Q4 2022 JPMorgan Chase & Co Earnings Call

Please stand by. We are about to begin. Good morning ladies and gentlemen. Welcome to J.P. Morgan Chase's fourth quarter of the 2022 running 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. Please stand by. After this time, I would like to turn the call over to J.P. Morgan Chase's Chairman and CEO , Jamie Vannen and Chief Financial Officer, Jeremy Vannen. Mr. Vannen, please go ahead. Good morning, everyone. The President of the United States of America, and I am very happy to be here today to present the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the and deliver an ROTC of 20%.

This quarter, we had two significant items in board. A $914 million gain on the sale of visa B shares offset by $824 million of tenant investment securities losses. Touching on a few highlights, combined credit incentives is a non-credit current year with a growth in both discretionary and non-discretionary spending. We ended the year ranked number one for global IABs with a large share of 80% and the credit continues to normalize but the actual performance remains strong across the company.

On page 2, we have a more on our four further goals.

Revenue of $35.6 billion was up $5.2 billion, or 17%.

An I.I. at the carcass was up 8.4 billion or 72% driven by higher rates.

NIRX markets are down 3.5 billion for 26% predominantly driven by lower ID fees as well as management and performance fees in AWM, lower or lower leasing income, and a normally Photosia

And the market revenue was up $382 million for seven times more.

Expenses of $19 billion were above $1.1 billion or 6% in year on year, primarily driven by higher structural returns and investments.

And the credit cost of $3.3 billion included a natural overdose of $887 million.

The net reserve bill of $1.4 billion was driven by the case of the firm's macroeconomic outlook, which now reflects a mild recession in the 100 years.

as well as long growth in hard surfaces, partially offset by reduction of that calculated uncertainty.

you

Looking at the full year results of phase 3.

The firm reported an adding on of $37.77 billion, EPS of $12.09, and a record revenue of 132.3 million.

and we delivered an ROV of 18 times.

Thank you.

On surrounding advocates or on page four.

We ended the quarter with a CZ1 ratio of 13.2% off 70 basis points, primarily driven by the benefit of net income, including the sale of B-Shares, less distributions, AOCI gains, and more of a WBA. We ended the quarter with a CZ1 ratio of 13.2% off 70 basis points, less distributions, less

Our WAA declined approximately $20 billion in the core-on-quarter, reflecting lower our WAA in the marketing business, which was partially offset by an increase in lending, primarily in car services.

For the call, we have a 13% CC1 target for the first quarter of 2023, which we have now reached one more early.

So given that, we expect to resume share reversions this quarter.

Now, let's go to our businesses starting on page 5.

Starting with a quick update on how US consumers and small businesses base on our data.

They are generally ontologically, although sentiment for both reflects recessionary concerns not yet wholly reflected in our data.

Combined, evidence and credit spend is up 9% year on year.

Both discretionary and non-discretionary spend are all beyond here.

The strongest growth and discretion are being probable.

Results ended up 4% on the back of a particularly strong fourth quarter last year.

E-commerce spend was up 7% while in-person spend was roughly flat.

Cash buffers for both consumers and small businesses continue to slowly formalize.

with lower income segments and smaller businesses to mobilize faster.

And the zoom or cash buffers to lower income segments are expected to be back to pre-pandemic levels by the third quarter of this year.

Now moving to the annual results, this quarter, CCB will further that income of $4.5 billion on a revenue of $15.8 billion.

which was up 29% year-on-year.

You'll notice in our presentation that we renamed consumer and business banking to banking involved management. Starting there, revenue was up 56% year on year driven by higher NII on higher rates.

Deposits were down 3% over a quarter as spend remains strong as the gray cycle plays out while being partially offset by new relationships.

Buying investment assets for down 10% in the drawing year, driven by market performance, partially offset by net inflows, where we are seeing good momentum, including from our positive customers.

On the one thing I knew it was down 46% year on year largely driven by lower production revenue.

Moving to car services in autumn, Ramanu was up 12% year on year, predominantly driven by higher car services and AI on higher revolving balances, partially offset by lower only lease choosing car.

Car out sandings were up 19%.

Total revolving balances were up 20%, we are now back to pre-pandemic bubbles. However, revolving balances per account are still below pre-pandemic bubbles, which should be a tailwind of time.

and then auto origination for 7.5 billion down 12 percent.

Expenses of 80 billion were up 3% year on year, primarily driven by investments as well on the

In terms of the credit performance this quarter, credit costs were $1.8 billion, reflecting reserve bills of $800 million in card short

And that charge offs $345 million, $330 million year on year.

Our underwriting businesses were affected by market conditions, resulting in fees down 58% for best and down 69% for equity.

Terms of the outlook the dynamics remain the same pipeline is relatively robust, but conversion is very sensitive to market conditions and sentiment about the economic outlook also note that it that it will be a difficult compare against last year's first quarter.

Moving to markets revenue was $5 7 billion up 7% year on year, driven by the strength in our macro franchise.

Fixed income was up 12%.

That volatility drove strong client activity, particularly in rates and currencies in emerging markets, while securitized products continued to be challenged by the market environment.

Equity markets was relatively flat against a strong fourth quarter last year.

Payments revenue was $2 1 billion up 15% year on year, excluding the net impact of equity investments. It was up 56% in the year on year growth was driven by higher rates.

Security services revenue of $1 2 billion was up 9% year on year predominantly driven by higher rates, largely offset by lower deposits and market levels.

Expenses of $6 4 billion were up 10% year on year predominantly driven by the timing of revenue related compensation on a full year basis expenses of $27 1 billion were up 7% year on year, primarily driven by higher structural expense and investments, partially offset by lower revenue related.

Sensation.

Moving to the commercial bank on page seven.

Commercial banking reported net income of $1 4 billion.

Record revenue of $3 4 billion was up 30% year on year, driven by higher deposit margins, partially offset by lower investment banking revenue and deposit related fees.

Gross investment banking revenue of $700 million was down 52% year on year, driven by reduced capital markets activity.

Ben says $1 3 billion were up 18% year on year.

Deposits were down 14% year on year, 1% quarter on quarter, primarily reflecting attrition of non operating deposits.

Loans were up 14% year on year and three essentially.

C&I loans were up 4% quarter on quarter, reflecting continued strength in originations and revolver utilization CRE.

CRE loans were up 2% quarter on quarter, reflecting a slower pace of growth from earlier in the year due to higher rates, which impacts both originations and prepayment activity.

Then to complete our lines of business AWS on page eight.

Asset and wealth management reported net income of $1 1 billion with pretax margin of 33%.

Revenue of $4 6 billion was up 3% year on Europe , driven by higher deposit margins on lower balances predominantly offset by reductions in management performance and placement fees linked to this year's market declines expense.

Expenses of 3 billion were up 1% year on year predominantly driven by growth in our private banking advisor teams largely offset by lower performance related compensation.

For the quarter net long term inflows were $10 billion positive across equities and fixed income and <unk> 47 billion for the full year.

And then liquidity, we saw net inflows of 33 billion for the quarter and net outflows of 55 billion for the year.

Yeah.

AUM of $2 828 trillion and overall client assets of four trillion were down 11% and 6% year on year, respectively, driven by lower market levels.

Finally loans were down 1% quarter on quarter, driven by lower securities based lending while deposits were down 6% sequentially driven by the rising rate environment, resulting in migration to investments and other cash alternatives.

Turning to corporate on page nine.

Yeah.

Corporate reported a net gain of $581 million revenue of $1 2 billion was up $1 7 billion year on year.

NII was $1 3 billion up $2 billion year on year due to the impact of higher rates and I are it was a loss of $115 million and reflects the two significant items I mentioned earlier and.

And expenses of $339 million were up $88 million on here.

Let's pivot to the outlook for 2023, which I will cover over the next few pages starting with NII.

10.

If I take a sip of water.

Okay.

We expect total NII to be approximately 73 billion and NII ex markets to be approximately $74 million on.

On the page we show how the significant increases in quarterly NII throughout 2022.

Culminated in the $81 billion run rate for the fourth quarter and how we expect that to evolve for 2023.

Billings were the drivers the outlook assumes that rates following the forward curve.

The combination of the annualized <unk> of the hike in late December hikes expected early in the year and the Cubs expected later in the year should be a net tailwind.

Not tailwind as the impact of deposit repricing, which includes our best guess of rate paid in both wholesale and consumer.

In addition, looking at balance sheet growth and mix, we expect solid overall card spend growth as well as further normalization of revolving balances per account and modest loan growth across the rest of the company.

We expect that this tailwind will be offset by lower deposit balances given modest attrition in both consumer and wholesale.

But it's very important to note that this NII outlook is particularly uncertain.

Typically fed funds could deviate from forwards balance attrition and migration of assumptions could be meaningfully different and deposit product and pricing decisions will be determined by customer behavior on competitive dynamics as we focus on maintaining and growing primary bank relationships and may be quite different from what this outlook assumes.

Further the timing of all these factors could significantly affect the sequential trajectory of NII throughout the year.

That said as we continue executing our strategy of investing to acquire new customers as well as deepen relationships with existing ones and as we see the impact of loan growth. We would expect sequential NII growth to return all else being equal.

And just to finish up on NII as the guidance indicates we expect markets on NII for the year to be slightly negative as a result of higher rates, but remember this is offset in markets in Iowa.

Now turning to expenses on page 11.

We expect 2023 adjusted expense to be about $81 billion, which includes approximately $500 million from the higher FDIC assessment.

Going through some of the other drivers, we expect increases from labor inflation, which while it seems to be abating on a forward looking basis as effectively in the run rate for 2023.

An additional an additional labor related driver is the annualized <unk> of 2022 head count growth as well as our plans for more modest headcount increases all of which are primarily in connection with executing our investments and on investments. While we are continuing to invest consistent with what we told you at Investor Day.

A more modest increase than last year. The themes remain consistent and we will continue to give you more detail throughout the year, including at Investor Day in May.

Of course as is always true. This outlook includes continuing to generate efficiencies across the company.

Finally, well volume and revenue related expense was ultimately a tailwind for 2022, we are expecting it to be close to flat in 2023, which will be completely market dependent as always.

Moving to credit on page 12.

On the page you can see how exceptionally benign credit environment was in 2022 for the company across wholesale card and the rest of the consumer.

Turning to the 2023 outlook for card net charge off rate, specifically maryann gave quite a bit of detail about this on a recent conference and our outlook hasn't really changed so to recap that story the entry to delinquency rate is the leading indicator of future charge offs and it is currently around 80% of pre pandemic.

Levels, and we expect that to normalize around the middle of the year with the associated charge offs falling about six months later.

As a result loss rates in 2023, we will still be normalizing. So while we anticipate exiting the year around normalized levels. We expect the 2023 card net charge off rate to be approximately two 6% up from the historically low rate of 147 basis points in 2022.

Bill well below fully normalized levels.

So, let's turn to page 13 for a brief wrap up before going to Q&A.

We're very proud of the 2022 results producing an 18% of our OTC and record revenue and what was a quite dynamic environment.

Throughout my discussion of the outlook I've emphasized the uncertainty in many of the key drivers of 2023 results.

We are ready for a range of scenarios our expectation is for another strong performance. So as we look forward. We expect to continue to produce strong returns in the near term and we remain confident in our ability to deliver on our through the cycle target of 17% of our OTC.

And with that operator, let's open up the line for Q&A.

Please standby.

Who is coming from the line of John Mcdonald from Autonomous Research you May proceed.

Hi, Good morning, Jeremy I wanted to ask you about the NII outlook Slide 10, the range of outcomes on deposit cost is quite wide as you mentioned it looks like one 5% to 2%.

Demonstrated there does the 74 billion NII lineup with kind of the midpoint of that maybe you could give some color about kind of the drivers of the 74 and where that lines up on this range of deposit cost outcomes.

Sure John I mean, I wouldn't take the chart on the bottom left to literally that's still supposed to give us stylized indication of the fact that relatively small changes in deposit rate paid for the company on average as you well know can produce quite significant impact on the NII.

And also that there is as we've already talked about are meaningful.

The outlook is our best guess as Jamie says.

And the drivers within that.

Are the usual drivers in wholesale.

We would expect to see a little bit of continued attrition.

Especially of the of the non operating type balances and youre going to see some internal migration there out of noninterest bearing into interest bearing over time and consumer Cds are flowing right now and we're seeing goodness. If your production we've got a 4% sitting in the market as of this morning.

And so continued CD production and natural migration, there will be a driver and the rest of it is.

As well and of course as I said in the prepared remarks, we do expect across the company modest deposit attrition as we look forward as a function of <unk> in the rate cycle and so on so we've got the best guesses for all of those in the outlook and of course, the actual outcome will be different.

One way or another and we will just.

On the business this year.

Okay. Thanks, and then on buybacks, how would you think about approaching buybacks and putting it in that mix of capital decisions that you have and any thoughts on kind of the size or quantifying the potential buybacks.

Yes, sure so sort of in the mode of like helping you guys out to put a number in the model. If you sort of look at the way were seeing things. Obviously, we've got another G. SIB stopped coming next year, So say 13, 5% target and sort of using your estimates organic capital generation and minus <unk>.

<unk> et cetera.

And all of the elements of uncertainty there I think a good number.

To use of something like $12 billion of buybacks for this year for 2023, but you know of course that buybacks are always at the end of our capital hierarchy. So we have better uses for the money.

Those will come first and the timing and the conditions of how much. We do win is entirely at our discretion and also noting that we are potentially going to see a basel III NPR sometime in the first quarter or maybe in the second quarter and while that will be an NPR only cover part of the surface area and it won't be fine also.

It's unlikely that it meaningfully say shapes short term decision that getting there'll be some information content and that really is that could shape our decisions as well.

Got it thank you.

The next question is coming from the line of Erika Najarian from UBS you May proceed.

Hi, good morning.

Jeremy My first question is just.

As you can imagine following up on the.

NII line of questioning.

I appreciate that there is a significant amount of.

Uncertainty in this year's NII forecast in particular.

Yes.

Follow up with.

John .

<unk> I'm wondering if you could give us sort of more specific guardrails with regards to what you're expecting for deposit attrition.

And deposit beta in terms of the terminal deposit data I think.

The feedback I'm getting very early from investors is that they have.

Appreciate the headwinds that occurring for NII. This year at the same time, you have been consistently beating what seemed like conservative NII expectation for 2022, including printing a giant 23 billion number in the fourth quarter.

No.

That's why I think the more specific guardrails could be.

Very helpful as investors try to figure out what their own expectations are versus that.

Thanks, Eric So look I totally appreciate the desire for more specific guardrails I wouldnt want that two of our U I.

I do think that.

We're trying to be quite helpful by giving you a full year number which if we're honest involves a lot of guessing about how things will evolve throughout the year I think once you start getting guard rails, you implicitly assume that outcomes outside of the guard rails are.

Very unlikely and that's just a level of precision that we're just not prepared to get into especially because in the end as I said.

Lot of the repricing decisions that will be faced with us as a company.

Our.

Sponsored data in a moment at a granular level in connection with our strategy, which is about growing and maintaining primary bank relationships rather than chasing.

Every dollar of balances at any cost so in that context, we do expect modest.

Balanced attrition across the company for the process as I said.

Jamie good morning.

Erica.

Let me give a big picture that wide.

I do not consider 74 conservative.

The federal reserve reduces balance sheet by 400 billion.

One five trillion came out of bank deposits.

And so investors can invest in T bills money market funds and of course base, you're competing for capital money now and been through all the different players with some basic joining compete heavily blood excess care to maybe compete less but if you look at Pryor and forget we head into 2016, I think we will make a huge mistake looking at that.

Never had Q zero rates, we've never had rates go up as fast. So I expect there will be more migration CD more migration to money market funds.

A lot of people out there competing and we're going to change savings rates, we can do at our own pace and look for other people are doing but we don't know the timing, but it will happen.

Just wanted to point out that the EBIT of 74 were already quite good returns.

We've always pointed out to you all and sometimes you're over earning and sometimes the under earning I would say okay. This timer overwriting on NII this quarter.

May be over earning credit maybe underwriting somebody else. So this is still very good numbers and.

We're going to wait and see and we'll report to you, but I don't want to give you a false notions how.

<unk> Securities.

And my follow up is is exactly in that line of questioning.

Zoom out for a second here to your point, Jamie the returns are still good.

Mentioned that your outlook already captures a mild recession and I'm going to re ask the question I ask in the third quarter. As you think about 2023 do you think J P. Morgan can hit that 17% our TCE that you laid out in.

At Investor day, even with the headwind in NII headwind on the provision.

Yes, yes, we can.

A lot of factors driving that but yes, we can I think when we do investor day in May we may give you a mortgage the number which is what do we think our TCE will be we have a real recession.

Which I think even in a real recession, it would probably equal the average industrial company.

Which is good so we can give you some detail around that.

These are still good returns and we can still grow.

<unk> 17 is very good if you can come down some growth of 17% those are extraordinary numbers.

And I also want to point, we don't know exactly what capital needs to be at this point and we have to modify that at one point.

And Erika let me just out of a very minor clarifying point I just wanted to be crystal clear about this so as you know and as we discussed a lot like through the pandemic in terms of the way, we construct and build the allowance well is anchored around our economists central case forecast with Joseph correctly.

Say as a mild recession.

Through the way, we waste the different scenarios a range of other factors the de facto scenario that's embedded in the forecast is actually more conservative than that from an allowance perspective. So I just wanted to be clear about that.

Perfect. Thank you.

The next question is coming from the line of Ebrahim <unk> from Bank of America Merrill Lynch You May proceed.

Good morning.

I guess, maybe Jamie just following up on the credit assumptions underlying if you could give.

Give us a sense of whats.

Assumed in that reserve ratio at the end of the beat in terms of the unemployment rate.

The JPMorgan Chase and Co earnings conference call will begin shortly.

And your outlook on just a lot of chatter around commercial real estate the struggles to the price in the current feedback.

Concerned about that are you seeing pinpoints in CRE customers.

Concerned about that are you seeing pinpoints in CRE customers.

What's happening with cap rates and then just the overall backdrop today?

What's happening with cap rates and then just the overall backdrop today.

Sure. Let me just briefly explain CRE quickly Abraham, as you know, are sort of a multifamily commercial term lending business which is really quite different from the classic office type business. Our office portfolio is very small class A, the best developers' best location. So the vast majority.

Sure. Let me just to CRE quickly Abraham as you know are sort of multifamily commercial term lending business is really quite different from the classic office type business. Our office portfolio is very small class a best developers best location. So the vast majority.

Of the loan balances in commercial Bill said, "Our dog."

Of the loan balances in commercial Bill said our dog.

Sort of affordable multifamily housing commercial term lending stuff, which is really quite secure from a credit perspective for a variety of reasons. So we feel quite comfortable.

Sort of affordable multifamily housing commercial term lending stuff, which is really quite secure from a credit perspective for a variety of reasons. So we feel quite comfortable.

Please stand by. We are about to begin. Good morning, ladies and gentlemen. Welcome to J.P. Morgan Chase's fourth quarter 2022 running 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. Please stand by. After this time, I would like to turn the call over to J.P. Morgan Chase's Chairman and CEO, Jamie Vannen, and Chief Financial Officer, Jeremy Vannen. Mr. Vannen, please go ahead. Good morning, everyone. The President of the United States of America, and I am very happy to be here today to present the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of the first of Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's Fourth Quarter 2022 Earnings Call. This call is being recorded. (Operator Instructions) Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's Fourth Quarter 2022 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.

Let's say it was the loss profile of that business, and so yes.

Let's say it was the loss profile of that business and so yes.

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. So then you were asking about the assumptions in credit overall. So yes, as I said, the Central case economic forecast has a mild recession and, if I remember correctly, unemployment peaking at something like four or 9%. Thank you very much. Good morning, everyone. The presentation is available on our website, and please refer to the disclaimer on the back. Thank you very much. Good morning, everyone. The presentation is available on our website, and please refer to the disclaimer on the back. Starting on Page 1, the firm reported net income of $11 billion, EPS of $3.57, on revenue of $35.6 billion and delivered an ROTCE of 20%. This quarter, we had 2 significant items in Corporate, a $914 million gain on the sale of Visa B shares, offset by $874 million of net investment securities loss. Starting on Page 1. The firm reported net income of $11 billion, EPS of $3.57, on revenue of $35.6 billion and delivered an ROTCE of 20%. This quarter, we had 2 significant items in Corporate, a $914 million gain on the sale of Visa B shares, offset by $874 million of net investment securities loss.

So then you were asking about the assumptions in credit overall.

So yes, as I said like the Central case economic forecast has a mild recession and if I remember correctly unemployment, peaking at something like four 9%.

The adjustments that we make to the scenarios to reflect a slightly more conservative outlook have us, touching on a few highlights. Combined credit and debit spend is up 9% year-on-year, with growth in both discretionary and nondiscretionary spending. We ended the year ranked at #1 for global IB fees with a wallet share of 8%, and credit continues to normalize, but actual performance remains strong across the company. Touching on a few highlights, combined credit and debit spend is up 9% year-on-year, with growth in both discretionary and nondiscretionary spending. We ended the year ranked at #1 for global IB fees with a wallet share of 8%, and credit continues to normalize, but actual performance remains strong across the company.

The adjustments that we make into the scenarios to reflect a slightly more conservative outlook have us.

You know, imply peak unemployment.

You know imply a peak unemployment.

Notably higher than that,

Notably higher than that.

So I think we have appropriately conservative assumptions about the outlook embedded in our current balances. On Page 2, we have more on our fourth quarter results. Revenue of $35.6 billion was up $5.2 billion or 17% year-on-year. NII ex Markets was up $8.4 billion or 72%, driven by higher rates. NIR ex Markets revenue was down $3.5 billion or 26%, predominantly driven by lower IB fees as well as management and performance fees in AWM, lower Auto lease income, and Home Lending production revenue. However, NIR ex Markets revenue was up $382 million or 7% year-on-year. On Page 2, we have more on our fourth quarter results. Revenue of $35.6 billion was up $5.2 billion or 17% year-on-year. NII ex Markets was up $8.4 billion, or 72%, driven by higher rates. NIR ex Markets was down $3.5 billion, or 26%, predominantly driven by lower IB fees as well as management and performance fees in AWM, lower Auto lease income, and Home Lending production revenue. And Markets revenue was up $382 million or 7% year-on-year. Expenses of $19 billion were up $1.1 billion or 6% year-on-year, primarily driven by higher structural expenses and investments. And credit costs of $2.3 billion included net charge-offs of $887 million. The net reserve build of $1.4 billion was driven by updates to the firm's macroeconomic outlook, which now reflects a mild recession in the central case as well as loan growth in card services, partially offset by a reduction in pandemic-related uncertainty.

So I think we have appropriately conservative assumptions about the outlook embedded in our current balances.

And then the trajectory that we talked about in the presentation.

And then the trajectory that we've talked about in the presentation.

They definitely can capture something more than a very mild soft landing, but of course, it wouldn't be appropriate to reflect a full-blown hard landing in our current numbers since the probability of that is clearly well below 100%. Expenses of $19 billion were up $1.1 billion or 6% year-on-year, primarily driven by higher structural expenses and investments. And credit costs of $2.3 billion included net charge-offs of $887 million. The net reserve build of $1.4 billion was driven by updates to the firm's macroeconomic outlook, which now reflects a mild recession in the central case as well as loan growth in card services, partially offset by a reduction in pandemic-related uncertainty.

They are definitely can capture something more than a very mild soft landing, but of course, it wouldn't be appropriate to reflect a full blown.

Hard landing in our current numbers since the probability of that is clearly well below 100%.

Noted and I guess, just as a follow-up on you've managed growth pretty well when you look at like loan growth year over year or listen stayed relatively flat as we think about just managing capital. Should we be thinking about the evolution of?

Noted and I guess, just as a follow up on you've managed <unk> growth pretty well when you look at like loan growth year over year listen <unk> stayed relatively flat.

As we think about just managing capital.

Looking at the full year results on Page 3, the firm reported net income of $37.7 billion, EPS of $12.09, and record revenue of $132.3 billion, and we delivered an ROTCE of 18%. On the balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 13.2%, up 70 basis points, primarily driven by the benefit of net income, including the sale of Visa B shares less distributions, AOCI gains, and lower RWA. Looking at the full year results on Page 3, The firm reported net income of $37.7 billion, EPS of $12.09, and record revenue of $132.3 billion, and we delivered an ROTCE of 18%.

Should we be thinking about the evolution of <unk>.

There are still opportunities to optimize that.

There's still opportunities to optimize that.

Going into whatever the Fed comes out with on Basel. Thank you.

Going into whatever the fed comes out with on Basel. Thank you.

Yes, there are definitely still opportunities to optimize, on the balance sheet and capital on Page 4. We ended the quarter with a CET1 ratio of 13.2%, up 70 basis points, primarily driven by the benefit of net income, including the sale of Visa B shares less distributions, AOCI gains, and lower RWA. RWA declined approximately $20 billion quarter-on-quarter, reflecting lower RWA in the Markets business, which was partially offset by an increase in lending, primarily in card services. We're continuing to work very hard on is a big area of focus. Some of that is reflected in this quarter's numbers, but some of the other drivers of this quarter, or what you might call more passive items, particularly in market risk. RWA declined approximately $20 billion quarter-on-quarter, reflecting lower RWA in the Markets business, which was partially offset by an increase in lending, primarily in card services. Recall that we had a 13% CET1 target for the first quarter of 2023, which we have now reached 1 quarter early. So given that, we expect to resume share repurchases this quarter. And yes, we should be clear that although we said that the effects of capital optimization are not a material economic headwind for the company, they are also not zero. There are real consequences to the choices that we're making as a result of this capital environment and as a Basel III outcome.

Yes, there are definitely still opportunities to optimize.

We're continuing to work very hard on is a big area of focus some of that is reflected in this quarters numbers, but some of the other drivers of this quarter or what you might call more passive items, particularly in market risk <unk>.

Recall that we had a 13% CET1 target for the first quarter of 2023, which we have now reached 1 quarter early. So given that, we expect to resume share repurchases this quarter.

And yes, we should be clear that although we said that the effects of capital optimization are not a material economic headwind for the company were also not zero there are real consequences to the choices that we're making as a result of this capital environment and in a Basel III outcome.

This quarter, we had two significant items on the board. A $914 million gain on the sale of visa B shares offset by $824 million of tenant investment securities losses. Touching on a few highlights, combined credit incentives is a non-credit current year with growth in both discretionary and non-discretionary spending. We ended the year ranked number one for global IABs with a large share of 80%, and credit continues to normalize, but the actual performance remains strong across the company.

Now let's go to our businesses, starting on Page 5. First, a quick update on the health of U.S. consumers and small businesses based on our data. They are generally on solid footing, although sentiment for both reflects recessionary concerns not yet fully reflected in our data. Now, let's go to our businesses, starting on Page 5. Starting with a quick update on the health of U.S. consumers and small businesses based on our data. They are generally on solid footing, although sentiment for both reflects recessionary concerns not yet fully reflected in our data. Combined debit and credit spend is up 9% year-on-year. Both discretionary and nondiscretionary spend are up year-on-year, the strongest growth in discretionary being. Retail spend is up 4% on the back of a particularly strong fourth quarter last year. E-commerce spend was up 7%, while in-person spend was roughly flat. Cash buffers for both consumers and small businesses continue to slowly normalize, with lower income segments and smaller businesses normalizing faster. Consumer cash buffers for lower income segments are expected to be back to pre-pandemic levels by the third quarter of this year. Combined debit and credit spend is up 9% year-on-year. Both discretionary and nondiscretionary spend are up year-on-year, the strongest growth in discretionary being travel. Retail spend is up 4% on the back of a particularly strong fourth quarter last year. E-commerce spend was up 7%, while in-person spend was roughly flat.

It is unreasonably punitive from a capital perspective; there will be additional consequences. We obviously are hoping that's not the case. And I believe that's not appropriate, but we will see what happens.

It is unreasonably punitive from a capital perspective, there will be additional consequences.

We obviously are hoping that's not the case.

Cash buffers for both consumers and small businesses continue to slowly normalize, with lower income segments and smaller businesses normalizing faster. Consumer cash buffers for lower income segments are expected to be back to pre-pandemic levels by the third quarter of this year.

And I believe that's not appropriate, but we will see what happens.

Got it, thank you. On page 2, we have more on our four further goals.

Got it thank you.

The next question is coming from the line of Glenn Schorr from Evercore ISI. You may proceed. Revenue of $35.6 billion was up $5.2 billion, or 17%.

The next question is coming from the line of Glenn Schorr from Evercore ISI you May proceed.

Now moving to financial results. This quarter, CCB reported net income of $4.5 billion on revenue of $15.8 billion, which was up 29% year-on-year. You'll notice in our presentation that we renamed Consumer & Business Banking to Banking & Wealth Management. Starting there, revenue was up 56% year-on-year, driven by higher NII on higher rates. Now moving to financial results. This quarter, CCB reported net income of $4.5 billion on revenue of $15.8 billion, which was up 29% year-on-year. You'll notice in our presentation that we renamed Consumer & Business Banking to Banking & Wealth Management. Starting there, revenue was up 56% year-on-year, driven by higher NII on higher rates. Deposits were down 3% quarter-on-quarter as spend remains strong and the rate cycle plays out, with outflows being partially offset by new relationships. Client investment assets were down 10% year-on-year, driven by market performance, partially offset by net inflows, where we are seeing good momentum, including from our deposit customers. Home Lending revenue was down 46% year-on-year, largely driven by lower production revenue.

Alright, thank you.

An I.I. at the carcass was up 8.4 billion, or 72%, driven by higher rates.

So I'm curious I would talk about leveraged loans for a second, which you've done a good job of avoiding. NIRX markets are down 3.5 billion for 26% predominantly driven by lower ID fees as well as management and performance fees in AWM, lower or lower leasing income, and normally, Photosia Some of them are putting on these loans sort of like the better half of the last half year.

Alright, thank you.

So I'm curious I would talk leveraged loans for a second you've done a good job of avoiding.

Some of them, putting on these loans sort of like the better half of the last half year.

Deposits were down 3% quarter-on-quarter as spend remains strong and the rate cycle plays out, with outflows being partially offset by new relationships. Client investment assets were down 10% year-on-year, driven by market performance, partially offset by net inflows, where we are seeing good momentum, including from our deposit customers. Home Lending revenue was down 46% year-on-year, largely driven by lower production revenue.

So a good call on your part. Things have gotten a lot cheaper. However, bank balance sheets, not yours, are still kind of mucking it up with a lot of the back book. I'm curious to see if things have gotten cheaper enough for you to consider yourself.

So a good call on your part things have gotten a lot cheaper however bank balance sheets, not yours are still kind of mucking. It up with a lot of the back book Im curious to see if things have gotten cheapen up do you consider yourself.

And the market revenue was up $382 million for seven times more.

Back in, and how important is it, in general, for activity levels to pick back up to have available funding from the big banks?

Expenses of $19 billion were above $1.1 billion or 6% of year on year, primarily driven by higher structural returns and investments. Moving to Card Services & Auto. Revenue was up 12% year-on-year, predominantly driven by higher card services NII on higher revolving balances, partially offset by lower Auto lease income. Card outstandings were up 19%. Total revolving balances were up 20%, and we are now back to pre-pandemic levels. However, revolving balances per account are still below pre-pandemic levels, which should be a tailwind in 2023. And then Auto originations were $7.5 billion, down 12%. Expenses of $8 billion were up 3% year-on-year, primarily driven by investments as well as higher compensation, largely offset by Auto lease depreciation from lower volumes. Moving to Card Services & Auto. Revenue was up 12% year-on-year, predominantly driven by higher card services NII on higher revolving balances, partially offset by lower Auto lease income. Card outstandings were up 19%, and total revolving balances were up 20%, and we are now back to pre-pandemic levels. However, revolving balances per account are still below pre-pandemic levels, which should be a tailwind in 2023. And then Auto originations were $7.5 billion, down 12%. Expenses of $8 billion were up 3% year-on-year, primarily driven by investments as well as higher compensation, largely offset by auto lease depreciation from lower volumes.

Back in and how important is that in general for activity levels to pick back up to have available funding from the big banks.

Yes, a couple of things there Glen, so the short answer is we're absolutely open for business. Their terms are about, our pricing is better.

Yes, a couple of things there Glen So short answer is we're absolutely open for business. Their terms are about our pricing is better.

And the credit cost of $3.3 billion included a natural disaster of $887 million.

The resources needed or fully fully there are no overhang or issue also.

The net reserve bill of $1.4 billion was driven by the case of the firm's macroeconomic outlook, which now reflects a mild recession in the next 100 years.

The resources needed or fully fully there no overhang no issue also.

I think there is a bit of a narrative that activity in the market needs to overcome the overhang. We're not convinced that that's true. We think that the overhang is in the numbers, and people need to look forward to the system having the capacity to handle the risks so, as well as the long growth in hard surfaces, partially offset by the reduction of that calculated uncertainty. In terms of credit performance this quarter, credit costs were $1.8 billion, reflecting reserve builds of $800 million in Card and $200 million in Home Lending and net charge-offs of $845 million, up $330 million year-on-year. In terms of credit performance this quarter, credit costs were $1.8 billion, reflecting reserve builds of $800 million in Card and $200 million in Home Lending and net charge-offs of $845 million, up $330 million year-on-year.

I think there is a bit of a narrative that like activity in the market needs to overcome overhang. We're not convinced that that's true we think that the overhang is in the numbers and people need to look forward in the system has the capacity to handle the risks so.

Looking at the full year results of phase 3. Next, the CIB on Page 6. CIB reported net income of $3.3 billion on revenue of $10.5 billion for the fourth quarter. Investment Banking revenue of $1.4 billion was down 57% year-on-year. IB fees were down 58%, in line with the market. In Advisory, fees were down 53%, reflecting lower announced activity earlier in the year. Our underwriting businesses were affected by market conditions, resulting in fees down 58% for debt and down 69% for equity. Next, the CIB on Page 6. CIB reported net income of $3.3 billion on revenue of $10.5 billion for the fourth quarter. Investment Banking revenue of $1.4 billion was down 57% year-on-year. IB fees were down 58%, in line with the market. In Advisory, fees were down 53%, reflecting lower announced activity earlier in the year. Our underwriting businesses were affected by market conditions, resulting in fees down 58% for debt and down 69% for equity.

The firm reported an accretions of $37.77 billion, EPS of $12.09, and a record revenue of 132.3 million.

I recognize your point. I think it's an interesting point, but we are wide open for business and not particularly concerned about the overhang from the perspective of, and we delivered an ROV of 18 times. ability to finance activity. Thank you.

I recognize your point I think it's an interesting point, but we are wide open for business and not particularly concerned about the overhang from the perspective of <unk>.

<unk> ability to finance activity.

On surrounding advocates or on page four.

So maybe a bit more stuff will be okay. In terms of the outlook, the dynamics remain the same. Pipeline is relatively robust, but conversion is very sensitive to market conditions and sentiment about the economic outlook. Also note that it will be a difficult comparison against last year's first quarter. In terms of the outlook, the dynamics remain the same. Pipeline is relatively robust, but conversion is very sensitive to market conditions and sentiment about the economic outlook. Also note that it will be a difficult compare against last year's first quarter. We ended the quarter with a CZ1 ratio of 13.2%, off 70 basis points, primarily driven by the benefit of net income, including the sale of B-shares, less distributions, AOCI gains, and more of a WBA. We ended the quarter with a CZ1 ratio of 13.2%, off 70 basis points, less distributions, and less Maybe Jamie, while we have you here in the last annual letter, you talked about low competitive moats and intense competition.

So maybe a bit more stuff okay.

Maybe Jamie while we have you in the last annual letter you talked about low competitive moats and intense competition.

Frontline does not just fantastic.

Moving to Markets, revenue was $5.7 billion, up 7% year-on-year, driven by the strength of our macro franchise. Fixed Income was up 12% as elevated volatility drove strong client activity, particularly in rates and currencies in emerging markets, while securitized products continue to be challenged by the market environment. Equity markets were relatively flat against a strong fourth quarter last year. Moving to Markets. Revenue was $5.7 billion, up 7% year-on-year, driven by the strength in our macro franchise. Fixed Income was up 12% as elevated volatility drove strong client activity, particularly in rates and currencies in emerging markets, while securitized products continued to be challenged by the market environment. Equity markets were relatively flat against a strong fourth quarter last year.

Frontline does not just fantastic.

I'm just trying to think out loud if that is better or worse than the competitive landscape and a much higher rate backdrop.

I'm just trying to think out loud is that better or worse that competitive landscape and a much higher rate backdrop.

Our WAA declined approximately $20 billion in the core-on-quarter, reflecting lower WAA in the marketing business, which was partially offset by an increase in lending, primarily in car services.

Maybe I'll just leave it at that, just the way you go with it.

Maybe I'll just leave it at that just the way you go with it.

Alright, I think it's the same.

Alright, I think it's the same.

Have the Apples, who were basically doing a lot of banking services in Walmart starting, obviously higher rates will hurt some of the folks in the Fintech world and maybe even help some folks so.

Have the apples, who were basically doing a lot of banking services in Walmart starting there's an obviously higher rates will hurt some of the folks in the Fintech world and maybe even help some folks so.

Payments revenue was $2.1 billion, up 15% year-on-year. Excluding the net impact of equity investments, it was up 56%, and the year-on-year growth was driven by higher rates. Security Services revenue of $1.2 billion was up 9% year-on-year, predominantly driven by higher rates, largely offset by lower deposits and market levels. Payments revenue was $2.1 billion, up 15% year-on-year. Excluding the net impact of equity investments, it was up 56%, and the year-on-year growth was driven by higher rates. Security Services revenue of $1.2 billion was up 9% year-on-year, predominantly driven by higher rates, largely offset by lower deposits and market levels. Expenses of $6.4 billion were up 10% year-on-year, predominantly driven by the timing of revenue-related compensation. On a full year basis, expenses of $27.1 billion were up 7% year-on-year, primarily driven by higher structural expenses and investments, partially offset by lower revenue-related compensation.

For the call, we have a 13% CC1 target for the first quarter of 2023, which we have now reached one more early. We expect tough competition going forward. So given that, we expect to resume share reversions this quarter. Expenses of $6.4 billion were up 10% year-on-year, predominantly driven by the timing of revenue-related compensation. On a full year basis, expenses of $27.1 billion were up 7% year-on-year, primarily driven by higher structural expenses and investments, partially offset by lower revenue-related compensation. Thanks. Now, let's go to our businesses, starting on page 5.

We expect tough competition going forward.

Okay. Thanks.

The next question is coming from the line of Gerard Cassidy from RBC capital markets. You may proceed. Starting with a quick update on how US consumers and small businesses base their decisions on our data.

The next question is coming from the line of Gerard Cassidy from RBC capital markets. You May proceed.

Thank you. Hi Jeremy. Moving to the Commercial Bank on Page 7. Commercial Banking reported net income of $1.4 billion. Record revenue of $3.4 billion was up 30% year-on-year, driven by higher deposit margins, partially offset by lower investment banking revenue and deposit-related fees. Gross Investment Banking revenue of $700 million was down 52% year-on-year, driven by reduced capital markets activity. However, expenses of $1.3 billion were up 18% year-on-year. Deposits were down 14% year-on-year and 1% quarter-on-quarter, primarily reflecting attrition of nonoperating deposits. However, loans were up 14% year-on-year and 3% sequentially.

They are generally ontologically similar, although sentiment for both reflects recessionary concerns not yet wholly reflected in our data.

Moving to the Commercial Bank on Page 7, Commercial Banking reported a net income of $1.4 billion. Record revenue of $3.4 billion was up 30% year-on-year, driven by higher deposit margins, partially offset by lower investment banking revenue and deposit-related fees. Gross Investment Banking revenue of $700 million was down 52% year-on-year, driven by reduced capital markets activity. Expenses of $1.3 billion were up 18% year-on-year, but deposits were down 14% year-on-year and 1% quarter-on-quarter, primarily reflecting attrition of nonoperating deposits. Loans were up 14% year-on-year and (inaudible) sequentially.

Thank you Hi, Jeremy.

Sure.

Jeremy, you mentioned in your payments business that if you took out the equity investment right from Downs, the growth was. Combined, evidence, and credit spend is up 9% year on year.

Sure.

Jeremy you mentioned in your payments business that if you took out the equity investment right Downs the growth was.

Over 50%. Can you share with us on the equity write-downs? Obviously, private equities are going through some challenging times.

Over 50%.

Both discretionary and non-discretionary spend are all beyond here.

Can you share with us on the equity write downs, obviously private equities going through some challenging times.

The strongest growth and discretion are being most probable.

I am assuming.

It was a gain last year, as results ended up 4% on the back of a particularly strong fourth quarter. It wasn't a write-down this year. C&I loans were up 4% quarter-on-quarter, reflecting continued strength in originations and revolver utilization. CRE loans were up 2% quarter-on-quarter, reflecting a slower pace of growth from earlier in the year due to higher rates, which impact both originations and prepayment activity. C&I loans were up 4% quarter-on-quarter, reflecting continued strength in originations and revolver utilization. CRE loans were up 2% quarter-on-quarter, reflecting a slower pace of growth from earlier in the year due to higher rates, which impact both originations and prepayment activity.

I am assuming.

It was a gain last year.

It wasn't a write down this year.

Oh.

I got it Okay. I thought there was a write down there okay. E-commerce spend was up 7% while in-person spend was roughly flat. Sorry about that. Cash buffers for both consumers and small businesses continue to slowly formalize. Very good. Thank you, Jamie.

Oh.

I got it Okay I thought there was a write down there okay im.

Sorry about that.

Very good thank you Jamie.

Can you just stick just with private equity for a moment, can you share with us where the risks are in the private equity markets for J.P. Morgan when you think about it from your loan book, or is it really just an equity investments? Maybe expand upon that.

Then to complete our lines of business, AWM on Page 8. Asset & Wealth Management reported net income of $1.1 billion with a pretax margin of 33%. Revenue of $4.6 billion was up 3% year-on-year, driven by higher deposit margins and lower balances, predominantly offset by reductions in management and performance and placement fees linked to this year's market declines. Then, to complete our lines of business, AWM on Page 8. Asset & Wealth Management reported net income of $1.1 billion with a pretax margin of 33%. Revenue of $4.6 billion was up 3% year-on-year driven by higher deposit margins and lower balances, predominantly offset by reductions in management and performance and placement fees linked to this year's market declines. Expenses of $3 billion were up 1% year-on-year, predominantly driven by growth in our Private Banking Advisory teams, largely offset by lower performance-related compensation. For the quarter, net long-term inflows were $10 billion, positive across equities and Fixed Income, and $47 billion for the full year. And in liquidity, we saw net inflows of $33 billion for the quarter and net outflows of $55 billion for the [full] year. AUM of $2.8 trillion and overall client assets of $4 trillion were down 11% and 6% year-on-year, respectively, driven by lower market levels. Finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while deposits were down 6% sequentially, driven by the rising rate environment, resulting in migration to investments and other cash alternatives, with lower income segments and smaller businesses being able to mobilize faster.

Can you just sticking just with private equity for a moment can you share with us where the risks are in the private equity markets to J P. Morgan is there when you think about it from your loan book or is it really just an equity investments and maybe expand upon that.

And the zoom or cash buffers to lower income segments are expected to be back to pre-pandemic levels by the third quarter of this year.

Now moving to the annual results, this quarter, CCB will further that income of $4.5 billion on a revenue of $15.8 billion. Expenses of $3 billion were up 1% year-on-year, predominantly driven by growth in our private banking advisor teams, largely offset by lower performance-related compensation. For the quarter, net long-term inflows were $10 billion, positive across equities and Fixed Income, and $47 billion for the full year.

Yeah.

Yeah.

Sorry, you want me to take that Joe on just a couple of things So Jamie is right, which was up 29% year-on-year.

Sorry, you want me to take that Joe just a couple of things So Jamie is right.

The headwind.

You'll notice in our presentation that we renamed consumer and business banking to banking involved management. Starting there, revenue was up 56% year on year driven by higher NII on higher rates. And in liquidity, we saw net inflows of $33 billion for the quarter and net outflows of $55 billion for the full year. AUM of $2.8 trillion and overall client assets of $4 trillion were down 11% and 6% year-on-year, respectively, driven by lower market levels. Finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while deposits were down 6% sequentially, driven by the rising rate environment, resulting in migration to investments and other cash alternatives.

The headwind.

Our on year is primarily a function of the fact that this is an investment that, just because of the measurement alternative accounting standard, we were forced to mark up previously.

Our on year is primarily a function of the fact that this is an investment that just because of the measurement alternative accounting standard we were forced to mark up previously.

Deposits were down 3% over a quarter as spend remains strong as the gray cycle plays out while being partially offset by new relationships.

This is.

This is.

And the investment that we got was a payment in kind as part of the sale of some of our internally developed initiatives. So anyway, That's fine, but the point is there is a small write-down this quarter, and the important point there is that the core business is performing exceptionally well, both because of higher rates and also because of that. Turning to Corporate on Page 9. Corporate reported a net gain of $581 million, and revenue of $1.2 billion was up $1.7 billion year-on-year. NII was $1.3 billion, up $2 billion year-on-year due to the impact of higher rates. NIR was a loss of $115 million and reflects the 2 significant items I mentioned earlier. And expenses of $339 million were up $88 million year-on-year. Turning to Corporate on Page 9. Corporate reported a net gain of $581 million, and revenue of $1.2 billion was up $1.7 billion year-on-year. NII was $1.3 billion, up $2 billion year-on-year due to the impact of higher rates. NIR was a loss of $115 million and reflects the 2 significant items I mentioned earlier. And expenses of $339 million were up $88 million year-on-year.

And the investment that we got a payment in kind as part of the sale of some of our internally developed initiatives. So anyway. That's fine but point is there is a small write down this quarter and the important point there is that the core business is performing exceptionally well both because of higher rates, but also because of that.

Buying investment assets for down 10% in the drawing year, driven by market performance, partially offset by net inflows, where we are seeing good momentum, including from our positive customers.

On the one thing I knew, it was down 46% year on year, largely driven by lower production revenue.

With that, let's pivot to the outlook for 2023, which I will cover over the next few pages, starting with NII on Page 10, while I take a sip of water. Okay. We expect total NII to be approximately $73 billion, and NII ex Markets to be approximately $74 billion. On this page, we show how the significant increases in quarterly NII throughout 2022 culminated in the $81 billion run rate for the fourth quarter and how we expect that to evolve for 2023.

I have talked a lot about Investor Day. With that, let's pivot to the outlook for 2023, which I will cover over the next few pages, starting with NII on Page 10. (inaudible) to the water. Okay. We expect total NII to be approximately $73 billion, and NII ex-markets to be approximately $74 billion. On this page, we show how the significant increases in quarterly NII throughout 2022 culminated in the $81 billion run rate for the fourth quarter and how we expect that to evolve for 2023.

<unk> has talked a lot at Investor day.

Paying off across fees and value-added services, so on and so forth.

Paying off across fees and value added services, so on and so forth.

Moving to car services in autumn, Ramanu was up 12% year on year, predominantly driven by higher car services and AI on higher revolving balances, partially offset by lower only lease choosing car.

And I guess your question is like private equity in general and how we feel about that space when I hear that correctly. Jeremy, and just in terms of any lending, obviously, so many of these companies have seen their valuations come down considerably. Is there any elevated risk lending to some of these companies considering the struggles they're having?

And I guess your question is like private equity in general and how are we feeling about that space when I hear that correctly.

Going through the drivers, the outlook assumes that rates follow the forward curve. The combination of the annualization of the hike in late December, the hikes expected early in the year, and the cuts expected later in the year should be a net tailwind. Offsetting that tailwind is the impact of deposit repricing, which includes our best guess of the rate paid by both wholesalers and consumers.

Car out sandings were up 19%.

Jeremy and just in terms of any lending obviously, so many of these companies have seen their valuations come down considerably is there any elevated risk lending to some of these companies considering the struggles theyre having.

Going through the drivers, the outlook assumes that rates follow the forward curve. The combination of the annualization of the hike in late December, the hikes expected early in the year, and the cuts expected later in the year should be a [nice] tailwind. Offsetting that tailwind is the impact of deposit repricing, which includes our best guess of the rate paid by both wholesalers and consumers.

Total revolving balances were up 20%; we are now back to pre-pandemic bubbles. However, revolving balances per account are still below pre-pandemic bubbles, which should be a tailwind of time.

I think that's a risk that we manage quite tightly as a company, our exposure to the sort of non-bank financial sector broadly defined and

I think thats, a risk that we manage quite tightly as a company our exposure to the sort of non bank financial sector broadly defined and.

In addition, looking at balance sheet growth and mix, we expect solid overall Card spend growth as well as further normalization of revolving balances per account and modest loan growth across the rest of the company. However, we expect that this tailwind will be offset by lower deposit balances given modest attrition in both consumer and wholesale. In addition, looking at balance sheet growth and mix, we expect solid overall card spend growth as well as further normalization of revolving balances per account and modest loan growth across the rest of the company. However, we expect that this tailwind will be offset by lower deposit balances given modest attrition in both consumer and wholesale. But it's very important to note that this NII outlook is particularly uncertain. Specifically, Fed funds could deviate from forwards, balance attrition and migration assumptions could be meaningfully different, and deposit product and pricing decisions will be determined by customer behavior and competitive dynamics as we focus on maintaining and growing primary bank relationships and may be quite different from what this outlook assumes, and then auto origination for 7.5 billion is down 12 percent. Expenses of 80 billion were up 3% year on year, primarily driven by investments as well as the. Of course, as you know, we thought a little bit about what normalized wholesale charge-offs could look like for the cycle. They are obviously higher than effectively zero, which is what we have now.

Of course, as you know, we thought a little bit about what normalized wholesale charge offs could look like for the cycle. There are obviously higher than effectively zero, which is what we have now.

But it's very important to note that this NII outlook is particularly uncertain. Specifically, Fed funds could deviate from forwards, balance attrition and migration assumptions could be meaningfully different, and deposit product and pricing decisions will be determined by customer behavior and competitive dynamics as we focus on maintaining and growing primary bank relationships and may be quite different from what this outlook assumes. In terms of the credit performance this quarter, credit costs were $1.8 billion, reflecting reserve bills of $800 million in card short. But we feel confident with our credit discipline and what we have on the books.

But we feel confident with our credit discipline and what we have on the books.

Great and then as a follow up question.

And that charge-offs $345 million, $330 million, year on year.

Great and then as a follow up question.

You guys did a.

Good job building up that loan loss reserve this quarter.

You guys did a.

And further, the timing of all these factors could significantly affect the sequential trajectory of NII throughout the year. That said, as we continue executing our strategy of investing to acquire new customers as well as deepen relationships with existing ones, and as we see the impact of loan growth, we would expect sequential NII growth to return, all else being equal. And just to finish up on NII. As the guidance indicates, we expect Markets NII for the year to be slightly negative as a result of higher rates. But remember, this is offset by Markets NIR. And further, the timing of all these factors could significantly affect the sequential trajectory of NII throughout the year. That said, as we continue executing our strategy of investing to acquire new customers as well as deepen relationships with existing ones, and as we see the impact of loan growth, we would expect sequential NII growth to return, all else being equal.

Good job building up that loan loss reserve this quarter.

Two questions on that first, the shared national credit exam results are always released in February; does the reserve buildup take some of that into account, and second, how much of the reserve buildup was more of a management overlay versus your base case?

Two questions to that first the shared national credit exam results are always released in February does the reserve buildup takes some of that into account and second how much of the reserve build was more of a management overlay versus your base case.

And just to finish up on NII. As the guidance indicates, we expect Markets NII for the year to be slightly negative as a result of higher rates. But remember, this is offset in Markets NIR.

The quantitative part of the decision making for building up the reserve.

The quantitative part of the decision making for building up the reserve.

Now turning to expenses on Page 11. We expect 2023 adjusted expenses to be about $81 billion, which includes approximately $500 million from the higher FDIC assessment. Going through some of the other drivers, we expect increases from labor inflation, which, while it seems to be abating on a forward-looking basis, is effectively in the run rate for 2023. An additional labor-related driver is the annualization of 2022 headcount growth as well as our plans for a modest headcount increase during the year, all of which are primarily in connection with executing our investments.

Yes, I mean. Now turning to expenses on Page 11. We expect 2023 adjusted expenses to be about $81 billion, which includes approximately $500 million from the higher FDIC assessment.

Yes, I mean.

I'll give you that answer, but I am over simplifying a lot. I would say that. We're simplifying it. Going through some of the other drivers, we expect increases from labor inflation, which, while it seems to be abating on a forward-looking basis, is effectively in the run rate for 2023. An additional labor-related driver is the annualization of 2022 headcount growth as well as our plans for a modest headcount increase this year, all of which are primarily in connection with executing our investments.

I'll give you that answer but im over simplifying a lot I would say that.

[laughter].

We're simplifying it.

Do you sort of?

[laughter].

Conservatism of the management overlay did not change for all intents and purposes quarter on quarter. I think that's the best way to think about that, Gerard. Oh, sure. Yes, go ahead. And on investments, while we are continuing to invest consistent with what we told you at Investor Day, it's a more modest increase than last year. The themes remain consistent, and we will continue to give you more detail throughout the year, including at Investor Day in May.

Do you sort of.

Conservatism of the management overlay did not change for all intents and purposes quarter on quarter I think that's the best way to think about that Gerard.

Oh sure Yes go ahead.

A national shared credit.

And on investments, while we are continuing to invest consistent with what we told you at Investor Day, it's a more modest increase than last year. The themes remain consistent, and we will continue to give you more detail throughout the year, including at Investor Day in May.

A national shared credits.

In fact, our results differ materially.

In fact, our results materially.

Very good. Thank you, Jamie.

Very good thank you Jamie.

Okay.

The next question is coming from the line of Ken from Jefferies. You may proceed. Of course, as is always true, this outlook includes continuing to generate efficiencies across the company. And finally, while volume and revenue-related expense was ultimately a tailwind for 2022, we are expecting it to be close to flat in 2023, which will be completely market dependent, as always. Of course, as is always true, this outlook includes continuing to generate efficiencies across the company. And finally, while volume and revenue-related expense was ultimately a tailwind for 2022, we are expecting it to be close to flat in 2023, which will be completely market dependent, as always.

Okay.

The next question is coming from the line of Ken <unk> from Jefferies. You May proceed.

Hi, Thanks, good morning.

Hi, Thanks, good morning.

Wondering if you can help us understand the ongoing efforts on your mitigation for the. Moving to credit on Page 12. On the page, you can see how exceptionally benign the credit environment was in 2022 for the company across wholesale, Card, and the rest of consumer. Turning to the 2023 outlook, for Card net charge-off rates specifically, Marianne gave quite a bit of detail about this at our recent conference, and our outlook hasn't really changed. So to recap that story, the entry to delinquency rate is the leading indicator of future charge-offs, and it is currently around 80% of pre-pandemic levels. We expect that to normalize around the middle of the year, with the associated charge-offs following about 6 months later. As a result, loss rates in 2023 will still be normalizing. So while we anticipate exiting the year around normalized levels, we expect the 2023 Card net charge-off rate to be approximately 2.6%, up from the historically low rate of 147 basis points in 2022 but still well below fully normalized levels.

Wondering if you can help us understand the ongoing efforts on your mitigation for the <unk>.

In advance of all the points you've made already about the pending capital regime, how do we do it?

Moving to credit on Page 12, on this page, you can see how exceptionally benign the credit environment was in 2022 for the company across wholesale, card, and the rest of consumer. Can you help us understand what type of effects that has, if any? Turning to the 2023 outlook, for card net charge-off rates specifically, Marianne gave quite a bit of detail about this at our recent conference, and our outlook hasn't really changed. So to recap that story, the entry to delinquency rate is the leading indicator of future charge-offs, and it is currently around 80% of pre-pandemic levels. We expect that to normalize around the middle of the year, with the associated charge-offs following about 6 months later. As a result, loss rates in 2023 will still be normalizing. So while we anticipate exiting the year around normalized levels, we expect the 2023 Card net charge-off rate to be approximately 2.6%, up from the historically low rate of 147 basis points in 2022 but still well below fully normalized levels.

In advance of all the points you've made already about the pending capital regime, how do we.

Can you help us understand what type of effects that has if any.

On all parts of the income statement, whether it's NII or the trading business.

On parts of the income statement, whether it's NII or the trading business.

Yes, so if I just take that one and assume we're going to have modest growth in and.

Yes, so if I just take that one just assume we're going to have modest growth in <unk> and <unk>.

Every single business is mortgage loans and derivatives.

Every single business is mortgages loans derivatives.

How we hedge CVA and stuff like that; we take actions to manage do not; it does not really affect the business that much.

How we hedged CVA and stuff like that we take actions to manage <unk> do not it does not really affect the business that much.

One day, but it doesn't affect it today, and so we don't build in somehow. It was a little bit of this, a little bit of that in there.

One day, but it doesn't affect it today and so we don't build in somehow it was a little bit of this a little bit of that in there.

So let's turn to Page 13 for a brief wrap-up before going to Q&A. We're very proud of the 2022 results, producing an 18% ROTCE and record revenue in what was a quite dynamic environment. Throughout my discussion of the outlook, I've emphasized the uncertainty in many of the key drivers of 2023 results. And while we are ready for a range of scenarios, our expectation is for another strong performance. So as we look forward, we expect to continue to produce strong returns in the near term, and we remain confident in our ability to deliver on our through-the-cycle target of 17% ROTCE. So, let's turn to Page 13 for a brief wrap-up before going to Q&A. We're very proud of the 2022 results, producing an 18% ROTCE and record revenue in what was a quite dynamic environment. Throughout my discussion of the outlook, I've emphasized the uncertainty in many of the key drivers of 2023 results. And while we are ready for a range of scenarios, our expectation is for another strong performance. So, as we look forward, we expect to continue to produce strong returns in the near term, and we remain confident in our ability to deliver on our through-the-cycle target of 17% ROTCE.

The biggest opportunity down the road would be a reopening of the securitization markets, and they're still very tight, and I think one day they will be open.

The biggest opportunity down the road would be a reopening in the securitization markets and they're still very tight and I think one day they will be open.

Okay, and then on the one follow-up, just coming back to the reservation process.

Okay, and then on the one follow up just coming back to the reserving process.

Can you just help us understand relative to the 5% peak in? And with that, operator, let's open up the line for Q&A. And with that, operator, let's open up the line for Q&A. [Our first question] is coming from the line of John McDonald from Autonomous Research.

Can you just help us understand relative to the 5% peak in <unk>.

That you gave for your unemployment rate quarterly average in that $3 nine average baseline. Where does this fourth quarter reserve get you to end, and does that rule of thumb that you kind of gave us last quarter still stand in terms of?

(inaudible) is coming from the line of John McDonald from Autonomous Research. Jeremy, I wanted to ask about the NII outlook on Slide 10. The range of outcomes on deposit costs is quite wide. As you mentioned, it looks like 1.5% to 2% is demonstrated there. Does the $74 billion NII line up with kind of the midpoint of that? Maybe you could give some color about some of the drivers of the $74 billion and where that lines up on this range of deposit cost outcomes. Jeremy, I wanted to ask about the NII outlook, Slide 10. The range of outcomes on deposit costs is quite wide. As you mentioned, it looks like 1.5% to 2% demonstrated there. Does the $74 billion NII line up with kind of the midpoint of that? Maybe you could give some color about some of the drivers of the $74 billion and where that lines up on this range of deposit cost outcomes.

That you gave for your unemployment rate quarterly average in that $3 nine average baseline. This where does this fourth quarter reserve getting you to end and does that rule of thumb that you kind of gave us last quarter still stand in terms of.

The scenario analysis on potential builds ahead of this mild recession. Yes, can I just make it real simple: the base case, okay? Sure, John. I mean, I wouldn't take the chart on the bottom left too literally. That's just supposed to give a stylized indication of the fact that relatively small changes in deposit rates and the amount paid for the company on average, as you well know, can produce quite significant impacts on the NII. Sure, John. I mean, I wouldn't take the chart on the bottom left too literally. That's just supposed to give a stylized indication of the fact that relatively small changes in deposit rates and the amount paid for the company on average, as we all know, can produce quite significant impacts on the NII. And also that there's, as we've already talked about, a meaningful (inaudible).

The scenario analysis on potential builds ahead of this mild recession.

Yes can I just make it real simple the base case okay.

Okay.

It's almost 5% unemployment.

Okay.

It's almost 5% unemployment.

Then you probability weight other scenarios. That's why Jeremy has seen the reserve is higher than the base case; we didn't change the probabilities near waiting, but of course, it got worse.

Then you probability weight other scenarios.

And also, as we've already talked about, a meaningful -- the outlook is our best guess, as Jamie says, and the drivers within that are the usual drivers in wholesale. We would expect to see a little bit of continued attrition, especially of the nonoperating type balances. And you're going to see some internal migration there out of noninterest-bearing into interest-bearing over time. The outlook is our best guess, as Jamie says, and the drivers within that are the usual drivers in wholesale. We would expect to see a little bit of continued attrition, especially of the nonoperating type balances. And you're going to see some internal migration there out of noninterest-bearing into interest-bearing over time.

That's why Jeremy has seen the reserve is higher than the base case, we didn't change the probabilities near waiting but of course it got worse.

Base case gone worse, that's all it is.

Base case gone worse, that's all it is.

Still, it would still be a good benchmark to keep in mind if we got to a relative adverse case pull that of 6% unemployment. In Consumer, CDs are flowing right now, and we're seeing good new CD production. We've got a 4% CD market share as of this morning, and so continued CD production and internal migration there will be a driver. And the rest of it is -- well, of course, as I said in the prepared remarks, we do expect, across the company, modest deposit attrition as we look forward as a function of QT in the rate cycle and so on. So we've got the best guesses for all of those in the outlook. And of course, the actual outcome will be different in one way or another, and we'll just run the business this year. In Consumer, CDs are flowing right now, and we're seeing good new CD production. We've got a 4% CD market share as of this morning, and so continued CD production and internal migration there will be a driver. And the rest of it is -- well, of course, as I said in the prepared remarks, we do expect modest deposit attrition across the company as we look forward as a function of QT in the right cycle and so on. So we've got the best guesses for all of those in the outlook. And, of course, the actual outcome will be different in one way or another, and we'll just run the business this year.

Still would still as a good benchmark you'll keep in mind, if we got to a relative adverse case pull that a 6% unemployment.

And then once you get there, you assume the average. It could get better; it could get worse.

And then once you get there you assume the average you have wings it could get better it could get worse.

In that case, we would need about $6 billion more when the base case itself deteriorates, moving closer to the relative Edgar's. That's all it is. These are all probabilities and possibilities and hypothetical numbers. If I were you, I'd just look at charge-offs like actual results.

That case, we would need about $6 billion more.

When the base case itself deteriorates moving closer to the relative Edgar's. That's all it is these are all probabilities and possibilities and hypothetical numbers. If I were you I'd just look at charge offs like actual results.

Okay. And on buybacks, how will you think about approaching buybacks and putting them in that mix of capital decisions that you have? And any thoughts on the kind of size or quantifying the potential buybacks? Okay. And on buybacks, how will you think about approaching buybacks and putting them in that mix of capital decisions that you have? And any thoughts on the size or quantifying the potential buyback? Yes, sure. So sort of in the mode of like helping you guys out to put a number in the model, if you sort of look at the way we're seeing things, obviously, we've got another GSIB start coming next year. So say, 13.5% target. And the sort of using your estimates, organic capital generation, minus dividends, et cetera, and all of the elements of uncertainty there, I think a good number to use is something like $12 billion of buybacks for this year and $20 billion for 2023. Yes, sure. So, sort of in the mode of like helping you guys out to put a number in the model. If you sort of look at the way we're seeing things, obviously, we've got another GSIB stuff coming next year. So say, 13.5% target. And the sort of using your estimates, organic capital generation, minus dividends, et cetera, and all of the elements of uncertainty there, I think a good number to use is something like $12 billion of buybacks for this year and $20 billion for 2023. But you know, of course, that buybacks are always at the end of our capital hierarchy. So if we have better uses for the money, those will come first, and the timing and the conditions of how much we do when is entirely at our discretion. Also, note that we are potentially going to see a Basel III NPR sometime in the first quarter or maybe the second quarter. And while that will be an NPR, it will only cover part of the surface area, and it won't be final, so it's unlikely that it meaningfully shapes short There will be some information content in that release that could shape our decisions as well.

And we break this out, but it's hard to describe, but every bank does it slightly differently. Every bank has a slightly different base case, a slightly different weighting of adverse cases, et cetera, and so we're just trying to make it as simple as possible. Yes, I hear you that the challenge this time is that we're going to have the income statement effect way ahead of those charge-offs. So we're all trying to just fit in with that, but I appreciate that, thanks Jamie. But you know, of course, that buybacks are always at the end of our capital hierarchy. So if we have better uses for the money, those will come first, and the timing and the conditions of how much we do when and where is entirely at our discretion. Also, note that we are potentially going to see a Basel III NPR sometime in the first quarter or maybe in the second quarter. And while that will be an NPR, it will only cover part of the surface area, and it won't be final, so it's unlikely that it meaningfully shapes short-term decision-making. However, there will be some information content in that release that could shape our decisions as well.

And we break this out but it's hard to describe but every bank does it slightly differently.

Every bank has a slightly different base case in slightly different weighting of adverse cases et cetera, and so we're just trying to make it as simple as possible.

Yes, I hear you that the challenge. This time is that we're going to have the income statement effect way ahead of that charge offs. So we're all trying to just fit for that but I appreciate that thanks Jamie.

And once the,

Base case get to when you expect relative adverse to be adding to reserves. Our reserves before you have charge-offs. Exactly right.

And once the.

Base case get to when you expect relative adverse would be adding to reserves.

Our reserves before you have charge offs.

Exactly right.

Okay, and then maybe just out of interest implied in your question, it might be a little bit.

Okay, and then maybe just out of interest implied in your question might be a little bit.

To what extent does this quarter's build sort of represent a down payment on the $6 billion?

What extent does this quarter's build sort of is a down payment on the $6 billion.

The next question is coming from the line of Erika Najarian from UBS. The next question is coming from the line of Erika Najarian from UBS.

Jeremy, my first question is, as you can imagine, following up on the NII line of questioning. I appreciate that there is a significant amount of uncertainty in this year's NII forecast, in particular. But to follow up with John's question, I'm wondering if you could give us sort of more specific guardrails with regard to what you're expecting for deposit attrition and deposit beta in terms of terminal deposit beta.

The answer to that question is no.

Jeremy, my first question is, as you can imagine, following up on the NII line of questioning. I appreciate that there is a significant amount of uncertainty in this year's NII forecast, in particular. But to follow up on John's question, I'm wondering if you could give a sort of more specific guardrails with regard to what you're expecting for deposit attrition and deposit beta in terms of the terminal deposit beta I think the feedback I'm getting very early from investors is that they appreciate the headwinds that are occurring for NII this year. But at the same time, you have been consistently beating what seems like conservative NII expectations for 2022, including printing a giant $20.3 billion number in the fourth quarter. So that's why I think the more specific guardrails could be very helpful as investors try to figure out what their own expectations are versus that.

The answer to that question is no.

Much less than all of it because a lot of it was driven by loan growth, but some of it is, Jamie says, driven by the flow through of the downward revision in the central case. I could say, subject to the caveat that this is a little bit of art, not science.

Much less than all of it because a lot of it was driven by loan growth, but some of it is Jamie says is driven by the flow through of the downward revision in the central case.

Could say subject to the caveat that this is a little bit of art not science.

I think the feedback I'm getting very early from investors is that they appreciate the headwinds that are occurring for NII this year. But at the same time, you have been consistently beating what seems like conservative NII expectations for 2022, including printing a giant $20.3 billion number in the fourth quarter. So that's why I think the more specific guardrails could be very helpful as investors try to figure out what their own expectations are versus that.

There is some down payment on the sixth. Yeah, I understand. Thank you for all that.

There is some down payment on the sixth.

Yeah understood. Thank you for all that.

The next question is coming from the line of Betsy from Morgan Stanley. You may proceed. Hi, good morning. Hey Betsy, thanks, Erika. So look, I totally appreciate the desire for more specific guardrails. I would want that too if I were you. I do think that we're trying to be quite helpful by giving you a full year number which, if we're honest, involves a lot of guessing about how things will evolve throughout the year. I wanted to understand a little bit about how you're thinking about managing the expense line as you go through this year. I know we talked about that already. Thanks, Erika. So, look, I totally appreciate the desire for more specific guardrails. I would want that too, if I were you. I do think that we're trying to be quite helpful by giving you a full year number which, if we're honest, involves a lot of guessing about how things will evolve throughout the year. I think once you start giving guardrails, you implicitly assume that outcomes outside of the guardrails are very unlikely. And that's just a level of precision that we're just not prepared to get into, especially because, in the end, as I said, a lot of the repricing decisions that we'll be faced with as a company are -- respond to data in the moment at a granular level in connection with the strategy, which So in that context, we do expect modest balance attrition across the company for deposits, as I said.

The next question is coming from the line of Betsy <unk> from Morgan Stanley You May proceed.

Hi, good morning.

Hey, Betsy.

I wanted to understand a little bit about how you're thinking about managing the expense line as you go through this year I know we talked already about.

Now, it's hard to predict NII. I think once you start giving guardrails, you implicitly assume that outcomes outside of the guardrails are very unlikely. And that's just a level of precision that we're just not prepared to get into, especially because, as I said, a lot of the repricing decisions that we'll be faced with as a company will respond to data in the moment at a granular level in connection with the strategy, which is about growing and maintaining primary bank relationships rather than chasing every dollar of balances at any cost. So in that context, we do expect modest balance Jamie, on (inaudible).

Now, it's hard to predict NII.

Obviously, markets have had pushes and pulls. Can you help us understand?

Obviously markets has had pushes and pulls.

Can you help us understand.

How are you thinking about delivering operating leverage where the elements of the expense base or.

How youre thinking about delivering operating leverage where the elements of the expense base or.

Meeting to be invested in so you really can't touch and where there are opportunities to potentially peel back such that if you get a weaker. Jamie, on Erika, thank you. I just want to give you the big picture about why I do not consider $74 billion conservative. So the Federal Reserve has reduced its balance sheet by $400 billion. $1.5 trillion came out of bank deposits, and so investors can invest in e-bills and money market funds. And, of course, banks are competing for the same amount of money now, and banks are all in different places. So some banks started competing heavily. Some have a lot of excess cash and maybe compete less. Erika, thank you. I just want to give you the big picture about why, and I do not consider 74 conservative. So the Federal Reserve reduced its balance sheet by $400 million. $1.5 trillion came out of bank deposits. And so investors can invest in bills, money market funds, and, of course, banks are competing for the cap of money now, and banks are all in different places. And some banks have started competing heavily. Some have a lot of excess cash and maybe will compete less. But if you look at the past -- and forget what happened in 2016. I think people make a huge mistake looking at that. We've never had this [queued] this 0 rates. We've never had rates go up this fast. So I expect there will be more migration to CDs, more migration to money market funds. A lot of people are competing for them, and we're going to have to change savings rates. Now we can do it at our own pace and look at what other people are doing. We don't know the timing, but it will happen.

Meeting to be invested in so you really can't touch and where there are opportunities to potentially peel back such that if you get a weaker <unk>.

<unk> line.

<unk> line.

You can still deliver positive operating leverage.

Can you can still deliver positive operating leverage.

Sure. So I mean as in.

Sure So I mean as.

As you know, obviously, we turned.

As you know obviously we turned.

To break down our expenses across all three categories,

But if you look at the past -- and forget what happened in 2016. I think people make a huge mistake looking at that. We've never had queued -- these 0 rates. We've never had rates go up this fast. So I expect there will be more migration to CDs, more migration to money market funds. A lot of people are competing for them, and we're going to have to change savings rates. Now we can do it at our own pace and look at what other people are doing. We don't know the timing, but it will happen.

To break down our expenses across all three categories.

What percentage of the category that you're addressing is the volume and revenue-related items, which we highlight because it should be pretty symmetrical.

What percentage of the category that you're addressing is the volume and revenue related items, which we highlight because it should pretty symmetrically.

Respond to a better or worse environment and thereby contribute to operating leverage. So, for example, and this year's ultimate outcome and the number that we wanted it to. And I just also want to point out that even at $74 billion, we're earning quite good returns. And that's not -- and we've always pointed out to you that sometimes we're over earning and sometimes we're under earning. But I would say, okay, this time we're over earning on NII this quarter. We're maybe over earning on credit. We may be under earning in something else. So these are still very good numbers, and we're going to wait and see, and we'll report to you, but I don't want to give you false notions about how secure it is. And I just also want to point out that even at 74, we're earning quite good returns. And that's not -- and we've always pointed out to you that sometimes we're over earning and sometimes we're under earning. But I would say, okay, this time we're over earning on NII this quarter. We're maybe over earning on credit. We may be underwriting something else. So these are still very good numbers, and we're going to wait and see, and we'll report to you, but I don't want to give you false notions about how secure it is.

Respond to a better or worse environment, and thereby contribute to operating leverage. So for example, and this year its ultimate outcome and the number that we wanted to.

The year on year change in volume and revenue related expenses. So we're finding a number of them that will probably show you more at Investor Day, but it's probably close to $1 billion in other words, a year on year decline, whereas next year, we're assuming something more like slot machines, so the sort of year on year dollar change in the outlook. And my follow-up is exactly in that line of questioning. Let's zoom out for a second here. To your point, Jamie, the returns are still good. You mentioned that your outlook captures a mild recession. And I'm going to rephrase the question I asked in the third quarter. As you think about 2023, do you think JPMorgan can hit that 17% ROTCE that you laid out on Investor Day, even with the headwind in NII and the headwind on the provision? And my follow-up is exactly in that line of questioning. Let's zoom out for a second here. To your point, Jamie, the returns are still good. You mentioned that your outlook captures a mild recession. And I'm going to rephrase the question I asked in the third quarter. As you think about 2023, do you think JPMorgan can hit that 17% ROTCE that you laid out on Investor Day, even with the headwind in NII and the headwind on the provision?

The year on year change in volume and revenue related expense. So we're finding a number of them probably show you more at Investor day, but it's probably close to $1 billion in other words year on year decline, whereas next year, we're assuming something more like slot, so well the sort of year on year dollar change in the outlook.

Sort of 'twenty, one to trying to try and do to 'twenty. Three is comparable, but the mix is quite different actually. For example, if we wind up being wrong about the type of environment that we're budgeting for, or you would expect a significant drop in the volume and revenue-related expense numbers and the current outlook, and that would contribute to operating leverage.

Sort of 'twenty, one to trying to try and do to 'twenty. Three is comparable the mix is quite different actually so for example, if we wound up being wrong about the type of environment that we're budgeting or you would expect a significant drop in the volume and revenue related expense numbers and the current outlook and that would contribute to operating leverage.

Yes, we can. But a lot of factors could change that, but yes, we can. I think when we do Investor Day in May, we may give you a more interesting number, which is what we think our ROTCE would be if we had a real recession, which I think even in a real recession, it would probably equal the average industrial company, which is good. So we're going to give you some detail around that, and those are still good returns, and we can still grow. Yes, we can. But a lot of factors could change that. But yes, we can. I think when we do Investor Day in May, we may give you a more interesting number, which is what we think our ROTC would be if we had a real recession, which I think even in a real recession, it would probably equal the average industrial company, which is good. So we're going to give you some detail around that, and those are still good returns, and we can still grow. And 17% is -- remember 17% is very good if you compound. Some growth is 17%. Those are extraordinary numbers. And I also want to point out that we don't know exactly what capital needs to be at this point, and we have to modify that at some point.

For the rest of it, we're always generating efficient revenue. And we work just as hard at that, whether the revenue environment is good or bad, and as you know, we invest through the cycle and so forth.

For the rest of it we're always generating efficient.

And we worked just as hard at that whether the revenue environment is good or bad and as you know we invest through the cycle and so forth.

And 17% is -- remember, 17% is very good if you compound -- some growth is 17%. Those are extraordinary numbers. And I also want to point out that we don't know exactly what capital needs to be at this point, and we have to modify that at some point.

Our investment plans really shouldn't be that sensitive to short-term changes in the environment, of course. And Erika, let me just add a very minor clarifying point. I just want to be crystal clear about this. So as you know and as we discussed a lot, like during the pandemic, in terms of the way we construct and build the allowance, while it's anchored around our economist's central case forecast, which you correctly say is a mild recession, through the way we weighed the different scenarios and a range of other factors, the de facto scenario that's embedded in the forecast is actually more conservative than So we just want to be clear about something.

Our investment plans really shouldnt be that sensitive to short term changes in the environment of course certain.

And Erika, let me just add a very minor clarifying point as I want to be crystal clear about this. So as you know and as we discussed a lot, like during the pandemic, in terms of the way we construct and build the allowance, while it's anchored around our economist's central case forecast, which correctly, say, is a mild recession, through the way we weight the different scenarios and a range of other factors, the de So we just want to be clear about something.

Types of things like marketing investments in the card business, in particular. Of what we expect that the NPV of those things to cycle may change in the downturn, and that could produce lower investment, all else equal. But the core strategic investments that we're making to secure the future of the company are not going to get modified because of the ups and downs of the.

Types of things like marketing investments in the card business in particular.

<unk> of what we expect that the NPV of those things to cycle may change in the downturn and that could produce lower investment all else equal what the core strategic investments that we're making to secure the future of the company are not going to get modified because of the ups and downs of the.

The next question is coming from the line of Ebrahim Poonawala from Bank of America Merrill Lynch. The next question is coming from the line of Ebrahim Poonawala from Bank of America Merrill Lynch.

The environment

I guess maybe, Jeremy, just following up on the credit assumptions underlying. If you could give us a sense of what's assumed in that reserve ratio at the end of the year, be it in terms of the unemployment rate and your outlook around, there's a lot of chatter around commercial real estate, the struggles to reprice in the current rate backdrop. Are you concerned about that? Are you seeing pain points in CRE customers given what's happening with cap rates? And then just the overall backdrop today. I guess, Jeremy, just following up on the credit assumptions underlying. If you could give us a sense of what's assumed in that reserve ratio at the end of the year, be it in terms of the unemployment rate. And your outlook on, just a lot of chatter around commercial real estate, and the struggles to reprice in the current rate backdrop. Are you concerned about that? Are you seeing pain points in CRE customers given what's happening with cap rates? And then just the overall backdrop today.

Okay, and part of the reason for asking is one of the debate points on JP Morgan stock has been around capital charges. The capital margin will be capital B. A bigger burden for you to bear as we go through the next couple of years.

The environment.

Okay and part of the reason for asking is one of the debate points on JP Morgan stock has been around the capital charges the capital margin will capital B.

A bigger burden for you to bear as we go through the next couple of years.

Sure. Let me just do CRE quickly, Ebrahim. As you know, our sort of multifamily commercial term lending business is really quite different from the classic office type business. Our office portfolio is very small, Class A, best developers, and best locations. So the vast majority of the loan balances in commercial real estate are that sort of affordable multifamily housing, commercial term lending stuff, which is really quite secure from a credit perspective for a variety of reasons. So we feel quite comfortable with the loss profile of that business.

As you deliver on the positive operating leverage side, it gives you room to absorb some more capital, obviously, and still hit your targets.

Sure. Let me just do CRE quickly, Ebrahim. As you know, our sort of multifamily commercial term lending business is really quite different from the classic office type business. Our office portfolio is very small, Class A, best developers, and best locations. So the vast majority of the loan balances in commercial real estate are that sort of affordable multifamily housing, commercial term lending stuff, which is really quite secure from a credit perspective for a variety of reasons. So we feel quite comfortable with the loss profile of that business.

As you deliver on the positive operating leverage side. It gives you room to absorb some more capital obviously and still hit those.

Our IRR and ROTC target on incremental investments. Maybe you could help us understand what level of capital increase you could absorb given the operating leverage you're expecting to generate, and maybe that's an unfair question today and it's a better question for Investor Day, but yes.

Our IRR and ROTC target on incremental investments.

Maybe you could help us understand what level of capital increase you could absorb given the operating leverage you're expecting to generate and maybe that's an unfair question today and it's a better question for Investor day, but yes.

And so, yes, then you were asking about the assumptions in credit overall. So yes, as I said, the central case economic forecast has a mild recession and, if I remember correctly, unemployment peaking at something like 4.9%. The adjustments that we make to the scenarios to reflect a slightly more conservative outlook have us imply a peak unemployment that's notably higher than that. And so, yes, so then you were asking about the assumptions in credit overall. So yes, as I said, the central case economic forecast has a mild recession and, if I remember correctly, unemployment peaking at something like 4.9%. The adjustments that we make to the scenarios to reflect a slightly more conservative outlook have us imply a peak unemployment that's notably higher than that. So I think we have appropriately conservative assumptions about the outlook embedded in our current balances. And the trajectory that we've talked about in the presentation, they're definitely -- can capture something more than a very mild soft lending. But, of course, it wouldn't be appropriate to reflect a full-blown hard landing in our current numbers since the probability of that is clearly well below 100%.

That's kind of the debate that's out there on the block. Okay, got it. Fair question. It's a good question I'm not going to answer it very specifically, Jamie, about something or two, but let me just quickly say, we've kind of said that we feel quite confident about this company's ability to generate 17% through the cycle and that includes our sense of the current environment, the operating leverage that you talked about, and the expectations. So I think we have appropriately conservative assumptions about the outlook embedded in our current balances, and the trajectory that we've talked about in the presentation, they're definitely -- can capture something more than a very mild soft lending. But, of course, it wouldn't be appropriate to reflect a full-blown hard landing in our current numbers since the probability of that is clearly well below 100%. And I guess just as a follow-up on you've managed RWA growth pretty well when you look at like loan growth year-over-year versus RWA, which stayed relatively flat. As we think about just managing capital, how should we think about the evolution of RWA? Are there still opportunities to optimize that going into whatever the Fed comes up with on Basel?

That's kind of the debate that's out there on the block Okay got it.

Fair question. It's a good question I'm not going to answer it Super specifically, Jamie how something is or two but let me just quickly say, we've kind of said that we feel quite confident about this company's ability to generate 17% through the cycle and thats incorporating our sense of the current environment. The operating leverage that you talked about and the expectation.

Higher capital requirements with the 13% target. Noted And I guess just as a follow-up on you've managed RWA growth pretty well when you look at like loan growth year-over-year versus RWA, which stayed relatively flat. As we think about just managing capital, how should we think about the evolution of RWA? Are there still opportunities to optimize that going into whatever the Fed comes up with on Basel?

Higher capital requirements with the 13% target.

First quarter of 'twenty. The question of whether Basel III and other factors increase that number and how much of that we can absorb and still produce those returns is, of course, impossible to answer right now, but I would remind you that it's not just denominated or expansion. Yes. So there are definitely still opportunities to optimize. We're continuing to work very hard, and it's a big area of focus. Some of that is reflected in this quarter's numbers, but some of the other drivers of this quarter are what you might call more passive items, particularly in market risk RWA. And yes, but we should be clear that although we've said that the effects of capital optimization are not a material economic headwind for the company, they're also not zero. There are real consequences due to the choices that we're making as a result of this capital environment. So there are definitely still opportunities to optimize. We're continuing to work very hard, and it's a big area of focus. Some of that is reflected in this quarter's numbers, but some of the other drivers of this quarter are what you might call more passive items, particularly in the market with RWA. And yes, but we should be clear that although we've said that the effects of capital optimization are not a material economic headwind for the company, they're also not zero. There are real consequences due to the choices that we're making as a result of this capital environment.

First quarter of 'twenty for the question of whether Basel III game and other factors increase that number and how much of that we can absorb and still produce those returns is of course impossible to answer right now, but I would remind you that it's not just denominated or expansion.

Unreasonable capital outcomes will increase costs in the real economy, which goes into the numerator or two. It's not what we want, but that is a possible outcome.

Unreasonable capital outcomes will increase costs into the real economy, which goes into the numerator or two it's not what we want but that is a possible outcome.

Thank you.

Thank you.

The next question comes from the line of Mike Mayo from Wells Fargo Securities: You may proceed. And as a Basel III outcome, that is unreasonably punitive from a capital perspective. There will be additional consequences to that. We obviously are hoping that's not the case and believe that it's not appropriate, but we'll see what happens. And in a Basel III outcome, that is unreasonably punitive from a capital perspective. There will be additional consequences to that. We're obviously hoping that's not the case and believe that it's not appropriate, but we'll see what happens.

The next question is coming from the line of Mike Mayo from Wells Fargo Securities You May proceed.

Hi.

Hi.

Yes, I recognize you're evolving your business model and you're spending money to make more money and that your track record in the last decade was strong there,

Yes, I recognize you're evolving your business model and you're spending money to make more money and that your track record last decade was strong there but.

The next question comes from the line of Glenn Schorr from Evercore ISI. The next question comes from the line of Glenn Schorr from Evercore ISI.

I'm curious, I want to talk about leveraged loans for a second. You've done a good job avoiding some of these -- put on these loans for the like the better half of the last half year. So, a good call on your part. Things have gotten a lot cheaper. However, bank balance sheets, not yours, are still kind of mucked up with a lot of the back book. I'm curious to see if things have gotten cheap enough. Do you consider yourself back in? And how important is this, in general, for activity levels to pick back up to have available funding from the big banks? I'm curious, I want to talk about leveraged loans for a second. You've done a good job avoiding some of these -- put on these loans for the like the better half of the last half year. So, a good call on your part. Things have gotten a lot cheaper. However, bank balance sheets, not yours, are still kind of mucked up with a lot of the back book. I'm curious to see if things have gotten cheap enough. Do you consider yourself back in? And how important is this, in general, for activity levels to pick back up to have available funding from the big banks?

As it relates to the Frank acquisition, that's been in the news. I'm just wondering what that says about the financial discipline for the 15 deals that you've pursued.

As it relates to Frank acquisition, that's been in the news.

I'm just wondering what that says about the financial discipline for the 15 deals that you've pursued the.

$7 billion of investing each year and an increase in expenses over three years to your guide of 81 billion.

$7 billion of investing each year and the increase in expenses over three years to your guide of 81 billion.

Yes. There are a couple of things there, Glenn. So the short answer is we're absolutely open for business there. Terms are better, and pricing is better. We have the resources needed. We're fully, fully there. No overhang, and no issue. Yes. A couple of things there, Glenn. So the short answer is we're absolutely open for business there. Terms are better, and pricing is better. We have the resources needed. We're fully there. No overhang, and no issue. Also, I think there's a bit of a narrative that activity in the market needs to overcome the overhang. We're not convinced that that's true. We think that the overhang is in the numbers, and people need to look forward, and the system has the capacity to handle the risks. So I recognize your point. I think it's an interesting point, but we are wide open for business and not particularly concerned about the overhang from the perspective of the banks' ability to finance activity.

In 2023, so it's really a question about financial discipline, and I know you can't go into details on the Frank deal. Also, I think there's a bit of a narrative that activity in the market needs to overcome the overhang. We're not convinced that that's true. We think that the overhang is in the numbers, and people need to look forward, and the system has the capacity to handle the risks. So I recognize your point. I think it's an interesting point, but we are wide open for business and not particularly concerned about the overhang from the perspective of the banks' ability to finance activity.

In 2023, so it's really a question about financial discipline and I know you can't go into details on the Frank deal.

And look, you earn the purchase price in two days, okay? So I get that and if there's fraud, you can't do anything about fraud, but still, it diverts management resources and attention. So maybe just in the specifics as it relates to the acquisition strategy, like who the sources.

And look you earn the purchase price in two days, okay. So I get that and if Theres fraud is only you can't do anything about fraud, but still it diverts management resources and attention. So maybe just in the specifics as it relates to the acquisition strategy like who sources.

Interesting. So maybe a bit [lasting] longer, more so. Okay. Maybe, Jamie, while we have you. In the last annual letter, you talked about low competitive moats and intense competition from all angles, not just fintech. I was just trying to think out loud. Is that better or worse, that competitive landscape in a much higher rate backdrop? Maybe I'll just leave it at that for you to see where you go with it.

You negotiate them, who does the due diligence, who runs them, and ultimately who is accountable for all of these 15 different deals and when you have investments going across business lines, which is a strength of your guys, but who is ultimately accountable when these investments don't go the way you want to, and Jamie, you recognized a couple of years ago at Investor Day, you said, "Look at some." Interesting. So maybe a bit of asking, more so. Okay. Maybe, Jamie, while we have you. In the last annual letter, you talked about low competitive moats and intense competition from all angles, not just fintech. I was just trying to think out loud. Is that better or worse, that competitive landscape in a much higher rate backdrop? Maybe I'll just leave it at that for you to see where you go with it. I think it's the same. You have the Apples, who are basically doing a lot of banking services, and Walmart is starting theirs. And obviously, higher rates will hurt some of the folks in the fintech world and maybe even help some. So we expect tough competition going forward. I think it's the same. You have the Apples, who are basically doing a lot of banking services, and Walmart is starting theirs. And obviously, higher rates will hurt some of the folks in the fintech world and maybe even help some. So we expect tough competition going forward.

Youre negotiates them, who does the due diligence who runs it and ultimately who is accountable for all of these 15 different deals and when you have investments going across business lines, which is a strength of your guys, but who is ultimately accountable. When these investments don't go the way you want to and Jamie you recognized a couple of years ago at Investor Day, You said look some.

Times, You're going to waste money as you're innovating and growing, but ultimately, who's accountable when an investment doesn't go right, like the Frank deal or another deal or some of the other $81 billion that you expect to spend this year.

Times, Youre going to waste money as you're as you're innovating and youre growing but ultimately who's accountable when investment doesn't go right like the Frank deal or another deal or some of the other $81 billion that you expect to spend this year.

The next question is coming from the line of Gerard Cassidy from RBC Capital Markets.

The next question is coming from the line of Gerard Cassidy from RBC Capital Markets. Jeremy, you mentioned in your payments business that if you took out the equity investment write-downs, the growth was over 50%. Can you share with us on the equity write-downs -- obviously, private equity is going through some challenging times. And I'm assuming that Jeremy, you mentioned in your payments business that if you took out the equity investment write-downs, the growth was over 50%. Can you share with us on the equity write-downs? Obviously, private equity is going through some challenging times. And I'm assuming that...

Obviously, Mike, that's a very good question, but we're always concerned about. We've always talked about complacency and all things like that.

Obviously, Mike that's a very good question, but we always concerned about we've always talked about complacency and all things like that.

It was a gain last year, so it wasn't a write-down this year.

Honestly, when you're getting up to bat 300 times a year, you are going to make errors, and we don't want our company making tariff errors, but we don't do anything, and complacency as a burdened by bureaucracy, which is a basis in that regard.

It was a gain last year, so it wasn't a write-down this year. I got it. Okay. I thought there was a write-down somewhere. Okay. I got it. Okay. I thought there was a write-down somewhere. Okay. Let me make that clear. Sorry about that. Let me make that clear. Sorry about that.

Honestly, when you're getting up to bat 300 times a year you are going to make have errors and we don't want our company the tariff errors, but we don't do anything and the complacency as an burdened by bureaucracy, which is basis in that regard.

Very good. Thank you, Jamie. Sticking just with private equity for a moment, can you share with us where the risks are in the private equity markets for JPMorgan? Is there -- when you think about it from your loan book, or is it really just an equity investment? And maybe you could expand upon that. Very good. Thank you, Jamie. Can you stick just with private equity for a moment? Can you share with us where the risks are in the private equity markets for JPMorgan? Is there -- when you think about it from your loan book? Or is it really just an equity investment? And maybe we could expand upon that. You have to be very careful when you make an error really triple the firm. We are very disciplined, and you see that in a lot of different ways. You see in our leverage lending book, you see the success of our investments, you see the quality of our products and services, you see ignore, and all these things there is no different for an acquisition. There are so acquisitions are done by the businesses.

You have to be very careful when you make an error really doing triple the firm. We are very disciplined and you see that in a lot of different ways you see in our leverage lending book you see at the success of our investments you've seen the quality of our products and services you see ignore and all these things there is no different for an acquisition. There are so the acquisitions are done by the businesses.

Sorry, do you want me to take that? Yes, there are a couple of things. So Jamie is right. The headwind year-on-year is primarily a function of the fact that this is an investment that, just because of the measurement alternative accounting standard, we were forced to mark up previously. This is an investment because we got payment in kind as part of the sale of some of our internally developed initiatives. So anyway, it's fine. Sorry, do you want me to take that? Yes, there are a couple of things. So Jamie is right. The headwind year-on-year is primarily a function of the fact that this is an investment that, just because of the management alternative accounting standard, we were forced to mark up previously. This is an investment because we got payment in kind as part of the sale of some of our internally developed initiatives. So anyway, it's fine.

Operator: And your outlook on just a lot of chatter about commercial real estate, the struggles to reprice in the current rate backdrop. Are you concerned about that? Are you seeing pain points in CRE customers, given what's happening with cap rates? And then just the overall backdrop.

But there's also a centralized team that does extensive due diligence so the business can do it.

The point is there is a small write-down this quarter, and the important point there is that the core business is performing exceptionally well, both because of higher rates but also because of the strategy that Takis talked a lot about at Investor Day paying off across fees and value-added services and so on and so forth. And I guess your question throughout is about private equity in general and how we are feeling about that space? Did I hear that correctly?

But there's also a centralized team that does extensive due diligence so the business does it.

The point is there is a small write-down this quarter, and the important point there is that the core business is performing exceptionally well, both because of higher rates but also because of the strategy that we talked about a lot at Investor Day paying off across fees and value-added services and so on and so forth. And I guess your question throughout is about private equity in general and how we are feeling about that space? Did I hear that correctly?

<unk>.

The central IT team does it. We've been doing it for 20 years, but it seems like we just started doing something like that, and obviously, there are always lessons learned.

<unk>.

The central it team does it we've been doing it for 20 years like we just started doing something like that and obviously there are always lessons learned.

Sure, let me just do CRE quickly, Ibrahim. As you know, our sort of Commercial Term Lending business is really quite different from the classic office type business or office portfolio, very small, class A, you know, best developers, best locations. So the vast majority of Sloan Bell's Affordable Multifamily Housing and one big stuff, really quite secure from a credit perspective for a variety feel quite secure, Lost Profile. And so yeah, so then you were asking about the assumptions in credit overall. So yeah, as I said, the central case economic forecast has a mild recession and, if I remember correctly, unemployment peaking at something like 4.9%. The adjustments that we make to the scenarios to reflect a slightly more conservative outlook have us, you know, imply a peak unemployment notably higher.

One point in the play is the lesson learned here when this thing goes down to litigation.

One point in the play the lesson learned here when this thing is down to litigation.

But we're quite comfortable with the people who are responsible for those people in the business. That's correct, Jeremy. And just in terms of any lending, obviously, so many of these companies have seen their valuations come down considerably. Is there any risk lending to some of these companies considering the struggles they're having? That's correct, Jeremy. And just in terms of any lending, obviously, so many of these companies have seen their valuations come down considerably. Is there any risk lending to some of these companies considering the struggles they're having?

But we're quite comfortable in the people who are responsible that people in the business.

That business did the acquisition date or was responsible. We're back, and we.

That business did the acquisition date or responsible we're back and we.

We expect people when they talk to us as the good and the bad yogurt. Yes. I mean, I think that's a risk that we manage quite tightly as a company. Our exposures to the sort of non-bank financial sector are probably defined. And of course, as we thought a little bit about what normalized wholesale charge-offs could look like through the cycle. They're obviously higher than effectively 0, which is what we have now. But we feel confident with our credit discipline and what we have on the books. I mean, I think that's a risk that we manage quite tightly as a company. Our exposure to the sort of non-bank financial sector is probably defined. And of course, as we thought a little bit about what normalized wholesale charge-offs could look like through the cycle, they're obviously higher than effectively 0, which is what we have now. But we feel confident with our credit discipline and what we have on the books.

We expect people when they talk to all of us as the good the bad yogurt.

We're looking for how great everything wasn't obviously a good thing. In one way or another, it was a huge mistake.

We're looking for how great everything wasn't obviously a good thing.

In one way or another it was a huge mistake.

I mean,

A follow-up on that, so that relates to inorganic growth as it relates to organic growth, such as in the payments business, which I know is a focus that cuts across a lot of different business lines.

I mean.

A follow up on that so that relates to the inorganic growth as it relates to the organic growth such as in the payments business, which I know is a focus that cuts across a lot of different business lines.

And then, as a follow-up question, you guys did a good job building up that loan loss reserve this quarter. Two questions on that. First, the Shared National Credit exam results are always released in February. Does the reserve buildup take some of that into account? And second, how much of the reserve build was more of a management overlay versus your base case, the quantitative part of the decision-making for building up the reserve? And then, as a follow-up question, you guys did a good job building up that loan loss reserve this quarter. Two questions on that. First, the Shared National Credit exam results are always released in February. Does the reserve buildup take some of that into account? And second, how much of the reserve build was more of a management overlay versus your base case, the quantitative part of the decision-making for building up the reserve?

As you invest more in payments, which can be a 20 or 30 p/e business, which could be great if you get there.

As you invest more in payments, which is can be a 20 or 30, p/e business, which could be great. If you got there.

Who is responsible for that sort of organic investment that cuts across, yeah, sometimes? Yes, I mean, I'll give you that answer, but I'm oversimplifying a lot. I would say that yes. I mean, I'll give you that answer, but I'm oversimplifying a lot. I would say that I will over simplify. I will over simplify.

Who is responsible for that sort of organic investment that cuts across yeah, sometimes.

Yes, yes, I know. I've got it. The sort of conservatism of the management overlay did not change, for all intents and purposes, quarter-on-quarter. I think that's the best way to think about that, Gerard. Yes, yes, I know. I've got it. The sort of conservatism of the management overlay did not change for all intents and purposes quarter-on-quarter. I think that's the best way to think about that, Gerard.

You aggregate that data; you know it's.

It's consumer at Citi investment bank. It can be asset management, it can be commercial, it can be everything in payments.

You aggregate that data you know it's.

It's consumer at Citi investment bank. It can be asset management can be commercial can be everything in the payments.

And then shared national -- yes, go ahead.

And then, sure, Natural -- yes, go ahead.

is responsible for those. The National Shared Credit thing will not affect our results materially. The National Shared Credit thing will not affect our results materially.

Is responsible for those.

Just to clarify, so I would say that married and Jen when it comes to credit, debit checks, and all the latest consumer Doug and talk, which I think you saw the presentation about payments.

So, you know, I think we have appropriately conservative assumptions about the outlook embedded in our current balances and in the trajectory that we've talked about in the presentation. There can definitely capture something, a very mild soft landing, but of course, it wouldn't be appropriate to reflect a full-blown hard landing in our current numbers since the probability of that is clearly well below, Noted.

The next question is coming from the line of Ken Usdin from Jefferies. I'm just wondering if you can help us understand the ongoing efforts in your mitigation for the RWAs in advance of all the points we've made already about the pending capital regime. How do we -- can you help us understand what type of effects that has, if any, on parts of the income statement, whether it's NII or the trading business? I'm just wondering if you can help us understand the ongoing efforts in your mitigation for the RWAs in advance of all the points we've made already about the pending capital regime. How do we -- can you help us understand what type of effects that has, if any, on parts of the income statement, whether it's NII or the trading business?

Just to be clarify so I would say that married and Jen when it comes to credit debit checks and all the consumer latest Doug and talk is which I think you saw the presentation about payments.

Yesterday, Daniel reported, and that is on the wholesale payments merchant processing, a whole bunch of stuff.

Yesterday reported Daniel and that is on the wholesale payments merchant processing, a whole bunch of stuff.

Yes. So I'll just take that one. Just assume we're going to have modest growth in RWA. And in every single business, mortgages, loans, derivatives, how we hedge CVA, and stuff like that, we take access to manage RWA. Do not -- it does not really affect the business that much. It might affect it one day, but it doesn't affect it today. And so we don't build in, somehow we lose a little bit of this, a little bit of that. Yes. So I just take that one. Let's assume we're going to have modest growth in RWA. And in every single business, mortgages, loans, derivatives, how we hedge CVA and stuff like that, we take access to manage RWA and do not -- it does not really affect the business that much. It might affect it 1 day, but it doesn't affect it today. And so we don't build in, somehow, we lose a little bit of this, a little bit of that. And there -- and the biggest opportunity down the road will be a reopening of the securitization markets, and they're still very tight. And I think that 1 day they will reopen.

And those are direct responsibilities are quite clear. This is an area of the country across the company. So the team is a working group. So just spend time on that.

And those are direct responsibilities is quite clear. This is an area of the country across the company. So the team is working group. So just spend time on that.

That working group has not yet done an acquisition.

That working group is not done an acquisition.

And if they make they want to invest, there are cases by the way would you would you, and You'll see more of this year. We decided jointly and all the way up to Daniel Amir.

And I guess just as a follow-up on, you've managed RWA growth pretty well when you look at like loan growth here over here versus RWA, which stayed relatively flat. As we think about just managing capital, how should we think about the evolution of RWA? Are there still opportunities to optimize that going into whatever the Fed comes out with on Basel? Yeah, so there are definitely still opportunities to optimize. We're continuing to work very hard, and it's a big area of focus. Some of that is reflected in..., https://www.youtube.com.uk Market Risk or WA And yeah, but we should be clear that although we've said that the effects of capital optimization are not, you know, a material economic headway, they're also not zero. They're a real constant. Secretariat of Fiscal Special Affairs

And if they make they want to invest there are cases by the way would you would you and Youll see more of this year, we decided jointly and all the way up to Daniel Amir.

And there -- and the biggest opportunity down the road will be a reopening of the securitization markets. And they're still very tight. And I think one day they will reopen.

Okay. And then on the -- one follow-up, just coming back to the reservation process. Can you just help us understand relative to the peak in 3Q that you gave for your unemployment rate quarterly average in the 3.9 average baseline? Just where does this fourth quarter reserve get you? And does that rule of thumb that you kind of gave us last quarter still stand in terms of scenario analysis on potential builds ahead of this mild recession? Okay. And then on the -- one follow-up, just coming back to the reserving process. Can you just help us understand, relative to the 5% peak in 3Q that you gave for your unemployment rate quarterly average in the 3.9 average baseline, just where does this fourth quarter reserve get you? And does that rule of thumb that you kind of gave us last quarter still stand in terms of scenario analysis on potential builds ahead of this mild recession?

And then my last follow up to my first start, the general comment I missed.

And then my last follow up to my first start the general comment I missed.

This is the third year in a row of about $5 billion of expense growth.

Is the third year in a row of about $5 billion of expense growth.

And you have slide 11, there right. That's a lot of certain frontloaded expenses for less certain back end benefits. Can I just make it real simple? The base case, okay, is where it hits almost 5% unemployment. Then you probability weight other scenarios. That's why Jeremy is saying the reserve is higher than the base case. We didn't change the probabilities in our weighting, but of course, it got worse, and the base case got worse. That's all it is, which still is a good benchmark to keep in mind, is if we got to a relative adverse case, all that 6% unemployment, we -- and then once you get there, you assume the average weighting, you have wins. It could get better or it could get worse. In that case, we would need about $6 billion more. Can I just make it real simple? The base case, okay, is where it hits almost that 5% unemployment rate. Then you probability weight other scenarios. That's why Jeremy is saying the reserve is higher than the base case. We didn't change the probabilities in our weighting. But of course, it got worse, and the base case got worse. That's all it is, which still is a good benchmark, you'll keep in mind, is if we got to a relative adverse case, all that, a 6% unemployment, we -- and then once you get there, you assume the average weighting, you have wins. It could get better, or it could get worse. In that case, we would need about $6 billion more.

And you have slide 11, there right.

That's a lot of certain frontloaded expenses for less certain back end it benefits.

How is your comfort level that you're going to see those back end benefits relative to the past?

How is your comfort level that youre going to see those back end it benefits relative to the past.

Totally shall we try to show you guys at Investor Day February branch, we opened for every banker we hire, every transaction we do, we're pretty comfortable there are certain things you can do.

Totally shall we tried to show you guys at Investor Day February branch, we opened for every banker we hire every texting we do we're pretty comfortable there are certain things you can.

More like infrastructure like getting to the cloud and stuff like that.

More like infrastructure like getting to the cloud and stuff like that which.

You can identify all of that.

You can identify all of that.

Pretty comfortable that we have it. When the base case itself deteriorates, we're moving closer to relative adverse, that's all it is. These are all probabilities and possibilities and hypothetical numbers. And if I were you, I'd just look at charge-offs, like actual results. And so -- we break this out, but it's hard to describe, and every bank does it slightly differently, and every bank has a slightly different base case and slightly different weighting of adverse cases, et cetera. And so we're just trying to make it as simple as possible. When the base case itself deteriorates, we're moving closer to relative adverse, that's all it is. These are all probabilities and possibilities and hypothetical numbers. And if I review, like just look at charge-offs, like actual results. And so -- and we break this out, but it's hard to describe, and every bank does it slightly differently, and every bank has a slightly different base case and slightly different weighting of adverse cases, et cetera. And so we're just trying to make it as simple as possible.

They were working, so we changed them.

Pretty comfortable that we have.

So we ask ourselves that question every day when you're adding wealth managers or branches or certain things in marketing.

They were working we change them.

So we ask ourselves that question every day, when you're adding wealth managers are branches or certain things so in marketing.

Operator: We obviously are hoping that's not the case and, you know, believe that it's not appropriate, but we'll see what happens. Thank you. The next question is coming from the line of Glenn Schorr from Evercore ISI. You may proceed. All right, thank you.

Not quite half would have that number; that's a very specific, for the most part, very specific dollar in how many dollars out.

Not quite half would have that number that's a very specific for the most part very specific dollar in how many dollars out.

Got against, and we're pretty accurate at that kind of stuff, and again, if there is a $1 billion that we were spending didn't give us the return, we cut the billion.

Yes, I hear you. The challenge at this time is that we're going to have the income statement effect way ahead of that charge-off. So we're all trying to just fit in with that. But I appreciate that. Thanks, Jamie. Yes, I can hear you. The challenge this time is that we're going to have the income statement effect way ahead of that charge-off. So we're all trying to just prepare for that. But I appreciate that. Thanks, Jamie. And once the -- any base case gets to where you expect relative adverse, you'd be adding $6 billion of reserves before you have charge-offs. Alright, thank you. And once the base case gets to where you expect relative adverse, you'd be adding to $6 billion of reserves before you have charge-offs.

Got against and we're pretty accurate at that kind of stuff and again, if we if there is $1 billion that we were spending didn't give us the return we cut the billion.

Glenn Schorr: I'm curious, I want to talk about leveraged loans for a second. You've done a good job avoiding some of these, putting on these loans for like the better half of the last half year. So, good call on your part.

Alright, thank you.

The next question is coming from the line of Steve from Wolfe Research. You may proceed.

The next question is coming from the line of Steve <unk> from Wolfe Research you May proceed.

Exactly. Right. Exactly. Right.

Ken, maybe just out of interest. Implied in your question might be a little bit, to what extent does this quarter's build sort of is a down payment on the $6 billion? And the answer to that question is much less than all of it because a lot of it was driven by loan growth, but some of it, as Jamie says, is driven by the flow-through of the downward provision in the central case. You could say, subject to the caveat that this is a little bit or not at all science, that there's some down payment on that $6 billion. Ken, maybe just out of interest. Implied to your question might be a little bit, to what extent does this quarter's build sort of is a down payment on the $6 billion? And the answer to that question is much less than all of it because a lot of it was driven by loan growth, but some of it, as Jamie says, is driven by the flow-through of the downward provision in the central case. You could say, subject to the caveat that this is a little bit or not at all science, that there's some down payment on that $6 billion.

Hey, good morning.

Hey, good morning.

So wanted to start off with a question on the outlook for trading and investment banking businesses. Jeremy, given the strong pipelines you mentioned, I was hoping you could provide some additional color just in terms of what you're hearing from corporate clients. Especially in the context of the mild recession scenario you outlined when you would expect to see some inflection in investment banking activity and similar questions on the trading side, where you're facing difficult comps in the coming year, we still have qt rate volatility proxy is still elevated. Do you anticipate a significant moderation in trading activity or not?

So wanted to start off with a question on the outlook for trading and investment banking businesses, just Jeremy given the strong pipelines you sided I was hoping you can provide some additional color just in terms of what youre hearing from corporate clients.

Glenn Schorr: Things have gotten a lot cheaper. However, bank balance sheets, not yours, are still kind of mucky with a lot of the back book. I'm curious to see if things have gotten cheap enough. Do you consider yourself?

The next question is coming from the line of Betsy Graseck from Morgan Stanley. I wanted to understand a little bit about how you're thinking about managing the expense line as you go through this year. I know we talked about how it's hard to predict NII. Obviously, markets have pushes and pulls. Can you help us understand how you're thinking about delivering operating leverage, where the elements of the expense base are needing to be invested in so you really can't touch them? And where there are opportunities to potentially peel back such that if you get a weaker revenue line, you can still deliver positive operating leverage? I wanted to understand a little bit about how you're thinking about managing the expense line as you go through this year. I know we talked already about how it's hard to predict NII. Obviously, markets have pushes and pulls. Can you help us understand how you're thinking about delivering operating leverage? Where are the elements of the expense base needing to be invested in so you really can't touch them? And where are there opportunities to potentially peel back such that if you get a weaker revenue line, you can still deliver positive operating leverage?

back in, and how important is this in general for activity levels to pick back up to have available funding from the government? Yeah, a couple of things there, Glenn. So, short answer. We're absolutely open for business there.

Especially in the context of the mild recession scenario you outlined when you would expect to see some inflection in investment banking activity and similar question on the trading side youre facing difficult comps in the coming year, we still have qt rate volatility proxy is still elevated do you anticipate a significant moderation in trading activity or.

Terms are better. Pricing is better. We have the resources needed, we're fully, fully there, no overhang. Also, I think there's a bit of a narrative that activity in the market needs to overcome overhang. We're not convinced that that's true.

Not.

Sure. Thanks, Steve So, let's let him do the banking for us. So I think the thing that's interesting about banking right now is that the declines have been so significant, obviously very elevated levels, but even relative to 2019, 2022 was a relatively weak year.

Not.

Sure. Thanks, Steve So, let's do banking for us. So I think the thing that's interesting about banking right now is that the declines have been so significant obviously very elevated levels, but even relative to 2019 2022 was a relatively weak year.

Sure. So, as we -- as you know, obviously, we tend to break down our expenses across our 3 categories. And in some sense, the category that you're addressing is the volume and revenue-related expense, which we highlight because it should pretty symmetrically respond to a better or worse environment and thereby contribute to operating leverage. So I mean, as you know, obviously, we tend to break down our expenses across our 3 categories. And in some sense, the category that you're addressing is the volume and revenue-related expense, which we highlight because it should pre-symmetrically respond to a better or worse environment and thereby contribute to operating leverage.

Glenn Schorr: We think that the overhang is in the numbers and people need to look forward and handle the risks. So, you know, I recognize your point, I think, but we are wide open for business and not an overhang from the perspective of the Bank's ability to finance. Hmm, interesting, so maybe a bid-ass thing, more so, okay.

And as we look into 2023, it's possible that the actual economic environment will be worse than it was in 2000. So, for example, in this year's ultimate outcome, and the number that we want on printing for 2022, the year-on-year change in volume and revenue-related expense, still refining the numbers, we'll probably show you more at Investor Day, but it's probably close to $1 billion. In other words, year-on-year decline. Whereas next year, we're assuming something more like flat. So while the sort of year-on-year dollar change in the outlook, sort of '21 to '22, '22 to '23 is comparable, the mix is quite different actually. So for example, in this year's ultimate outcome, and the number that we want to print on Page [22], the year-on-year change in volume and revenue-related expense, still we're finding the numbers. We'll probably show you more at Investor In other words, year-on-year decline. Whereas next year, we're assuming something more like flat. So while the sort of year-on-year dollar change in the outlook, sort of '21 to '22, '22 to '23 is comparable, the mix is quite different actually. So that could conceivably make you pessimistic about the investment banking wallet outlook, and to be sure. It's not as if we're super optimistic, but it's important to note that part of the issue here is how quickly things change in 2022, specifically with respect to rates as that affects the debt business and valuation.

And as we look into 2023, it's possible that the actual economic environment will be worse than it was in 2000.

So that could conceivably make you pessimistic about the investment banking wallet outlook and to be sure. It's not as if we're super optimistic, but it's important to note that part of the issue here is how quickly things change in 2022, specifically with respect to rates as that effects the debt business and valuation.

Jamie Dimon: Maybe, Jamie, while we have you, in the last annual letter, you talked about low competitive moats and intense competition from all angles, not just FinTech, and I was just trying to think out loud, is that better or worse, that competitive landscape in a much higher rate backdrop? Maybe I'll just leave it at that for you to see where you go with that. I think it's the same, you know, because you have Apple who are basically doing a lot of banking services, and Walmart is starting theirs.

And so, for example, if we wind up being wrong about the type of environment that we're budgeting for, you would expect a significant drop in the volume and [revenue-related] expense numbers that's in the current outlook, and that would contribute to operating leverage.

And so, for example, if we wind up being wrong about the type of environment that we're budgeting for, you would expect a significant drop in the volume and revenue (inaudible) expense number that's in the current outlook, and that would contribute to operating leverage.

It is FX, M&A, and ECM as well, and one of the sort of necessary conditions for people to do deals or decide to raise capital and just get more comfortable with valuation than normal in the market. So I think there is a chance that actually winds up helping in 2023 and investment banking.

Is it FX, M&A and ECM as well and one of the sort of necessary conditions for people to do deals or decide to raise capital and just getting comfortable with valuation than normal in the market. So I think theres a chance does that actually winds up helping in 2023 and the investment banking.

For the rest of it, we're always generating efficiency, and we've worked just as hard at that, whether the revenue environment is good or bad. And as you know, we invest through the cycle. And, so broadly, our investment plans really should be that sensitive to short-term changes in the environment. For the rest of it, we're always generating efficiency, and we've worked just as hard at that, whether the revenue environment is good or bad. And as you know, we invest through the cycle. And, so broadly, our investment plans really should be that sensitive to short-term changes in the environment. Of course, certain types of things like marketing investments in the card business, in particular, the math of what we expect the NPV of those things to be during the cycle may change in a downturn, and that could produce lower investment, all else equal. But the core strategic investments that we're making to secure the future of the company are not going to get modified because of the ups and downs of both the environment. Of course, certain types of things like marketing investments in the Card business, in particular, the math of what we expect the NPV of those things to be in the cycle may change in a downturn. And that could produce lower investment, all else equal. But the core strategic investments that we're making to secure the future of the company are not going to get modified because of the ups and downs of both the environment. Similarly, on the market side, obviously, markets had another very strong year.

Operator: And, you know, obviously higher rates will hurt some of the folks in the fintech world and maybe even help some of them. So we expect tough competition going forward. Okay, thanks.

Similarly on the market side, obviously markets had another very strong year.

You know, better than we expected since the numbers were so strong coming out of the pandemic; we were expecting more normalization than what we actually saw. And part of the reason for asking is that one of the debate points on JPMorgan stock has been around capital charges, the capital march, and will capital be a bigger burden for you to bear as we go through the next couple of years? As you deliver on the positive operating leverage side, it gives you room to absorb some more capital obviously and still hit those IRR and ROTCE targets on incremental investments. Okay. And part of the reason for asking is that one of the debate points on JPMorgan's stock has been around capital charges, the capital march. And will capital be a bigger burden for you to bear as we go through the next couple of years? As you deliver on the positive operating leverage side, it gives you room to absorb some more capital obviously and still hit those IRR and ROTCE targets on incremental investments. Maybe you could help us understand what level of capital increase you could absorb given the operating leverage you're expecting to generate? And maybe that's an unfair question today, and it's a better question for Investor Day, but that's kind of the debate that's out there on the stock.

You know better than we expected since the numbers were so strong coming out of the pandemic, we were expecting more normalization than what we actually saw.

Gerard Cassidy: The next question is coming from the line of Gerard Cassidy from RBC Capital Markets. You may proceed. Thank you. Hi Jeremy.

And 2022 had a lot of themes. I think the active management community did well, that always helps us a little bit. And we added volatility with relatively orderly and container markets. As we look towards 2023, maybe some of those themes will be a little bit less obvious, and that could be a little bit of a headwind, but on the other hand, it's not like the volatility is going away, and markets seem to continue to be quite orderly.

And 2022 had a lot of themes I think the active management community did well that always helps us a little bit.

Gerard Cassidy: Jeremy, you mentioned in your payments business that if you took out the equity investment write-downs, the growth was phenomenal, you know, over 50%. Can you share with us on the equity write-downs, obviously, private equities are going through some challenging times, and I'm assuming it was a gain last year. It wasn't the write-down this year.

And we added volatility with relatively orderly and container markets.

Maybe you could help us understand what level of capital increase you could absorb given the operating leverage you're expecting to generate? And maybe that's an unfair question today, and it's a better question for Investor Day, but that's kind of the debate that's out there on the stock. I got it. I mean, it's a fair question. It's a good question, but I'm not going to answer it very specifically. And Jamie may have some views there, too. But let me just quickly say that we've kind of said that we feel quite confident about this company's ability to generate 17% in the cycle. And that's incorporating our sense of the current environment, the operating leverage that you talked about, and the expectation of higher capital requirements with the 13.5% target in the first quarter of '24. I mean, it's a fair question. It's a good question. I'm not going to answer it super specifically, and Jamie may have some views there, too. But let me just quickly say that we've kind of said that we feel quite confident about this company's ability to generate 17% in the cycle. And that's incorporating our sense of the current environment, the operating leverage that you talked about, and the expectation of higher capital requirements with the 13.5% target in the first quarter of '24.

As we look towards 2023, maybe some of those themes will be a little bit less obvious and that could be a little bit of a headwind, but on the other hand, it's not like the volatility is going away and markets seem to continue to be quite orderly.

455% rate environment, there's probably one where there were more trading opportunities in the Bureau for Sun.

455% rate environment, there's probably one where there was more trading opportunities in the Bureau for Sun.

Jamie Dimon: Oh, I got it. Okay. I thought there was a right down there.

Jamie Dimon: Okay. Very good. Thank you, Jamie.

Sticking just with private equity for a moment, can you share with us where the risks are in the private equity markets for JP Morgan? When you think about it from your loan book, or is it really just in equity investments? And maybe expand upon that.

Numbers are really very strong in the markets, but we'll see what happens. The question of whether Basel III's end game and other factors increase that number and how much of that we can absorb and still produce those returns is, of course, impossible to answer right now. But I would remind you that it's not just denominator expansion; unreasonable capital outcomes will increase costs in the real economy, which goes into the numerator, too. It's not what we want, but that is a possible outcome. The question of whether Basel III's end game and other factors increase that number and how much of that we can absorb and still produce those returns is, of course, impossible to answer right now. But I would remind you that it's not just denominator expansion; unreasonable capital outcomes will increase costs in the real economy, which goes into the numerator, too. It's not what we want, but that is a possible outcome. Finalization of Basel III, sorry, Jeremy. I couldn't help myself here, but in his December speech, he strongly hinted at capital requirements moving higher for you and your peers. You also alluded in your comments or in response to one of the questions that the finalization of Basel III could potentially be very punitive.

Numbers are really very strong in markets, but we'll see we'll see what happens.

Finalization of Basel, III, sorry, Jeremy I couldn't help myself here, but in bars December speech, he strongly hinted at capital requirements moving higher for you and peers. You also alluded in your comments or in response to one of the questions that the finalization of Basel III can potentially be very punitive.

The next question is coming from the line of Mike Mayo from Wells Fargo Securities. I recognize you're evolving your business model and you're spending money to make more money and that your track record in the last decade was strong there. But as it relates to the Frank acquisition that's been in the news, I'm just wondering what that says about the financial discipline for the 15 deals that you pursued, the $7 billion of investing each year and the 1/5 increase in expenses over 3 years to your guide of $81 billion in 2023. I recognize you're evolving your business model and you're spending money to make more money and that your track record in the last decade was strong there. But as it relates to the Frank acquisition that's been in the news, I'm just wondering what that says about the financial discipline for the 15 deals that you pursued, the $7 billion of investing each year and the 1/5 increase in expenses over 3 years to your guide of $81 billion in 2023. So it's really a question about financial discipline, and I know you can't go into details on the Frank deal. And look, you earn the purchase price in 2 days, okay? So I understand that. And if there's fraud, there's only -- you can't do anything about fraud, but still, it's divergent management resources and attention. So maybe just in the specifics as it relates to the acquisition strategy, like who sources them? Who negotiates them? Who does the due diligence? Who runs it? And ultimately, who's accountable for all these 15 different deals? And when you have investments going across business lines, which is a strength of yours, but who's ultimately accountable when these investments don't go the way you want them to?

Okay, so just a couple things. So Jamie's right. The headwind, you know, year on year, is primarily a function of the fact that this is an investment that, you know, just because of the measurement alternative accounting standard, we were forced to mark up previously. This is, you know, an investment for which we got payment in kind as part of the sale of some of our internally developed initiatives. So anyway, it's fine.

Given the absence of the proposal, I was really just hoping you could speak to how your scenario planning for the eventual finalization and any additional detail you can offer on the areas of mitigation. I think the one issue or area of confusion is that one of the biggest sources of inflation is operational risk, which can't really be mitigated.

Given the absence of the proposal I was really just hoping you could speak to how your scenario planning for the eventual finalization and any additional detail you can offer on the areas of mitigation I think the one issue or area of confusion is that one of the biggest sources of <unk> inflation is op risk, which can't really be mitigated.

So it's really a question about financial discipline, and I know you can't go into details on the Frank deal. And look, you earn the purchase price in 2 days, okay? So I understand that. And if there's fraud, there's only one thing you can do about fraud, but still, it's diverse management resources and attention.

The point is, there is a small write-down this quarter, and the important point there is that the core business is performing exceptionally well, both because of higher rates, but also because of the strategy that Takis talked a lot about yesterday, paying off across fees and value added. Um, and I guess, Gerard, your question is about private equity in general, and how are we feeling about that space? Did I hear that correctly?

The word of the actions that you can take to really offset some of those potential headwinds.

The word of the actions that you can take to really offset some of those potential headwinds.

So maybe just the specifics as it relates to the acquisition strategy, like who sources them? Who negotiates them? Who does the due diligence? Who runs it? And ultimately, who's accountable for all these 15 different deals? And when you have investments going across business lines, which is a strength of yours, but who's ultimately accountable when these investments don't go the way you want them to?

I'd love to get into a lot of detail here, but I just think that the question of how to mitigate is really hard to discuss in a lot of detail until we see an actual proposal.

I'd love to get into a lot of detail here, but I just think that the question of how to mitigate is really hard to discussing a lot of detail until we see an actual proposal.

And the reason that we talk about potentially punitive increases is that you are studying this issue closely, just to point out that under.

And Jamie, you recognized, a couple of years ago at Investor Day, you said, "Look, sometimes you're going to waste money as you're innovating and you're growing." But ultimately, who's accountable when an investment doesn't go right, like the Frank deal or another deal or some of the other $81 billion that you expect to spend this year? And Jamie, you recognized, a couple of years ago at Investor Day, you said, "Look, sometimes you're going to waste money as you're innovating and you're growing." But ultimately, who's accountable when an investment doesn't go right, like the Frank deal or another deal or some of the other $81 billion that you expect to spend this year?

And the reason that we talk about potentially punitive increases are you studying this issue closely as just to point out that under.

The version of the World where you've got the worst outcome in all of the different moving parts of this thing is a very significant increase to the capital requirements of the system as a whole, and given how strong the system is today, it doesn't make sense to us. So we just want to say that, Jamie, please.

That's correct, Jeremy. And just in terms of any lending, you know, obviously, so many of these companies have seen their valuations come down considerably. Is there any elevated risk lending to some of these companies, considering the struggles they're having? Yeah, I mean, I think that's a risk that we manage quite tightly as a company, our exposures to the sort of non-bank financial sector, broadly defined. And, you know, as you know, we thought a little bit about what normalized wholesale charge-offs could look like. So the cycle, they're obviously higher than effectively zero, which is what we have now.

The version of the World, where you've got the worst outcome in all of the different moving parts of this thing it's a very significant increase to the capital requirements of the system as a whole and given how strong the system is today than just like it doesn't make sense to us. So we just want to say that but yes, Jamie please.

Obviously, Mike, that's a very good question, which we're always concerned about. We've always talked about complacency and all things like that. So obviously, when you're getting up to bat 300 times a year, you are going to make -- have errors. And we don't want our company to be so terrified of errors that we don't do anything and that complacency is then burdened by bureaucracy, which is stasis and death. So you have to be very careful when you make an error like you cripple the firm. Obviously, Mike, let's say, a very good question which we are always concerned about. We've always talked about complacency and all things like that. So obviously, when you're getting up to bat 300 times a year, you are going to make -- have errors. And we don't want our company to be so terrified of errors that we don't do anything. And complacency is then burdened by bureaucracy, which is stasis and depth. So you have to be very careful when you make an error like you cripple the firm.

You guys noted the operating risk capital and trading book, the CCAR all those moving parts; let's just see what they are; we'll deal with them when we get there.

You guys noted operating risk capital and trading book, the CCAR <unk> all those moving parts, let's just see what they are we'll deal with them when we get there.

We are very disciplined, and you see that in a lot of different ways. You see it in our leverage lending book, you see it in the success of our investments, you see it in the quality of our products and services, you see it in our -- in all these things. And it's no different for an acquisition. We are very disciplined, and you see that in a lot of different ways. You see, in our leverage lending book, the success of our investments. You see it in the quality of our products and services. You see it in our -- and all these things. And it's no different for an acquisition. There are -- so the acquisitions are done by the businesses, but it's also a centralized team that does extensive due diligence. So the business does it. The centralized team does it. We've been doing it for 20 years, but it seems like we just started doing something like that. And, obviously, there are always lessons learned.

Then we will figure out what we have to modify our business and stuff like that we don't think is necessarily increasing capital ratios are quite clear that what the new numbers you can put on the top of the press release are our total loss absorbing capacity. So we now have almost 500 billion.

Then we will figure out what we have to modify our business and stuff like that we don't think is necessarily increase capital ratios are quite clear that what are the new numbers you can put on the top of the press release was our total loss absorbing capacity. So we have now almost 500 billion.

There are -- so the acquisitions are done by the businesses, but it's also a centralized team that does extensive due diligence. So the business does it, and the centralized team does it. We've been doing it for 20 years; it's not like we just started doing something like that. And, obviously, there are always lessons learned.

Gerard Cassidy: But, you know, we feel confident with our credit discipline and what we have. Great. And then, as a follow-up question, you guys did a good job building up that loan loss reserve this quarter. Two questions on that. First, the shared national credit exam results are always released in February.

I mean really like at one point when does 500 beta that trillion dollars liquidity all of those things enough and so.

I mean really like at one point when does 500 beta that trillion dollars liquidity all of those things enough and so.

And at some point, we'll tell you the lesson we learned here when this thing is out of litigation. But we're quite comfortable. And the people who are responsible are the people in the business. So they -- that business did the acquisition, they are responsible. They report back. And we expect people to give us the goods, the bad, the ugly. We're never looking for how great everything was. And obviously, this thing, in one way or another, it was a huge mistake. And at some point, we'll tell you the lessons learned here when this thing is out of litigation. But we're quite comfortable. And the people who are responsible are the people in the business. So they -- that business did the acquisition, they are responsible, and they report back. And we expect people, when they talk to all of us, to tell us the good, the bad, the ugly. We're never looking for how great everything was. And obviously, this thing was, in one way or another, a huge mistake.

See what it is they're going to work it through their international laws. It sounds like their requirements were.

See what it is they're going to work it through their international laws. It sounds requirements were.

Does the reserve buildup take some of that into account? And second, how much of the reserve build was more of a management overlay versus your base case, you know, the quantitative part of the decision-making for building up the reserve? Yeah, I mean, I'll give you that answer.

The same is internationally, that'd be nice supposed to be correctly, we'll see if that happens. Let's just say yes.

The same is internationally that'd be nice <unk> supposed to be correctly, we'll see if that happens lets just say yes.

Let me follow up on that. So that relates to inorganic growth. As it relates to organic growth, such as in the Payments business, which I know is a focus that cuts across a lot of different business lines. So as you invest more in Payments, which is -- can be a 20 or 30 PE business, which would be great if you got there, who is responsible for that sort of organic growth that cuts across? Sometimes, when you aggregate the data, it's consumer, it's the investment bank, it could be asset management, it could be commercial, it could be everything in payments. Who's responsible for those? Let me follow up on that. So that relates to inorganic growth. As it relates to organic growth, such as in the payments business, which I know is a focus that cuts across a lot of different business lines. So as you invest more in payments, which can be a 20 or 30 [PE] business, which would be great if you got there, who is responsible for that sort of organic growth that cuts across? Sometimes the way you aggregate the data, it's consumer, it's the investment bank, it could be asset management, it could be commercial, it can be everything in payments. Who's responsible for those?

But I'm oversimplifying a lot. I would say that oversimplifies. Yeah, no, I got it.

They are a minor expansion.

They are minor expansion.

The sort of conservatism of the management overlay did not change for all, Oh, and the sure and natural, yeah, go ahead. The national shared credit thing will not affect our results materially. Very good. Thank you, Jamie. The next question is coming from the line of Ken Usdin from Jeffries. You may proceed. Hi, thanks. Good morning.

There's a long road from the MPR to two, so that sort of supports Jamie. It's pointless, let's see what it is.

There's a long road from the MPR to two so that sort of supports Jamie it's pointless, let's see what it is.

So just to be clarified. Marianne and Jen, when it comes to credit, debit, checks, and all the consumer-related stuff; and Takis, which I think you saw in the presentation about payments at Investor Day reporting to Daniel, and that is on wholesale payments, merchant processing, a whole bunch of stuff, and those are direct responsibilities; it's quite clear this is an area that counts across the company. So it's a payments working group that just spends time on that. That working group has not done an acquisition, okay? And if they make -- if they want to invest -- which there are cases, by the way, which you'll see more this year -- we decide jointly, and all the way up to Daniel and me. So just to be clear. So I would say that Marianne and Jen, when it comes to credit, debit, checks, and all the consumer-related stuff; and Takis, which I think you saw in the presentation about payments at Investor Day, reporting to Daniel, and that is on wholesale payments, merchant processing, a whole bunch of stuff. And those are direct responsibilities. It's quite clear that this is an area that cuts across the company, so it's a payments working group that just spends time on that.

The next question is coming from the line of Matthew O'connor from Deutsche Bank. You may proceed. Good morning, how are you guys thinking about managing the securities book, given an outlook of lower deposits? Obviously, the yield curve is quite in front of it depending on what part you're looking at, but for the most part, frankly.

The next question is coming from the line of Matthew O'connor from Deutsche Bank You May proceed.

Good morning, how are you guys thinking managing the securities book, given an outlook of lower deposits. Obviously, the yield curve is quite in front of it depending on what part Youre looking at are most part frankly.

Operator: Just wondering if you can help us understand the ongoing efforts in your mitigation for the RWAs in advance of all the points we've made already about the pending capital regime. How do we, can you help us understand what type of effects that has, if any, on parts of the income statement, whether it's NII or the trading business? So if I just take that one, just assume we're going to have modest growth in RWA, and in every single business, mortgages, loans, derivatives, how we hedge CVA and stuff like that, we take actions to manage RWA. It does not really affect the business that much. You know, it might one day, but it doesn't affect it today. And so we don't build in, you know; somehow, we lose a little bit of this, a little bit of that.

That working group has not done an acquisition, okay? And if they make -- if they want to invest, which there are cases, by the way, which you'll see more this year, we decide jointly, all the way up to Daniel and me.

And then at the same time, the securities book is cash flowing a lot less than it was a couple of years ago, just given the rate environment.

And then at the same time the Securities book is cash flowing a lot less than it was a couple of years ago, just given the rate environment.

And then last follow-up to my first comment, the general comment. I mean, this is the third year in a row of about $5 billion of expense growth, and you have Slide 11 there. But I mean, that's a lot of certain front-loaded expenses for fewer certain back-ended benefits. How is your comfort level that you're going to see those back-ended benefits relative to the past? And then last follow-up to my first comment, the general comment. I mean, this is the third year in a row of about $5 billion of expense growth, and you have Slide 11 there. But -- I mean, that's a lot of certain front-loaded expenses for fewer certain back-ended benefits. How is your comfort level that you're going to see those back-ended benefits relative to the past?

Yes, remember the Securities book is an outcome of investing basically excess deposits, and you have like two fortunately deposits in a trillion dollars of loans. And things like that, so we manage it to manage interest rate exposure. All these various things and so, and then when you say the size of it, we forecast, which I'm not going to give you. The numbers we forecast every quarter are how much we buy, but we're going to sell how much is coming in, how much we need for liquidity, and we adjust all the time based upon deposits coming down in loans and stuff like that.

Yes remember the Securities book is an outcome of investing basically excess deposits and you have like two fortunately deposits in a trillion dollars of loans.

Totally. And we tried to show you guys at Investor Day that for every branch we open, for every bank that we hire, for every tech thing we do, we're pretty comfortable. There are certain things that are more like infrastructure, like getting to the cloud, stuff like that, which you can't identify all of that. But we're pretty comfortable that we -- if they weren't working, we changed them. Totally. And we try to show you guys at Investor Day that every branch we open, for every bank that we hire, for every tech thing we do, we're pretty comfortable. There are certain things that are more like infrastructure, like getting to the cloud, stuff like that, which you can't identify all of that, but we're pretty comfortable that we -- if they weren't working, we changed them. So we ask ourselves that question every day with any wealth managers or branches or certain things, so -- and marketing is half of that, not quite half, but half that number. That's a very specific -- for the most part, very specific dollar in, how many dollars out. It's not a guess, and we're pretty accurate at that kind of stuff. And again, if we -- if there's $1 billion that we were spending that didn't give us a return, we cut the $1 billion.

And things like that so and we manage it to manage interest rate exposure. All these various things and so and then when you say the size of it we forecast, which I'm not going to give you. The numbers we forecast every quarter, we're going to buy but we're going to sell how much is coming in how much we need for liquidity and we adjusted all the time based upon deposits coming down in loans and stuff like.

So we ask ourselves that question every day with adding wealth managers or branches or certain things, so -- and marketing is half of that -- not quite half, but half that number. That's a very specific, for the most part, very specific dollar in, how many dollars out. It's not a guess, and we're pretty accurate at that kind of stuff. And again, if we -- if there's $1 billion that we were spending that didn't give us the return, we'd cut the $1 billion.

Obviously, when you get to invest in,

And there, you know, and the biggest opportunity down the road will be a reopening of the securitization market, and it's still very tight, and I think one day it will reopen. Okay, and then on the one follow-up, just coming back to the reserving process. Can you just help us understand relative to the 5% peak in 3Q that you gave for your unemployment rate quarterly average and the 3.9 average baseline, where does this fourth quarter reserve get you to? And does that rule of thumb that you kind of gave us last quarter still stand in terms of scenario analysis on potential builds ahead of this mild recession? Can I just make it real simple? The base case, Okay, is where it hits almost 5% unemployment, then you probably wake up other scenarios. That's why Jeremy is saying the reserve is higher than the base case. We didn't change the probability of scenario weighting, but, of course, it got worse since the base case got worse.

Obviously, when you get to invest in.

At much higher rates today, and you see JP Morgan's laws and ACM loan book as a percentage is much lower than most other people.

At much higher rates today, and you see JP Morgan's laws and ACM loan book as a percentage is much lower than most other people.

The next question is coming from the line of Steve Chubak from Wolfe Research. The next question is coming from the line of Steve Chubak from Wolfe Research.

Well, I guess, a bigger picture question. We've seen Hutzel drop in the 10 year part of the curve and even further out.

So I wanted to start off with a question on the outlook for trading in the Investment Banking businesses. Jeremy, given the strong pipelines you cited, I was hoping you could provide some additional color just in terms of what you're hearing from corporate clients, especially in the context of the mild recession scenario you outlined, when you would expect to see some inflection in Investment Banking activity. And similar questions on the trading side. You're facing difficult competition in the coming year. We still have QT, and the rate volatility proxy is still elevated. Do you anticipate a significant moderation in trading activity or not? So I wanted to start off with a question on the outlook for trading in the Investment Banking businesses. Jeremy, given the strong pipelines you cited, I was hoping you could provide some additional color just in terms of what you're hearing from corporate clients, especially in the context of the mild recession scenario you outlined, when you would expect to see some inflection in Investment Banking activity. And similar questions on the trading side. You're facing difficult competition in the coming year. We still have QT, and the rate volatility proxy is still elevated. Do you anticipate a significant moderation in trading activity or not?

Well I guess, a bigger picture question, we've seen hutzell drop in 10 year part of the curve and even further out.

And I guess I was wondering if you had thoughts on who is buying and what's driving the rates so much lower than most people think they should be.

And I guess I was wondering if you have thoughts on who is buying and what's driving the rates so much lower than most people think they should be.

As reported to get that we look at what everybody is doing in pension plans and governments.

Sure. Thanks, Steve. So let's do banking first. So I think the thing that's interesting about banking right now is that the declines have been so significant, obviously, from very elevated levels. But even relative to just 2019, 2022 was a relatively weak year. Thanks, Steve. So let's do the banking first. So I think the thing that's interesting about banking right now is that the declines have been so significant, obviously, from very elevated levels. But even relative to just 2019, 2022 was a relatively weak year.

As reported to get that we look at it what everybody is doing pension plans governments.

What other banks are doing, I think I mentioned earlier in this call banks are in different positions, somehow somehow relating social security to their loan books. We obviously don't know.

What other banks are doing I think I had mentioned earlier in this call banks are in different positions somehow some way up the social security to their loan books, we obviously don't know.

And as we look into 2023, it's possible that the actual economic environment will be worse than it was in ['20]. That could conceivably make you pessimistic about the Investment Banking wallet outlook. And to be sure, it's not as if we're super optimistic. But it's important to note that part of the issue here is how quickly things change in 2022, specifically with respect to rates as that affects the debt business and valuations as that affects M&A and DCM as well. And as we look into 2023, it's possible that the actual economic environment will be worse than it was in [2022]. That could conceivably make you pessimistic about the Investment Banking wallet outlook. And to be sure, it's not as if we're super optimistic. But it's important to note that part of the issue here is how quickly things change in 2022, specifically with respect to rates as that affects the debt business and valuations as that affects M&A and DCM as well. Jeremy pointed out it's very important that the yield curve will not be the same six months from now as it is today. While we use that to kind of look forward, it's not actually or forecast. And one of the sort of necessary conditions for people to do deals or decide to raise capital is just getting comfortable with valuations in all of the market. So I think there's a chance that that actually winds up helping in 2023 in the Investment Banking world. Of course, we don't know. But those are some of the things that we're thinking about.

Jeremy pointed out it's very important that yield curve will not be the same six months now that it is today, while we use that to kind of look forward, it's not actually or forecast.

Jamie Dimon: That's all it is, which still is a good benchmark, if you'll keep in mind, is if we got to a relative adverse case, call that a 6% unemployment rate, and then once you get there, you assume the average weight; you have wings. It could get better or it could get worse. In that case, we would need about $6 billion more. When the base case itself deteriorates, we're moving close to the relative adverse. That's all it is.

And one of the sort of necessary conditions for people to do deals or decide to raise capital is just getting comfortable with valuations in the open market. So I think there's a chance that that actually winds up helping in 2023 in the investment banking world. Of course, we don't know, but those are some of the things that we're thinking about.

So it will be wrong, and where the investment portfolio, we'd be investing where there are opportunities. We bought a lot of Ginnie maes. When there is no. The other 60 OAS spread we sold is one of the reasons; we take securities losses, that gives you $10 billion you can reinvest in securities you think are more attractive. Similarly, on the markets side, obviously, markets had another very strong year, better than we'd expected since the numbers were so strong. Coming out of the pandemic, we were expecting more normalization than what we actually saw. And 2022 had a lot of themes. I think the active management community did well. That always helps us a little bit, and we have volatility with relatively orderly and continuing markets. Similarly, on the markets side, obviously, markets had another very strong year, better than we'd expected since the numbers were so strong coming out of the pandemic. We were expecting more normalization than what we actually saw. And 2022 had a lot of themes. I think the active management community did well. That always helps us a little bit. And we had volatility with relatively orderly and continuing markets.

So it will be wrong, and where the investment portfolio, we'd be investing where there are opportunities. We bought a lot of Ginnie maes. When there is no. Other 60 OAS spread we sold one of the reasons, we take securities losses that gives you $10 billion you can reinvest that you think are more attractive securities.

Got it. Thank you. As we look towards 2023, maybe some of those themes will be a little bit less obvious, and that could be a little bit of a headwind. But on the other hand, it's not like the volatility is going away, and markets seem to continue to be quite orderly. And 4.5%, 5% rate environment is probably one where there are more trading opportunities than the 0% rate. But, of course, we don't know. We'll see. I think you would probably have to expect some normalization there. It's -- the numbers are really very strong in Markets, but we'll see and we'll see what happens. As we look towards 2023, maybe some of those themes will be a little bit less obvious, and that could be a little bit of a headwind. But on the other hand, it's not like the volatility is going away, and markets seem to continue to be quite orderly. And 4.5%. The 5% rate environment is probably one where there are more trading opportunities than the 0% rate environment.

Got it thank you.

Jamie Dimon: These are all probabilities and possibilities and hypothetical numbers. You know, if I were you, I'd just look at charge-offs, like actual results. And so, and, you know, we break this out, but it's, you know, it's hard to describe, and every bank does it slightly differently, and every bank has a slightly different base case and a slightly different weighting of adverse cases, et cetera. And so we're just trying to make it as simple as possible. Yeah, I hear you.

Hi, good morning. Thanks for taking my questions. So the first one on credit quality, thanks for giving us commentary on the state pools, and and I guess, specifically for credit cards.

Hi, good morning, Thanks for taking my questions. So the first one on credit quality, thanks for giving us commentary on the state pools, and <unk> and I guess, specifically for credit cards.

So, of course, we don't know. We'll see. I think you would probably have to expect some normalization there. It's -- the numbers are really very strong in Markets, but we'll see, we'll see what happens.

At the end of this year,

At the end of this year.

Could you give us a bit more color on how we saw Bill Shea pallet?

Could you give us a bit more color on how we saw bill Shea pallet.

That's a really helpful color. And just for my follow-up on the finalization of Basel III. Sorry, Jeremy, I couldn't help myself here. But in your December speech, you strongly hinted at capital requirements moving higher for you and your peers. You also alluded in your comments or in response to one of the questions that the finalization of Basel III can potentially be very punitive. Given the absence of the proposal, I was really just hoping you could speak to your scenario planning for the eventual finalization and any additional detail you can offer on the areas of mitigation. I think the one issue or area of confusion is that one of the biggest sources of RWA inflation is operational risk, which can't really be mitigated. So what are the actions that you can take to really offset some of those potential headwinds? That's a really helpful color. And just for my follow-up on the finalization of Basel III. Sorry, Jeremy, I couldn't help myself here. But in [Bar's] December speech, you strongly hinted at capital requirements moving higher for you and your peers. You also alluded in your comments or in response to one of the questions that the finalization of Basel III could potentially be very punitive.

This year, like I said with respect to seasonal changes, I'm guessing that you could top out quite soon.

Jamie Dimon: The challenge this time is that we're going to have the income statement effect way ahead of that charge off. So we're all trying to just budget for that. But I appreciate that. Thanks, Jamie.

This year like I said with respect to seasonal I'm guessing that you could top out quite soon.

Ask the question. Yes.

Ask the question.

Okay, That's assuming all your macro assumptions are unchanged. Given the absence of the proposal, I was really just hoping you could speak to your scenario planning for the eventual finalization and any additional detail you can offer on the areas of mitigation. I think the one issue or area of confusion is that one of the biggest sources of RWA inflation is operational risk, which can't really be mitigated. So what are the actions that you can take to really offset some of those potential headwinds?

Yes.

Okay, Thats, assuming all your macro assumptions.

And once the ME base case gets to where you expect relative adverse, you'll be adding the $6 billion reserves before you have to charge off. Exactly right. And the answer to that question is... Much less than all of it, because a lot of it was driven by long growth, but then some of it, as Jamie says, is driven by the flow through of the down... You could say, subject to the caveat that this is a little bit of art, not science, that there's some down payment.

Christmas is unchanged, the waitstaff tender and simple.

Unchanged.

Christmas is unchanged waitstaff tender and simple.

Well I think we've talked about seasonal like quite a bit.

Well I think we've talked about seasonal like quite a bit.

And I think there is some decent color there in terms of Jamie's 6 billion over a few quarters in a world where the economic outlook is worse than it is today. We're definitely not going to get into the business of giving you an outlook for sequential evolution. So Steve, I'd love to get into detail here, but I just think that the question of how to mitigate is really hard to discuss in a lot of detail until we see an actual proposal. And the reason that we talk about potentially punitive increases is that you studied this issue closely. It's just to point out that under the version of the world where you get the worst outcome in all of the different moving parts of this thing, it's a very significant increase to the capital requirements of the system as a whole. And given how strong the system is today, that just doesn't make sense to us. So we just want to say that. But yes, Jamie, please. Yes. So Steve, I'd love to get into detail here, but I just think that the question of how to mitigate is really hard to discuss in a lot of detail until we see an actual proposal. And the reason that we talk about potentially punitive increases, I mean, you studied this issue closely, is just to point out that under the version of the world where you get the worst outcome in all of the different moving parts of this thing, it's a very significant increase to the capital requirements of the system as a whole. And given how strong the system is today, that just doesn't make sense to us.

And I think there are some decent color there in terms of Jamie's 6 billion over a few quarters in a world where the economic outlook is worse than it is today, we're definitely not going to get into the business of giving you an outlook for sequential evolution of.

The loan loss allowance. It's appropriate today, and it will evolve as a function of the environment.

The loan loss allowance.

It's appropriate today and that will evolve as a function of the environment.

Operator: Yep, understood. Thank you for all that. The next question is coming from the line of Betsy Graseck from Morgan Stanley. You may proceed. Hi, good morning. Hey Betsy.

Sure. Okay.

Sure Okay.

Let's drill down into.

NII Then I just want to square a few comments you made that Jeremy, so if I heard you correctly.

Let's drill down into <unk>.

NII then I just want to square a few comments you made that Jeremy So if I heard you correctly.

So we just want to say that. But yes, Jamie, please.

I think you're still talking about sequential increases in NII. So I guess I'm looking towards slide 20 billion plus full for, maybe even.

Just, look, you guys know that the operators' capital, the trading book, the CCAR, G-SIFI, all those moving parts, let's just see what they are. We'll deal with them when we get there. And then we'll figure out what we have to modify our business and stuff like that. We don't think it's necessary to increase the capital ratio. We're quite clear on that. Just, look, you guys know that the operators' capital, the trading book, the CCAR, G-SIFI, all those moving parts. Let's just see what they are. We'll deal with them when we get there, and then we'll figure out what we have to modify in our business and stuff like that. We don't think it's necessary to increase the capital ratio. We're quite clear on that.

I think you're still talking about sequential increases in NII. So I guess looking towards slide 20 billion plus full for <unk>, maybe even <unk>.

I wanted to understand a little bit about how you're thinking about managing the expense line as you go through this year. I know we talked already about how, you know, it's hard to predict NII, obviously, markets have pushes and pulls. Can you help us understand?

So I guess we're hitting about 40 billion for one H and then. One of the new numbers we put on the top of the press release was our total loss-absorbing capacity. So we have now almost $500 [billion]. I mean really, like at one point, when there is $500 billion of that, $1 trillion liquidity, all those things are enough. And so -- but let's just see what it is. They're going to work it out through their international laws, their international requirements. We're hoping that America is the same as international. That would be nice. G-SIFI is supposed to be corrected. We'll see if that happens. So let's just see. We don't have to guess. And if the number's too high, we're going to tell you what we're going to do about it.

So I guess, we're hitting about 40 billion for one H and then.

Dropoff. One of the new numbers we put on the top of the press release was our total loss-absorbing capacity. So we have now almost $500 billion. I mean really, like at one point, when there is $500 billion of that, $1 trillion liquidity, all those things are enough. And so -- but let's just see what it is. They're going to work it out through their international laws, their international requirements. We're hoping that America is the same as international. That would be nice. G-SIFI is supposed to be corrected. We'll see if that happens. So let's just see. We don't have to guess. And if the number's too high, we're going to tell you what we're going to do about it.

Let's say deposit cost increases so that maybe we get a few fed fund rate cuts as well. Is that the way we should be thinking about it? Yes, no. So let me, controversially, say no thereafter.

Dropoff.

Let's say deposit cost increase so that maybe we get a few fed fund rate cuts as well is that the way we should be thinking about it yes, no. So let me I'll controversially, saying no thereafter.

How you're thinking about delivering operating leverage, where the elements of the expense base are needing to be invested in so you really can't touch them, and where there are opportunities to potentially peel back such that if you get a weaker rev line, you know, you can still deliver positive operating leverage. Sure.

So my comments about sequential increases work to address the sort of obvious conclusion on what you are somewhat correctly drawing from the slide, which is that in a world where we're exiting the fourth quarter run rate, it would be one, and we're telling our AVX markets or whatever, and we're telling you 74 for the full year. There are obviously some sequential declines in there somewhere. Just a minor expansion, just to expand a bit on Jamie's point that it's important to be clear, there will be time to adjust, like there's a long road from the NPR to -- so to sort of support Jamie's point, let's see what it is and then we'll. There will be time to adjust. Like there's a long road from NPR to -- so to sort of support Jamie's point, let's see what it is, and then we'll...

So my comments about sequential increases work to address the sort.

Sort of obvious conclusion on what you are somewhat correctly, drawing from slide which is that in a world where we're exiting the fourth quarter run rate it would be one and we're telling our AVX markets or whatever and we're telling you 74 for the full year. There are obviously some sequential declines in there somewhere.

The next question is coming from the line of Matthew O'Connor from Deutsche Bank.

As a function of what plays out, we're simply saying don't project those into the future in perpetuity; once things adjust, we will return to normal sequential growth. The next question is coming from the line of Matthew O'Connor from Deutsche Bank.

So I mean, as we've, as you know, obviously, we tend, you know, to break down our expenses across all three categories. And sometimes the category that you're addressing is the volume of revenue, which we highlight because it should be pretty symmetric, respond to a better or worse environment and thereby So, for example, in this year's ultimate outcome, and the number that we're looking at, the year-on-year change in volume and revenue-related expense is probably close to a billion dollars. Whereas next year, we're assuming something more like flat.

As a function of what plays out we're simply saying don't project those into the future in perpetuity once things adjust we will return to normal sequential growth.

How do you guys think of managing the securities book, given the outlook of lower deposits? Obviously, the yield curve is quite inverted depending on what part you're looking at or most parts, frankly. And at the same time, the securities book is cash flowing a lot less than it was a couple of years ago just given the rate environment. How do you guys think of the management of the securities book, given the outlook for lower deposits? Obviously, the yield curve is quite inverted depending on what part you're looking at or most parts, frankly. And at the same time, the securities book is cash flowing a lot less than it was a couple of years ago just given the rate environment.

So that makes right Buddy.

Yeah, and then Nashville, absolutely that makes sense.

So that makes right Buddy.

Yes. So, remember, the securities book is an outcome of investing but basically excess deposits. And you have like $2.4 trillion in deposits and $1 trillion in loans and things like that. So we manage it to manage interest rate exposure, all these various things. And so, when you say the size of it, we forecast -- which I'm not going to give you the numbers, we forecast every quarter what we're going to buy, what we're going to sell, how much is coming in, how much we need for liquidity, and we adjust it all the time based upon deposits coming down and loans and stuff like that. Obviously, what you get to invest in is at much higher rates today. And you see JPMorgan's lost an ACM loan book as the percentage is much lower than most other people. We're kind of conservative there too. Yes. So, remember, the securities book is an outcome of investing but basically excess deposits. And you have like $2.4 trillion in deposits and $1 trillion in loans and things like that. So we manage it to manage interest rate exposure, all these various things. And so, when you say the size of it, we forecast -- which I'm not going to give you the numbers, we forecast every quarter what we're going to buy, what we're going to sell, how much is coming in, how much we need for liquidity, and we adjust it all the time based upon deposits coming down and loans and stuff like that.

Yeah, and then Nashville, absolutely that makes sense.

Thanks, Matt, for that. Thanks.

Thanks, Matt for that.

Thanks.

We have no additional questions. Thank you. I would now like to hand the call back to Mr. Brian. That's it. Thank you very much. Thank you very much. We'll talk to you all soon. That concludes today's conference. Thank you all for participating; you may disconnect at this time.

We have no additional questions. Thank you I would now like to hand, the call back to Mr. Brian .

That's it. Thank you very much. Thank you very much we'll talk to you all soon.

That concludes today's conference. Thank you all for participating you may disconnect at this time.

So while the sort of year on year dollar change in the outlook, sort of 21 to 22, three is comparable, the mix is quite different. And so, for example, if we wind up being wrong about the type of environment that we're budgeting for, you would expect a significant drop in volume. And that would contribute to all of that.

For the rest of it, we're always, and we work just as hard at that, you know, whether the revenue environment is good or bad. And, as you know, we invest with a cycle. And so, broadly, our investment plans really shouldn't be that sensitive to the environment.

Of course, certain types of things like marketing investments in the car business, in particular, the math of what we expect the NPV of Michael to change in a downturn and that could produce lower investment, although sequel, but the core strategic investments that we're making are not going to get modified because of the ups and downs. Okay, and part of the reason for asking is that one of the debate points about J.P. Morgan's stock has been around capital charges, the capital march, and will capital be, you know, a bigger burden for you to bear as we go through the next couple of years? You know, as you deliver on the positive operating leverage side, it gives you room to absorb some more capital, obviously, and still hit those, you know, IRR and ROTC targets on incremental investments. Maybe you could help us understand what level of capital increase you could absorb given the operating leverage you're expecting to generate? And maybe that's an unfair question today, and it's a better question for Investor Day, but, you know, that's kind of the debate that's out there on the stock. I mean, it's not an unfair question.

It's a good question. I'm not going to answer it super specifically, and Jamie may have some views here too, but let me just quickly say that we feel quite confident about, you know, the ability to generate. The question of whether Basel III's endgame and other factors increase that number and how much of that we can absorb and still produce those returns is, of course, impossible to answer right now. But I would remind you that it's not just denominator expansion. You know, unreasonable capital outcomes will increase costs in the real economy, which goes into the numerator, too. It's not what we want, but that is a possible outcome. Thank you.

Operator: The next question is coming from the line of Mike Mayo from Wells Fargo Security. You may proceed. Hi.

Mike Mayo: Yeah, I recognize you're evolving your business model, and you're spending money to make more money, and that your track record in the last decade was strong there. But as it relates to the Frank acquisition that's been in the news, I'm just wondering what that says about the financial discipline for the 15 deals that you've pursued, the $7 billion of investing each year, and the one-fifth increase in expenses over three years to your guide of $81 billion in 2023. So it's really a question about financial discipline, and I know you can't go in detail on the Frank deal. And look, you earn the purchase price in two days. Okay, so I get that.

Jamie Dimon: And if there's fraud, there's only – you can't do anything about fraud, but still, it's divergent management resources and attention. So maybe just in the specifics, as it relates to the acquisition strategy, like who sources them, who negotiates them, who does the due diligence, who runs them, and ultimately, who's accountable for all these 15 different deals? And when you have investments going across business lines, which is a strength of yours, but who's ultimately accountable when these investments don't go the way you want to? And Jamie, you recognized a couple years ago at Investor Day that sometimes you're going to waste money as you're innovating and growing. But ultimately, who's accountable when an investment doesn't go right, like the Frank deal or another deal or some of the other $81 billion that you expect to spend this year? And obviously, Mike, that's a very good question, which we're always concerned about. We've always talked about complacency and all things like that. So, you know, obviously, when you're getting up to bat 300 times a year, you are going to make errors.

Jamie Dimon: And we don't want our company to be so terrified of errors that we don't do anything. And complacency is then burdened by bureaucracy, which has basis and depth. So you got to be very careful when you make an error, like you cripple the firm. We are very disciplined.

Jamie Dimon: And you see that in a lot of different ways. You see it in our leveraged lending book. You see it in the success of our investments. You see it in the quality of our products and services. You see it in all these things.

Jamie Dimon: And it's no different for an acquisition. So the acquisitions are done by the businesses, but there's also a centralized team that does extensive due diligence. So the business does it. The centralized team does it.

Jamie Dimon: We've been doing it for 20 years, like we just started doing something like that. And, obviously, there are always fewer. And, you know, at some point, I'm going to tell you the lesson learned here when this thing is out of litigation. But we're quite comfortable, and the people who are responsible are the people in the business. So if they, you know, that business did the acquisition, they are responsible, they report back. And we expect people to tell all of us the good, the bad, and the ugly. We're never looking for, you know, how great everything was.

Mike Mayo: And obviously, this thing was, in one way or another, a huge mistake. Let me, uh... A follow-up on that. So that relates to inorganic growth.

Mike Mayo: As it relates to organic growth, such as in the payments business, which I know is a focus, that cuts across a lot of different business lines. So as you invest more in payments, which is, you know, can be a 20 or 30 P business, which would be, you know, great if you got there. Who's responsible for that sort of organic investment that cuts across, you know, sometimes, the way you aggregate data, you know, it's, it's, it's, it's consumer, it's the investment bank, it can be asset management, it can be commercial, it can be everything in the payments? Who's responsible for that?

Jamie Dimon: So just to be clarified, so I would say that Marianne and Jen, when it comes to credit, debit, checks, and all the consumer-related stuff, and Takis, which I think we saw the presentation about payments at Investor Day reporting to Daniel, and that is on wholesale payments, merchant processing, a whole bunch of stuff. And those are direct responsibilities. It's quite clear this is an area that cuts across the company, so there's a payments working group that just spends time on that. That working group has not yet done an acquisition.

Jamie Dimon: And if they want to invest, which there are cases of, by the way, and you'll see more this year, they've decided jointly and all the way up to Daniel and Mitch. And then, last follow-up to my first comment, the general comment: I mean, this is the third year in a row of about $5 billion of expense growth. And you have slide 11 there, but that's a lot of certain front-loaded expenses for fewer certain back-ended benefits. How's your comfort level that you're going to see those back-ended benefits relative to the past? Totally.

Jamie Dimon: And we try to show you guys an investor day. For every branch we open, for every banker we hire, for every tech thing we do, we're pretty comfortable. There are certain things that are more like infrastructure, like, you know, getting to the cloud and stuff like that, which, you know, you can't identify all of that. But we're pretty comfortable.

Jamie Dimon: And if they weren't working, we'd change. So we ask ourselves that question every day when adding wealth managers or branches or certain things. So and marketing, you know, is half of that, not quite half, but half of that number. That's a very specific, for the most part, very specific dollar in, how many dollars out. Not a guess.

Mike Mayo: And we're pretty accurate at that kind of stuff. And again, if there's a billion dollars that we were spending that didn't give us the return, we cut the billion. All right, thank you.

Operator: The next question is coming from the line of Steve Chubak from Wolf Research. You may proceed. Hi, good morning.

Steven Chubak: So I wanted to start off with a question on the outlook for trading and investment banking businesses. Jeremy, given the strong pipelines you cited, I was hoping you could provide some additional color just in terms of what you're hearing from corporate clients, especially in the context of the mild recession scenario you outlined, when you would expect to see some inflection in investment banking activity. And similar questions on the trading side. You're facing difficult competition in the coming year.

We still have QT, and rate volatility proxies are still elevated. Do you anticipate a significant moderation in trading activity or not? Sure, thanks, Steve.

So let's do banking first. So I think the thing that's interesting about banking right now is that the declines have been so significant, obviously, from very elevated levels, but even relative, 2022 was a relatively weak year. And if, as we look into 2023, it's possible that the actual economic environment will be worse, that could conceivably make you pessimistic about the Investment Banking Wallet outlook. And to be sure, it's not as if we're super optimistic. But it's important to note that part of the issue here is how quickly things change, specifically with respect to rates, as that affects the debt business, and valuations as that affects M&A and ECM as well. And one of the necessary conditions for people to do deals or decide to raise capital is just getting comfortable with valuations and the level of the market. So I think there's a chance that that actually winds up helping in 2023. Of course. But, you know, those are just some of them. Similarly, on the market side, obviously, markets had another very strong year, better than we'd expected. The numbers were so strong coming out of the pandemic.

We were expecting more normalization than what we actually saw. And, you know, 2022 had a lot of themes. I think the active management community did well.

That always helps us a little bit. And we had volatility with relatively... As we look towards 2023, maybe some of those themes will be a little bit less obvious, and that could be a little bit of a headwind. But on the other hand, it's not like the volatility is going away, and markets seem to continue to be quite orderly, and you know, a four and a half 5% rate environment is probably one where there's more trading, Bureau. So, you know, of course, we don't know what we'll see. I think you would probably have to expect some normalization there, because the numbers are really very strong in markets, but we'll see. That's really helpful, Culler.

Steven Chubak: And just for my final follow-up on the finalization of Basel III, sorry, Jeremy; I couldn't help myself here. But in Barr's December speech, he strongly hinted at capital requirements moving higher for you and your peers. You also alluded in your comments or in response to one of the questions that the finalization of Basel III can potentially be very punitive. Given the absence of the proposal, I was really just hoping you could speak to your scenario planning for the eventual finalization and any additional detail you can offer on the areas of mitigation. I think the one issue or area of confusion is that one of the biggest sources of RWA inflation is operational risk, which can't really be mitigated. What are the actions that you can take to really offset some of those potential headwinds?

Yeah, so Steve, I'd love to get into a lot of detail here, but I just think that the question of how to mitigate is really hard to discuss in a lot of detail until we see an actual proposal. You know, and the reason that we talk about potentially punitive, and you study this issue closely, is just to point out that under the version of the world where you get the worst outcome in all of the different moving parts, It's a very significant increase to the capital requirement. And, given how strong the system is today, that just doesn't make sense to us. So, we just want to say that. But yeah.

Jamie Dimon: I just look, you guys know, the operator's capital, the trading book, the C-CAR, the G-50, all those moving parts. Let's just see what they are. We'll deal with them when we get there. And, you know, and then we'll figure out what we have to modify or business stuff like that. We don't think it's necessary to increase the capital ratio. We are quite clear that one of the new numbers we put on top of the press release was our total loss absorbing capacity.

Jamie Dimon: So we now have almost 500 billion. I mean, really, like at one point, when is 500 billion of that, a trillion dollars' liquidity, all those things enough? And so, but let's just see what it is, you know, they're going to work it through, there are international laws, there are international requirements, you know, we're hoping that America is the same as international standards, that would be nice. G-SIFI's supposed to be corrected, we'll see if that happens. So, we don't have to guess, and you know, if the number's too high, And just a very minor expansion of that is...

I just want to expand a bit on Jamie's point that it's important to be clear, there will be time to adjust, you know, like there's a long road from NPR. That sort of supports Jamie's point, let's see what it is. Fair enough. Thanks so much for taking my question. The next question is coming from the line of Matthew O'Connor from Deutsche Bank. You may proceed. Good morning.

Operator: How do you guys think of managing the securities book, given the outlook for lower deposits? Obviously, the yield curve is quite inverted, depending on what part you're looking at, or most parts, frankly. And at the same time, the securities book is cash flowing a lot less than it was a couple of years ago, just given the rate environment. Yes, but remember that the securities book is an outcome of investing but a basic excess deposit.

Jamie Dimon: You have like 2.4 trillion deposits and a trillion dollars of loans and things like that. And we manage them to manage interest rate exposure, all these various things. And then when you say the size of it, we forecast, which I'm not going to give you the numbers, we forecast every quarter what we're going to buy, what we're going to sell, how much is coming in, how much we need for liquidity. And we adjust it all the time based upon deposits coming down and loans and stuff like that. Obviously, what you get to invest in is a much higher rate today, and you see JP Morgan's loss in the HCM loan book as a percent is much lower than most other people. We're kind of conservative there, too.

Jamie Dimon: I guess a bigger picture question, you know, we've seen such a drop in the, you know, really five, 10 year part of the curve and even further out, and banks aren't really buying, the Fed is selling. And I guess I was wondering if you had thoughts on who's buying and what's driving the rates so much lower than you know, most people think they should be at? Yeah, we do, but you should read, get the analyst reports to get that. We look at what everybody's doing, pension plans, governments. We look at every part of the curve.

Jamie Dimon: We look at what other banks are doing. As I mentioned earlier in this call, banks are in different positions. Some may have to sell securities to finance their loan books. We obviously do not.

Jamie Dimon: You know, so people are in a different position, and as Jeremy pointed out, it's very important that the yield curve will not be the same six months from now as it is today. While we use that to kind of look forward, it's not actually our forecast, and we know it will be wrong. And the investment portfolio will be invested when there are opportunities. We bought a lot of Ginnie Mae's when there was, you know, the 60 OAS spread.

Jamie Dimon: We sold, you know, one of the reasons we take securities losses is because that gives you 10 plus billion dollars; you can reinvest it when you think of more attractive securities. Got it. Thank you. The final question is coming from the line of Andrew Lim from Société Générale. You may proceed. Hi, good morning.

Operator: Thanks for taking my questions. So the first one on credit quality, thanks for giving us commentary on the shape of NCOs, I guess specifically for credit cards, topping out at the end of this year. Could you give us a bit more color on how reserve builds should shape out this year, I guess, you know, with respect to CECL? I'm guessing that it should top out quite soon. That's my first question. This is assuming all your macro assumptions are unchanged, and the probability weight is unchanged. But I think we've talked about Cecil quite a bit.

And I think there's some decent color there, in terms of Jamie's, you know, six billion over a few quarters, in a world where the economic outlook today is definitely not going to get... of giving you an hour. The Loan Loss Allowance, that's... The Washington Department of Transportation.

Sure, okay. Let's drill down into NII, then. I just want to clarify a few comments you made there, Jeremy. So, if I heard you correctly, I think you're still talking about sequential increases in NII. So I guess we're looking towards like $20 billion plus for 1Q, maybe even 2Q. So I guess we're hitting about $40 billion for 1H and then a sharp drop-off. Deposit costs will increase, and maybe we will get a few fund rate cuts as well. Is that the way we should be thinking about it? Yeah, no, so let me uncontroversially say no there. So my comments about sequential increases were to address the sort of obvious conclusion, which you are somewhat correctly drawing from the slide, which is that in a world where we're exiting the fourth quarter run rate at 81, and we're telling our ADX markets or whatever, and we're telling you 74 for the full year, there are obviously some sequential declines in there somewhere as We're simply saying, don't project those thoughts into the future in perpetuity.

Once things adjust, we will return to normalcy. Thanks, buddy. Yeah, no, no, no, sure, absolutely. That makes sense.

Andrew Lim: Great, thanks for that. We have no additional questions in queue. I would now like to hand the call back to Mr. Barnum. That's it. Thank you very much. Thank you very much. We'll talk to you all soon.