fully settled hopefully we're back to being bound by risk based constraints, we have a bit more experience with a couple of years of SCB.

And theres, a little bit less rule uncertainty it would be there is an interesting conversation to have about what the right management buffers are for people and the world, where we do think it's important and and we've made these points.

Stigmas ties the use of buffers.

No. We've made this point and the context for example of the money market complex too. We have all these kind of guidelines and the rules have them as buffers that youre supposedly and free to use but that's not the way everyone and treats them. So buffers become minimums and that adds a brittleness and a system that makes it more.

More pro cyclical and anyone wants it to be so.

Down the road when things are stable and buffer discussion could become interesting, but right now it's a somewhat similar story and it's really about us and remember there's 1 buffer you Gotta, we don't really talk about which is <unk> $40 billion and pre tax earnings a year [laughter]. Okay. That's a huge buffer smoothed allows you to change your forward looking capital did you buy back stock adult buyback stock and.

So we have a lot of levers and whatever happens we're going to figure out a way to do a great job for shareholders.

Fair point, thanks, so much for taking my questions.

Thanks, Steve.

Our next question is coming from the line from Matt O'connor from Deutsche Bank. Please go ahead. Your line is open now.

Good morning.

And I wanted to circle back on costs.

This year and all of it is driven by the stronger than expected. Some of it is inflationary pressures you mentioned from us I think discretionary.

Now on the path accelerating from investment spend.

But the question is as we exit this year when we look back on costs from 2021, and say, they're a little bloated.

Of all those factors or is this could be a good faith here to grow off from going forward.

Okay. So there was a couple of points on there.

Let's talk about bloated I mean, you've heard Jamie and talk about cost before right. So we go after everything all the time and go after waste and we try very hard to never be bloated and to not waste time Theres a constant discipline, that's hard work and we look forward everywhere.

So I would like to say that bloated and is not so worried with whatever it is described ourselves and <unk>.

And then a bunch of time and the balance of this organization and I really don't take that that's true and I don't think anything about what we're doing in terms of how money is being spent this year.

And as wasteful and.

And in fact as you know.

Really big driver of the kind of impact on run rate spend is the investments that we're making especially investments and technology and customer experience and in transforming the core efficiency of the company in terms of things like technology modernization and data centers and so on so in terms of projecting forward into 2020.2.

I don't want to get into giving client and 22 expense guidance here and I think that you know.

And you really have to unpack that cost number between the parts of it that our volume and revenue related and the kind of more run rates structural and investment costs as we've talked about before so I.

I think this year is it's a little bit tricky to unpick the components from their perspective to project on Tonight, and if we can find more goodbye and spend we're going to spend it.

And I told you guys that there's good expense you know when we have credit card can spend so much money in marketing and the or the returns are very good and spend it if we can open higher great bankers and stuff that we're going to spend it if we can.

Spent $200 million new data centers and have you embedded for us down the road, we're going to spend it we do not manage the company. So we can tell analysts with the expense number is going to be that is just a bad weighted around okay and.

Conversely, a lot of revenue software revenue.

And you don't always good.

And we all know how much risk, we take and businesses and stuff like that.

Spent a lot of time and good revenue bad revenue and good expense and that expense and that's what's going to drive.

On the franchise and it's 5 to 10 years.

Yeah.

Understood and then separately as you think about capital allocation have longer term is there a thought and more meaningfully increase the dividend payout.

At the beginning of the Covid crisis buybacks were suspended after stocks dropped sharply thanks current repurchase until they roughly doubled.

But dividends were maintained and.

And obviously your pretax earnings power that you alluded to is very strong.

It seems like that from 30% cap.

And obviously.

So just thoughts on that going to happen all in maybe 1 and CCAR cycle, but if we do get a multiyear economic recovery and her thoughts on pushing that Devon and higher maybe closer to like a 50% payout.

We are not.

I mean.

Hey, good peripheral and you wanted to do that and which is sustainable through a bad downturn and.

And so we really want to do that and I think this time kind of prove that it was a very minor thing relative to capital retention, but you'll be want to invest and our future and invest and growing and stuff like that and if we can and youll wagon and raised the dividend. So hide it equivalents your ability to do on the things and send the way that flows into stress capital buffer and that sort of makes that point and click.

Yeah right. So every part of the reason there were $3, 2 and sort of $3.1 as it and some increase of the board announced its intention to do so.

And if I owned 100% and the company there would be no dividend.

And.

Okay. Thank you.

The next question is coming from the line of Gerard Cassidy from RBC capital markets. Please go ahead. Your line is open now.

Thank you good morning, Jeremy.

Can you.

Can you guys share with us if you take a look at your net interest margin and the quarter, obviously came under pressure and if we assume and I on this is a big assumption, but if we assume net rates don't really change from here over the next 6 to 12 months for long and stays anchored where it is at what point does the average yield and your.

Average interest, earning assets start to stabilize or maybe go up because the new business that you're putting on equals or exceeds whats running off in terms of interest rates on the products that are coming off the balance sheet.

Yeah. Good question Gerard So I mean, I guess, 1 way to think about your question is whether we basically think that NIM has hit the bottom and this quarter.

And you know I think we've all learned the lesson that calling the bottom is a very dangerous thing and I would also point out and I would direct you to like the last page of our supplement and I'm going to give you a big speech on markets NII, which is my favorite topic and why that is really a sort of a distraction that we shouldnt look at and maybe over the next quarter.

But we do have that disclosure, where we split out.

Total NII and markets NII as well as you know NIM, excluding markets and the reason I raised that is that.

Yes. Your overall mental model is not wrong, it's reasonable to think that and then might stabilize around these levels, but its noisy.

And the market's numbers and there and that's going to add noise and also I would say right now there's an unusual amount of numerator denominator type of effects, so whatever winds up being true about the numerator and you'll also have quite a bit of volatility and the denominator there which is 1 of the reasons that we honestly don't manage to that number as you've heard us say before.

But your overall.

Frame it sounds reasonable to me.

Very good and then as a follow up and then I may have misheard, you so and <unk>.

Correct me, if I'm wrong, but I think you said that the.

The higher level of noninterest expense and the outlook that is was really driven by the improved outlook for noninterest income can you give us any color on that part of it the outlook for noninterest income improvement.

Well.

And in some of its and actuals and some others and the outlook, but at a high level point is simply that if you look at the mix of revenue across the company. We have some offsetting dynamics right now we've got NII headwinds from the consumer Delevering as we've discussed but as you saw and this where our CIB and AWS unresolved, we have exceptional performer.

And banking, even though and and wealth management and even though markets is down year on year, it's actually up significantly from what we expect.

Very good on expense guidance, so that's kind of how it all comes together.

And I appreciate it thank you.

And some of those expenses to go up.

And could that move the good revenues are going up and did.

Our next question is coming from the line of Betsy <unk> from Morgan Stanley. Please go ahead. Your line is open now.

Hi, Thanks, good morning.

Hey, Betsy.

And I had a couple questions..1 was just on thinking through the outlook for NII like you've indicated $52.5 billion subject to market conditions can you just give us a sense as to how youre thinking about market conditions.

What's the trigger point for being maybe better than expected versus coming down and and I ask and contact of I noticed your securities book has shifted a bunch from ASF to HTM.

So it feels like.

From that.

And on your Youre waiting more for rates to move up materially before you would lean into that and yield curve trade, but maybe you can give us a sense as to what that market conditions comment was referring to and how youre thinking about that.

Sure. So let's go through that for a second and so I'll start I wasn't going to get them on a big markets and I ask Bruce until next quarter, but I can't I can't resist so.

You're talking about market conditions.

And the markets NII component of that NII outlook includes things like the extent to which we have spec pools versus TBA is the extent to which we have futures versus cash and a high rate countries like Brazil the growth in prime brokerage balances the common theme across all of these.

Is there are situations, where youre deploying balance sheet and the market's business to serve clients.

And that's profitable deployment on a spread basis, but theres quite a bit of a gross up between the kind of non derivative piece of it and the derivative of derivative like piece of it where.

And where the derivative piece of it doesn't have any NII and the non derivative piece of it does so every unit of that sort of activity that you do creates a significant.

Swing and Eni number either up or down with very little and back to the bottom line and that's not the entirety of the market story. There are parts of the markets business, where we're actually doing more HD and the market.

No I know, but part of it is part of the market dependent comment is the market dependent and mark.

And I'll go to the other point on a second and I'm almost done with the speech.

[laughter] anyway.

You got the point so that's 1 that's 1 point of fluctuation by going through our other pieces and so the FSA as Jim and I think your implied question, which is basically what would make us want to deploy more into a higher rate environment. So I will say that the <unk> HTM.

The changes that you've seen are really just primarily about managing.

Managing capital across the various constraints, while preserving the right level of flexibility to do deployment, but given the level of cash balances right. Now are the NFS HTM isn't really remained constrained in terms of duration buys and I think we would have enough flexibility in there to do kind of short on cash deployment and tactically as we always do.

So to get to the punch line is kind of what we said before which is we're bullish on the economy. We believe that that comes with higher inflation, and therefore higher rates and in light of that.

We're happy to be patient right now when that actually changes and and we decided to deploy more you know you'll see it.

And just a simple way to think about the 52 and a half a dozen markets business, which goes up or down.

Let's go up and you can see this disclosure, we will earn more and Oh.

And you can equal which of course, they never off with Oppo and and in addition to that we can make decisions to deploy more money from more NII.

And it's interesting versus when you were at our conference Jamie that it seems like the <unk> 52, and a half is.

More a function of the curve given the fact that card did it looks like better than you had thought at that time and the middle of June based on your comments about spend being up so much but.

But let me just sorry.

Sorry to interrupt you, but let me just pick up on that point for a second because I think someone else asked a similar question, but I would just remind you that we do see that very healthy sequential growth in card loans on the volume of spending but the key issue is the revolve behavior and so our view on that really hasnt changed and we do see elevated pay.

The rates as a result of the cash buffers.

Which remains kind of a consistent user and why we have a muted outlook for card on high this year, yes.

Total sales.

And I haven't worked correct anyone here bright participant youll see it go up by the end of the year.

Okay, I think for being more conservative on that because of all the spend and stuff like that but we hate guessing right and look at how many cars you have how much spend you have how many happy customers you have and I will take care of itself.

And on that front your card fees were quite good right. You mentioned that in your press release, maybe you can give us a sense as to the drivers is that new openings is that basically what it is how sustainable is that because that was a a bit of an upside surprise and this result, the card fees.

Yes, and I think it was suspended by Betsy I mean.

We can get even a bit more color than that.

Rajiv and you can follow up if you want but at a high level I think the card spend number is really all about I mean, sorry. The current fee number is really all about the spend trends.

Okay, and then just 1 last if I can squeeze it in your var came down significantly can you give us a sense as to what's going on there.

Yes, I mean, that's just the volatility of last year's prior quarter are coming out of the time series right. If you think about it.

Alright, okay. Thanks.

These numbers are and the per se.

Yeah.

Our next question is coming from the line of.

Charles Peabody from <unk> Partners. Please go ahead. Your line is open now.

Yes, I wanted to ask that question a little bit differently.

And reiterating your $52.5 billion guidance, you said there was potential for some variation or variability around that number and I'm trying to understand where are the greatest variation could come from is it and your loan growth expectations. Because I'm hearing that you really are not expecting much in the weighted loan growth or is it.

And the shape of the yield curve because of the feds QE actions or words around taper and.

And talking about the yield curve could you also talk a little bit about what's more important the short end of the yield curve between fed funds and the 2 year or the long and.

And in that conversation off the talk about the significant amount of liquidity that's about to hit short net.

And there is a disclosure and the March 31 and 10-Q.

And so it's earning at risk.

If rates go up 100 basis points U S dollar and non U S. Dollar a $7 billion. If the whole co goes up 100 basis points on the $7 billion. Some number like 4 and a half with 5 short rates versus long rates long rate numbers cumulative I would add every year and tell me rollover. These payments by a rate that is the number.

Okay and.

Obviously loan growth loan growth, that's on the plus or minus but the biggest thing is the.

And interest rates.

Yes.

On the variable let me give you the variables Charles because it's kind of a reasonable question. So I'll spare room on markets on a high speed you heard it already but thats, obviously, a big factor.

Within card, we are somewhat optimistic about loan growth, but just from a number of about loan growth has to translate into evolve.

To drive NII, and so if pay rates and pay rates remain.

As I said earlier is there sort of a forecast that reflects the recent experience. So we are forecasting elevated pay rates, but of course, we could be wrong, there could be even more elevated than we are currently forecasting so that would be downside and the opposite of that if we see the consumer we levering starting a little bit sooner would create upside there and.

And then there's the impact of deployment. So we're staying patient right now that means that we're not earning the steepness of the yield curve and if that changes that could create a little bit of upside and then there's always the tactical actions that we can take.

And the front end of the curve right now those on very interesting because we are is about money market rates, which is a big part of the reason that you see on RFP.

Having so much uptick, but it's not where the change and there were opportunities and repo and so on and then.

Could.

Help a little bit as part of our on our constant tactical deployment, there, but that's not again, our simple case.

Just to follow up on that I mean.

And the liquidity that is going to hit in July and August is substantial and that's going to have some impact on the shape of the yield curve and the short and.

We saw a rise on the overnight repo rate reverse repo rate and June.

Is it possible that we have to have another 1 to keep rates from from falling too far.

Okay.

Yeah, I mean, I think that's a question for our kind of short term fixed income market strategists and my old research team, but right.

Right now it seems like the fed is pretty committed to making sure that repo rates don't trade and negative that's part of the reason they made their technical correction on this part of the reason the RFP is.

Paying when it pays.

So we'll see what happens there, but but to me the front end of the yield curve from a deployment opportunity perspective looks not very interesting right now and that is kind of our central cash for the rest of this year.

And did the the rise and the RP rate have any and your comments about market driven and the NII does it have any impact on market driven NII.

Yes, that's not really the way that we're about 5 basis point, yes, and I think you maybe I mean I don't know if this is part of your question or not but there is of course, the envision and <unk> and there are some pretty simple math you can do there about.

5 basis points on more 10 basis points on on half a trillion dollars for half a year or so but those are pretty small numbers and the scheme of the level of precision we're dealing with here.

Okay. Thank you.

Thanks.

Yeah.

A follow up question is coming from the line from Gerard Cassidy from RBC capital markets. Please go ahead. Your line is open now.

Thank you Jeremy just wanted to follow up can you give us some color about the residential mortgage lending business.

What was the gain on sale margins this quarter and the outlook on margin and then ill.

Look on volume so I should say, but also on did you say also that you guys sustain this small loss or a loss on the servicing area. If so what drove that thank you.

Yes, so let's talk a little bit about mortgage which is a business I'm still I'm still learning, but we've had very robust originations 40 billion and this quarter.

I think the most significant 1 of the significant things Thats going on is we've really finished unwinding all of our credit pullbacks from the crisis. So we're fully back in the correspondent channel.

Which is obviously, helping and volumes.

There's obviously been a huge refi boom over last year with lower rates.

<unk> starting to slow down a little bit.

And the purchase market has been quite robust, although now we've seen so much home price appreciation and net new.

Jamie affordability starts to be a little bit on a headwind.

So as we sit here today from a margin perspective, you have your kind of typical by Nymex as rates go up a little bit refi was downward at the industry as both capacity.

You have probably a little bit of a margin headwind looking forward and obviously there is a mix effect so as corresponding becomes a much bigger part of the of the.

Nations.

You have mix based.

Margin compression so.

And obviously and again and see how it was at all time highs and now it's.

It's nice and normally you guys, just getting lower and all time, yes exactly.

And relative to our Super elevated.

Prior year quarter, but it's still on perfectly healthy.

In terms of the servicing business I think really as you all.

I understand and the current environment.

The prepayment rates prepayment speeds have been running significantly above our model forecast and so as we continually update those as part of our risk management that can progress on small risk management losses, but in general the risk management of the parts of your MSR or it can be managed has actually been.

Very good and very stable.

So I think that's everything Gerard right.

Yes, thank you very much.

Yep.

No incoming question and thank you.

And on.

Just wanted to thank Jamie Pizza and a great job as CFO. We also notice is happy and Scott and a new job and and Jeremy I know why you know, Germany, but he's been the CFO and the IV for 7 or 8 or 8 years and social.

<unk> professional and also Germany welcome to the first call and congratulations. Thank you and talk to you all soon and thank you and I survived it.

Yes.

Thank you everyone that marks the end of your call. Thank you for joining and have a great day.

Okay.

[music].

Yes.

[music].

And.

[music].

Yes.

And.

[music].

And.

Yes.

Yeah.

Okay.

And.

Okay.

[music].

Yeah.

[music].

Okay.

Yes.

And.

[music].

Yes.

And.

Yes.

Okay.

And.

Good day.

[music].

And.

[music].

Okay.

[music].

Yes.

And.

Yes.

[music].

And.

Okay.

And.

Okay.

Yeah.

[music].

Yes.

And.

And then.

Okay.

And.

Hum.

And.

Yeah.

Okay.

[music].

Yeah.

And.

Okay.

[music].

And.

Okay.

And.

Okay.

Yes.

And.

Yes.

And.

And then.

Yes.

Okay.

And.

Yes.

And.

Yes.

Okay.

Good day.

Yes.

And.

Sure.

Yes.

Okay.

And.

[music].

Okay.

[music].

Sure.

Yes.

Okay.

And then.

Okay.

Yes.

And.

Okay.

And then.

And.

Yeah.

Yes.

And.

Yes.

And then.

And.

Yes.

And.

Hum.

And.

Mhm.

Okay.

Hum.

And.

And then.

Yeah.

And.

Okay.

[music].

And.

Yes.

Okay.

Yes.

Okay.

And.

Yeah.

Yes.

Yeah.

And.

And then.

And.

Yes.

And.

Yes.

And.

Yes.

And.

Yes.

And.

Okay.

And then.

And.

Okay.

And.

Okay.

Yeah.

Okay.

[music].

And.

[music].

And.

Okay.

Yes.

Okay.

Yes.

And.

Yeah.

Yes.

And.

Yeah.

Yes.

And.

Okay.

Yeah.

And.

Hum.

Yeah.

Hum.

And.

And then.

Yes.

[music] zone.

Thanks.

Okay.

And there.

And.

Yes.

[music].

Yes.

And.

Yeah.

Okay.

And then.

And.

Yes.

And.

Yes.

And.

Yes.

Okay.

Yes.

And.

Okay.

And.

Okay.

Sure.

Okay.

And.

Okay.

And.

Okay.

Yes.

Okay.

[music].

And.

Okay.

And.

Okay.

Yeah.

Yes.

And.

And then.

Yes.

And.

Yes.

And.

Okay.

Yes.

And.

Yes.

And.

Great.

And.

Okay.

Yeah.

Uh huh.

And.

Hum.

And.

Hum.

And.

Hum.

And then.

And.

Yeah.

And.

Okay.

[music].

Thanks.

And then.

And.

Okay.

And.

Yes.

And.

Yes.

And then.

Okay.

And.

And yet.

Sure.

And.

Yeah.

Okay.

Yes.

And then.

And.

Okay.

And.

Okay.

And.

Okay.

[music].

And.

[music].

And.

Yeah.

And then.

Yes.

And then.

And.

Okay.

And then.

Yeah.

And.

Yes.

And.

And then.

Yes.

Okay.

And then.

Oh.

Hum.

And.

Hum.

And.

Okay.

Hum.

And.

And then.

Yes.

And.

Yeah.

And.

Yes.

[music].

Thanks.

Okay.

And.

Okay.

And there.

Okay.

And.

Sure.

And.

Yeah.

And.

Yes.

And.

And then.

Okay.

And.

And yes.

And.

Yes.

Okay.

Yes.

And.

And <unk>.

And.

Okay.

Yeah.

Okay.

And.

Okay.

Yes.

Okay.

And.

[music].

Okay.

Yes.

And.

And then.

And.

Yeah.

Yes.

Yeah.

Okay.

Yes.

And.

And then.

Yes.

Yeah.

And then.

Okay.

Hum.

Okay.

Hum.

From.

Hum.

And then.

Hum.

Yeah.

And.

Hum.

And.

Yeah.

And.

And then.

And.

And then.

Okay.

And.

And then.

Okay.

And then.

Yes.

Okay.

Yeah.

Yes.

Thank you.

And then.

And.

Okay.

And then.

And.

Okay.

And you're correct.

And.

Yes.

And.

And then.

And.

Okay.

Sure.

And.

Okay.

And.

Okay.

And.

Yes.

Okay.

[music].

And then.

Yes.

And.

And then.

Yeah.

And.

Yes.

And.

Okay.

Yes.

And.

Okay.

Yeah.

And.

Yeah.

And.

Yes.

Okay.

And then.

Yes.

Okay.

Yeah.

And.

Yeah.

Hum.

From.

And.

Hum.

And.

Hum.

And.

Yeah.

Hum.

And.

Okay.

Yeah.

Yes.

And then.

And.

Okay.

And then.

Yes.

[music].

And.

Yes.

Okay.

And then.

Okay.

And.

Okay.

And then.

And.

And then.

And.

Yes.

And.

Yes.

Sure.

And.

Okay.

Yeah.

And.

Okay.

Yeah.

Yes.

Okay.

[music].

Yes.

And.

And then.

Okay.

Yes.

And then.

And.

Yes.

Okay.

Yes.

Okay.

And.

Yes.

And.

Yeah.

And.

Yes.

Okay.

Yeah.

Hum.

Okay.

Hum.

And.

Hum.

And.

And so.

And.

Hum.

And.

Okay.

Yes.

And then.

Yes.

And then.

And.

And then.

And.

Yes.

Okay.

Yes.

And.

And then.

Okay.

Yes.

And then.

And.

And then.

And.

Yes.

And.

Yes.

And.

Yes.

And.

Okay.

Sure.

Yeah.

Okay.

[music].

Yes.

Yeah.

Okay.

[music].

Okay.

Yes.

[music].

Yes.

And.

Yes.

And.

Good day.

Yes.

Okay.

Yes.

Okay.

And.

And then.

Yeah.

And.

Yes.

Yeah.

And.

Yes.

Okay.

And.

Yeah.

Uh huh.

And.

Hum.

And then.

Hum.

And.

And then.

And.

Yeah.

Okay.

And.

Yes.

Thanks.

Okay.

And there.

And.

[music].

Yeah.

Yes.

And.

Yes.

Okay.

And.

And yes.

On.

Yeah.

Okay.

Yes.

And.

And <unk>.

And.

Sure.

Yeah.

And.

Okay.

And.

Yeah.

Okay.

And.

[music].

Okay.

Yes.

And.

And then.

Yeah.

And.

And then.

Okay.

And.

Okay.

And.

Yeah.

Yes.

And.

Yes.

And.

Yeah.

Okay.

And.

Mhm.

Hum.

And.

Hum.

And.

And this.

Okay.

And.

Okay.

Yeah.

And.

Okay.

And.

And there.

And.

Okay.

And.

Yes.

Okay.

Yes.

And.

And then.

Okay.

Yes.

And.

Okay.

And then.

Okay.

And.

Yeah.

And.

Okay.

And.

Okay.

Yeah.

Yes.

Yeah.

And.

Okay.

And.

Okay.

Yeah.

Okay.

[music].

Yeah.

Yes.

And.

Okay.

Yes.

Yeah.

Yes.

Okay.

And.

Okay.

Yes.

Okay.

Yeah.

And.

Yes.

And.

Yes.

And.

Yeah.

And then.

Yeah.

Okay.

Hum.

From.

And.

Mhm.

And.

Hum.

And.

Hum.

And.

Hum.

And.

Yeah.

And.

And then.

Okay.

And.

Okay.

And then.

And.

Yeah.

Yes.

And.

Okay.

And.

And yes.

And.

Yes.

Okay.

Yes.

And.

And then.

And.

[music].

Yeah.

Okay.

And.

[music].

Okay.

[music].

Yeah.

Yes.

Okay.

[music].

And.

Okay.

[music].

And.

Yeah.

Yes.

And.

Good day.

Yeah.

Okay.

And.

Yes.

Okay.

Yeah.

[music].

And.

Yes.

And.

And then.

Yeah.

Okay.

Yeah.

Mhm.

And.

Hum.

And.

Hum.

And then.

And.

And then.

And.

From.

Hum.

And.

From.

And.

Hum.

Yeah.

Okay.

And.

Okay.

Yes.

And.

Okay.

And.

Yes.

And.

[music].

Yeah.

Yes.

And then.

Okay.

And.

Great.

And.

Sure.

And you're correct.

Okay.

Yes.

And.

And then.

Okay.

Sure.

And.

Okay.

[music].

Okay.

[music].

Yes.

Okay.

Uh huh.

And.

Yeah.

Okay.

[music].

And.

[music].

Yeah.

And.

Yeah.

Yes.

And.

And then.

Yes.

Okay.

Yes.

Okay.

And.

Yeah.

Yes.

Okay.

Yes.

Yeah.

And.

Okay.

Hum.

And.

Hum.

And.

Mhm.

And.

And then.

And.

And then.

And.

From.

And.

Okay.

And.

And then.

Thanks.

And then.

And there.

And.

Sure.

And.

Yes.

Okay.

Yes.

And.

And then.

Okay.

And.

Yeah.

And.

Yes.

Okay.

Yes.

Yeah.

And.

[music].

Yeah.

And.

Okay.

[music].

Yeah.

Okay.

Uh huh.

Yeah.

Yes.

Okay.

[music].

And.

Yes.

And.

[music].

Yes.

And.

Good day.

Yes.

Okay.

And.

Okay.

And.

Yeah.

Yes.

And.

Okay.

Sure.

And.

And then.

Okay.

Hum.

Uh huh.

Hum.

Mhm.

And.

Hum.

And.

Hum.

From.

And then.

And.

Okay.

Yes.

And then.

And.

Thanks.

And then.

Okay.

And then.

And.

Okay.

[music].

Yeah.

Yes.

And.

Yes.

Okay.

And then.

Okay.

And then.

Okay.

Yes.

And.

Yes.

Okay.

Yes.

And.

Q2 2021 JPMorgan Chase & Co Earnings Call

Request a DemoDemo

JPM

JPMorgan Chase

Earnings