Q1 2024 JPMorgan Chase & Co Earnings Call

Operator: Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's first quarter 2024 earnings call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. Please stand by. At this time, I would like to turn the call over to JPMorgan Chase Chairman and CEO, Jamie Dimon, and Chief Financial Officer, Jeremy Barnum.

Good morning, ladies and gentlemen, welcome to Jpmorgan Chase's first quarter 2024 earnings call. This call is being recorded your line will be muted for the duration of the call. We will now go live to the presentation. Please standby.

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. Burnham. Please go ahead.

Jeremy Barnum: Thank you very much, and good luck!

Jeremy Barnum: Good morning everyone. The presentation is available on our website, and please refer to the disclaimer at the back. Starting on page 1, the firm reported a net income of $13.4 billion.

Jamie Dimon: Thank you very much and good morning.

Jamie Dimon: The presentation is available on our website and please refer to the disclaimer at the back.

Speaker Change: Starting on page one the firm.

Speaker Change: Reported net income of $13 $4 billion EPS of $4 44 songs on revenue of $42 5 billion and delivered an <unk> of 21%.

Jeremy Barnum: and delivered an ROTC of 21%. These results included 700...

Jeremy Barnum: The Special Assessment resulting from the FDIC's updated estimate of expected losses from the closures of Silicon Valley Bank and Cigna Touching on a couple of highlights, firm-wide IB fees were up $18,000.

Speaker Change: These results include a $725 million increase.

Speaker Change: Initial assessment, resulting from the FDIC as updated estimates of expected losses.

Speaker Change: Closure of Silicon Valley Bank and signature bank.

Speaker Change: A couple of highlights.

Speaker Change: Wide IV fees were up 18% year on year, reflecting particular strength in underwriting fees and we've seen strong net inflows across AWS as well as in the CCP wealth management business.

Jeremy Barnum: 18% year-on-year.

Jeremy Barnum: and we've seen strong net inflows across the AWM as well as in CCB Wealth Management. On Page 2, we have some more detail.

Speaker Change: Two we have some more detail. This is the last quarter I will discuss results. Excluding first Republic, given that going forward first Republic results will naturally be included in the prior period, making year on year results comparable.

Jeremy Barnum: This is the last quarter we'll discuss results excluding First Republic, given that going forward, First Republic results will naturally be included in the prior period, making your results comparable. For this quarter, First Republic contributed $1.7 billion of revenue, $806 million of expense, and $668 million of netting. Now, focusing on the firm-wide results excluding First Republic, revenue of $40.9 billion was up $1.5 billion, or 4% year-on-year. NII-X markets was up $736 million, or 4%, driven by the impact of balance sheet mix and higher rates, as well as higher revolving balances in CARD, largely offset by deposit margin compression and lower deposit balance. NIR X markets was up 1.2 billion, Expenses of $22 billion were up $1.8 billion, or 9% year-on-year, driven by higher compensation, including growth in employees and the increase to the FDIC Special Assessment. And credit costs were $1.9 billion, reflecting net charge-offs of $2 billion and a net reserve release of $38 million.

Speaker Change: This quarter first Republic contributed $1 $7 billion of revenue $806 million of expense and $668 million up adding huh.

Speaker Change: Now focusing on the firm wide results, excluding first Republic revenue of $40 9 billion was up $1 5 billion or 4% year on year.

Speaker Change: Ex markets was up 736 million or 4%.

Speaker Change: <unk> got a balance sheet mix and higher rates as well as higher revolving balances in card largely offset by deposit margin compression and lower deposit balances M. C. C D.

Speaker Change: And I R X markets was up $1 2 billion or 12% driven by higher firm wide asset management and investment banking fees as well as lower net investment securities losses.

Speaker Change: Markets revenue was down 400 million or 5% year on year.

Expenses of 22 billion were up $1 8 billion or 9% year on year, driven by higher compensation, including growth in employees and the increase of the FDIC special assessment and credit costs were $1 9 billion, reflecting net charge offs of 2 billion and a net reserve release of $38 million net charge offs were up.

Jeremy Barnum: Net charge-offs were up $116 million, predominantly driven by cards, under Balancing Capital on page 3. We ended the quarter with a CG1 ratio of 15%, relatively flat versus the prior quarter, reflecting net income which was predominantly offset by higher RWA and capital distribution. This quarter's higher RWA is largely due to seasonal effects, including higher client activity in markets and higher risk rates on deferred tax assets, partially offset by lower carbon.

Speaker Change: 116 million predominantly driven by car.

On the balance sheet and capital on page three.

Speaker Change: We ended the quarter with a CET one ratio of 15% relatively flat versus the prior quarter, reflecting net income, which was predominantly offset by higher R. W. I N capital distributions.

Speaker Change: This quarter's higher or W. I is largely due to seasonal effects, including higher client activity and markets and higher risk weights on deferred tax assets, partially offset by lower card loans.

Jeremy Barnum: Now, let's go to our businesses, starting with CCB on page 4. Consumers remain financially healthy, supported by a resilient labor market. While cash buffers have largely normalized, balances are still above pre-pandemic levels, and wages are keeping pace with inflation. When looking at a stable cohort of customers, overall spend is in line with the prior year. Turning now to the financial results, excluding First Republic.

Speaker Change: Now, let's go to our businesses starting with <unk> on page four.

Speaker Change: Consumers remain financially healthy supported by a resilient labor market or cashcall herself largely normalized balances are still above pre pandemic levels and wages are keeping pace with inflation when looking at a stable cohort of customers overall spend is in line with the prior year.

Speaker Change: Turning now to the financial results, excluding first Republic.

Jeremy Barnum: CCB reported a net income of $4.4 billion on revenue of $16.6 billion, which was up 1% year-on-year. In banking and wealth management, revenue was down 4% year-on-year, reflecting lower NII on lower deposits, with average balances down 7% as the RCD mix increased. Client investment assets were up 25% year-on-year, driven by market performance and a strong net inflow. In home lending, revenue was up 10% year-on-year, predominantly driven by higher NII and production. Originations, while still modest, were up-tempered. Moving to card services and auto, revenue was up 8% year-on-year, driven by higher card services and NII on higher revolving balances, partially offset by higher card acquisition costs from new account growth and lower auto leasing. Card outstandings were up 13% due to strong account acquisition and the continued normalization of revolts, and auto originations were $8.9 billion, down 3%, while we maintained healthy margins and market share. Expense In terms of credit performance this quarter, credit costs were $1.9 billion, driven by net charge-offs, which were up $825 million year-on-year, predominantly due to continued

Speaker Change: <unk> reported net income of $4 4 billion on revenue of $16 6 billion, which was up 1% year on year.

Speaker Change: In banking and wealth management revenue was down 4% year on year, reflecting lower NII on lower deposits with average balances down 7% as RCD mix increase.

Speaker Change: Investment assets were up 25% year on year, driven by market performance and strong net inflows.

Speaker Change: Home lending revenue was up 10% year on year predominantly driven by higher NII on production right.

Speaker Change: Originations, while still modest were up 10%.

Speaker Change: Moving to card services and auto revenue was up 8% year on year, driven by higher card services NII on higher revolving balances, partially offset by higher card acquisition costs from new account growth and lower auto lease income.

Speaker Change: Card Outstandings were up 13% due to strong account acquisition and the continued normalization of revolt.

Speaker Change: And then auto originations.

Speaker Change: Were $8 9 billion down 3%, while we maintained healthy margins and market share expenses.

Speaker Change: Expenses of $8 8 billion were up 9% year on year, largely driven by field compensation and continued growth in technology and marketing.

Speaker Change: In terms of credit performance this quarter credit costs were $1 9 billion driven by net charge offs, which were up $825 million year on year predominantly due to continued normalization in card. The net reserve build was 45 million, reflecting a build in card largely offset by a release in home lending.

Jeremy Barnum: The net reserve billed was $45 million.

Jeremy Barnum: and CARD, largely offset by release and home. Next, the Corporate Interinvestment Bank on page 5. Before reporting the CIB's results, I want to note that this will also be the last quarter we will report earnings for the CIB and CB as stand-alone segments. Between now and Investor Day, we will furnish an 8K with historical results, including five quarters and two full years of history, consistent with the structure of the new commercial and investment bank segment, in line with the reorganization that was announced in January. Turning back to this quarter, CIV reported a net income of $4.8 billion on revenue of $13.6 billion. Investment banking revenue of $2 billion was up 27% year-on-year. IV fees were up 21% year-on-year, and we ranked number one with a year-to-date wallet share of 9.1% and Advisory.

Speaker Change: Next the corporate and investment bank on page five.

Speaker Change: Before reporting <unk> results I want to note that this will also be the last quarter. We will be we will report earnings for the CIB and see be a stand alone segments between now in Investor Day, We will furnish an 8-K with historical results, including five quarters and two full years of history consistent with the structure of the new commercial and <unk>.

Speaker Change: Investment banking segment in line with the reorganization that was announced in January training.

Speaker Change: Turning back to this quarter CIB reported net income of $4 8 billion on revenue of $13 6 billion.

Speaker Change: Banking revenue of 2 billion was up 27% year on year.

Speaker Change: Ivy fees were up 21% year on year, and we ranked number one with year to date wallet share of nine 1%.

Speaker Change: And advisory fees were down 21% driven by fewer large completed deals.

Jeremy Barnum: These were down 21% driven by fewer large completed deals; underwriting fees were up significantly benefiting from improved market conditions, with debt up 58% and equity up 51% In terms of the outlook, while we're encouraged by the level of capital markets activity we saw this quarter, we need to be mindful that some meaningful portion of that is likely pulling forward from later in the year. Similarly, while it was encouraging to see some positive momentum in announced M&A in the quarter, it remains to be seen whether that will continue.

Speaker Change: Underwriting fees were up significantly benefiting from improved market conditions, but that 58% in equity up 51%.

Speaker Change: In terms of the outlook, while we are encouraged by the level of capital markets activity. We saw this quarter, we need to be mindful that some meaningful portion of that is likely pulling forward from later in the year. Similarly, well it was encouraging to see some positive momentum in announced M&A in the quarter. It remains to be seen whether that will continue and the advisory.

Jeremy Barnum: The regulatory environment will continue, and the advisory business still faces structural headwinds from the regulatory environment. Payments revenue was $2.4 billion, down 1% year-on-year, as deposit margin normalization and deposit-related client credits were largely offset by higher fee-based revenue and deposit balance. Going to markets total revenue was $8 billion, down 5% Fixed income was down 7% driven by lower activity and rates in commodities compared to a strong prior year quarter, partially offset by strong results in securitized products. Aquarium Markets was flat.

Still faces structural headwinds from the regulatory environment.

Speaker Change: Payments revenue was $2 4 billion down 1% year on year as deposit margin normalization in deposit related client credits were largely offset by higher fee based revenue and deposit balances.

To markets total revenue was 8 billion down 5% year on year fixed income was down 7% driven by lower activity in rates and commodities compared to a strong prior year quarter.

Speaker Change: Really offset by strong results in securitized products.

Speaker Change: Equity markets was flat Securities services revenue of $1 2 billion was up 3% year on here.

Jeremy Barnum: Security Services revenue of $1.2 billion was up 3% year-on-year, and expenses of $7.2 billion were down 4% year-on-year, predominantly driven by lower legal expenses. Moving to the commercial bank on page six.

Speaker Change: Spencers of $7 2 billion were down 4% year on year predominantly driven by lower legal expenses.

Speaker Change: Going to the commercial bank on page six.

Speaker Change: Marshall banking reported net income of $1 6 billion.

Jeremy Barnum: Commercial banking reported net income of $1.6 billion. Revenue of $3.6 billion was up 3% year-on-year, driven by higher non-interest revenue. Gross investment banking and markets revenue of $913 million was up 4% year-on-year, with increased IV fees largely offset by lower market revenue compared to a strong prior year quarter. Payments revenue of $1.9 billion was down 2% year-on-year, driven by lower deposit margins and balances

Speaker Change: Revenue of $3 6 billion was up 3% year on year, driven by higher noninterest revenue.

Speaker Change: Gross investment banking and markets revenue of 913 million was up 4% year on year with increased IV fees, largely offset by lower markets revenue compared to a strong prior year quarter.

Speaker Change: Payments revenue of $1 9 billion and it was down 2% year on year, driven by lower deposit margins imbalances, largely offset by Pedro not of higher deposit related client credits.

Speaker Change: Fences, a 1.5 billion were up 13% year on year predominantly driven by higher compensation, reflecting an increase in employees, including for office on technology investments as well as higher volume related expenses.

Jeremy Barnum: Largely offset by feed growth.

Jeremy Barnum: Expenses of $1.5 billion were up 13% year-on-year, predominantly driven by higher compensation, reflecting an increase in employees, including for office and technology investments, as well as higher volume-related expenses. Average deposits were down 3% year-on-year, primarily driven by lower non-operating expenses.

Speaker Change: Average deposits were down 3% year on year, primarily driven by lower non operating deposits and down 1% in quarter on quarter, reflecting seasonally lower balances.

Speaker Change: Loans were flat quarter on quarter, C&I loans were down 1%, reflecting muted demand for new loans as clients remain cautious.

Speaker Change: <unk> loans were flat as higher rates continue to have an impact on originations and pay off activity.

Jeremy Barnum: Operating Deposits, and down 1%

Jeremy Barnum: Loans were flat for them. C&I loans were down 1%, reflecting muted demand for new loans as clients remain cautious, and CRE loans were flat as higher rates continue to have an impact on originations and payoff. Finally, credit costs were a net benefit of $35 million, including a net reserve release of $101 million, and not charge-offs of 60. Then, to complete our lines of business, AWM on page 7.

Speaker Change: Credit costs were a net benefit of 35 million with a net reserve release of $101 million and net charge offs of $66 million.

Speaker Change: Then to complete our lines of business AWS on page seven.

Speaker Change: I Should've wealth management reported net income of $1 billion with pretax margin of 28%.

Speaker Change: Revenue of $4 7 billion and was down 1% year on year, excluding net investment valuation gains in the prior year revenue was up 5% driven by higher management fees on strong net inflows and higher average market levels, partially offset by Laura.

Jeremy Barnum: Asset and Wealth Management reported a net income of $1 billion, with a pre-tax margin of 28%. Revenue of $4.7 billion was down 1% year-on-year. Excluding net...

Speaker Change: Due to deposit margin compression.

Speaker Change: Expenses of $3 4 billion were up 11% year on year, largely driven by higher compensation, including revenue related compensation continued growth in our private banking advisor teams and the impact of the JP Morgan asset management, China acquisition, as well as higher distribution fee.

Jeremy Barnum: Revenue was up 5% driven by higher management fees on strong net inflows and higher average market levels, partially offset by lower NII due to deposit margin compression. Expenses of $3.4 billion were up 11% year-on-year, largely driven by higher compensation, including revenue-related compensation, continued growth in our private banking advisor teams, and the impact of the JPMorgan Asset Management China acquisition, as well as higher distribution. For the quarter, long-term net inflows were $34 billion, led by equities and fixed income. AUM of $3.6 trillion was up 19% year-on-year, and client assets of $5.2 trillion were up 20% year-on-year, driven by higher market levels and continued net inflows. And finally, loans were down 1% quarter-on-quarter, and deposits were flat. Turning to corporate on page 8.

Speaker Change: For the quarter long term net inflows were 34 billion led by equities and fixed income.

Speaker Change: Of three six trillion was up 19% year on year and client assets of $5. Two trillion were up 20% year on year, driven by higher market levels and continued net inflows.

Speaker Change: And finally loans were down 1% quarter on quarter and deposits were flat.

Speaker Change: Turning to corporate on page eight.

Speaker Change: Corporate reported net income of $919 million revenue was $2 3 billion up $1 3 billion year on year NII was $2 5 billion up $737 million year on year, driven by the impact of balance sheet mix and higher rates.

Speaker Change: It was a net loss of 188 million. The current quarter included net investment securities losses of $366 million compared with net securities losses of $868 million in the prior year quarter.

Jeremy Barnum: Corporate reported net income of $918 million. Revenue was $2.3 billion, up $1.3 billion year-on-year. NII was $2.5 billion, up $737 million year-on-year, driven by the impact of balance sheet mix and higher rates, and NIR was a net loss of $188 million. The current quarter included net investment securities losses.

Speaker Change: Expenses 1 billion were up $889 million year on year predominantly driven by the increase to the FDIC special assessment.

Speaker Change: To finish up we up the outlook on page nine.

Speaker Change: We now expect NII ex markets to be approximately 89 billion based on a forward curve that contained three rate cuts at quarter end.

Speaker Change: Our total NII guidance remains approximately 90 billion, which implies a decrease in our markets NII guidance from around 2 billion to around 1 billion. The primary driver of that reduction is balance sheet growth and mix shift in the markets business and Thats. A reminder, changes in markets and I are generally revenue neutral.

Jeremy Barnum: $266 million compared with securities losses of $868 million in the prior year quarter. Expenses of $1 billion were up $889 million year-on-year, predominantly driven by the increase to the FDIC Special Assessment. To finish up, we have the Outlook on page 9.

Speaker Change: Our outlook for adjusted expense is now about 91 billion, reflecting the increase of the FDIC Special assessment I mentioned upfront.

Speaker Change: And on credit we continue to expect the 'twenty 'twenty four card net charge off rate to be below 3.5%.

Jeremy Barnum: We now expect...

Jeremy Barnum: $1.9 billion based on a forward curve that contained three rate cuts at quarter end. Our total NII guidance remains approximately $90 billion, which implies a decrease in our market's NII guidance from around $2 billion to around $1 billion. The primary driver of that reduction is balance sheet growth and mixed shifts in the markets business, and as a reminder, changes in markets and NII are generally revenue driven. Our outlook for adjusted expense is now about $91 billion, reflecting the increase to the FDIC special assessment I mentioned up front. And on credit, we continue to expect the 2024 card net charge-off rate to be below 3.5%. Finally, you may have noticed that our effective interest rate is currently at 4.5%.

Speaker Change: Finally, you may have noticed that our effective tax rate has increased this quarter and it will likely stay around 23%. This year absent discrete items, which can vary quite a bit the.

Speaker Change: The driver of this change is the firm's adoption of the proportional amortization method for certain tax equity investments are managed rate is unchanged and it should average about three 5% above the effective tax rate. This is a smaller gap than we've previously observed and we expect this approximate relationship to persist going forward although the.

Speaker Change: The difference will continue to fluctuate as it has in the past.

Speaker Change: For the avoidance of doubt these changes have no meaningful impact unexpected annual net income we're just mentioning this to help with your models.

So to wrap up we're pleased with another quarter of strong operating results, even as the journey towards NII normalization, but yes.

Jeremy Barnum: You may have noticed that our

While we remain confident in our ability to produce strong returns and manage risk across a range of scenarios economic geopolitical and regulatory uncertainties that we've been talking about for some time remain prominent and we are focused on being prepared to navigate those challenges as well as any others that may come our way.

Jeremy Barnum: This is a list of the top 10 things you should do to stay safe this quarter. It will likely stay around 23% this year, absent discreet items, which can vary quite a bit. The driver of this change is the firm's adoption of the proportional amortization method for certain tax equity investments. The managed rate is unchanged, and it should average about 3.5% above the effective tax rate. This is a smaller gap than we've previously observed, and we expect this approximate relationship to persist going forward, although the difference will continue to fluctuate as it has in the past. For the avoidance of doubt, these changes have no meaningful impact on expected annual net income.

Speaker Change: And with that let's open up the line for Q&A.

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

Betsy: Hi, good morning.

Betsy: Good morning.

Betsy: So a couple of questions here just one Jamie.

Betsy: Jamie could you talk through the decision to raise the dividend you know kind of mid cycle. It felt like a pre CCAR and <unk>.

Betsy: So help us understand how you're thinking about where that payout ratio that dividend payout ratio.

Jeremy Barnum: We're just mentioning this to help with your model. So to wrap up, we're pleased with another quarter of strong operating results, even as the journey towards NII normalization begins. While we remain confident in our ability to produce strong returns and manage risk across a range of scenarios, the economic, geopolitical, and regulatory uncertainties that we have been talking about for some time remain prominent, and we are focused on being prepared to navigate those challenges, as well as any others that may come our way. And with that, let's open up the line for Q&A.

Betsy: Range should be because over the past several years, it's been somewhere between 24 and 32% and so is this.

Betsy: Justin we could be towards the higher end of that range or even expanding about that and then I also just wanted to understand the buyback in the keeping of the CET one at 15% here.

Betsy: The minimum is 11 nine I know, it's you know we have to wait for Basel III on game re proposal to come through and all that but are we should we be expecting that hey, we're going to hold 15% CET one until we know all these rules. Thanks.

Betsy: So Betsy before I answer the question.

Betsy Lynn Graseck: The first question is coming from the line of Betsy Graseck from Morgan Stanley. You may proceed. Hi, good morning.

Betsy: Wanted to say something on behalf of all of Us at JP Morgan and me personally.

Thrilled to have you on this call for those who don't know Betsy has been through a terrible medical episode and dogs, who reminded all of us how lucky we ought to be here, but Betsy in particular the amount of respect we have not just in your work with your character over the last 20 plus years has been exceptional so on behalf of all of US I just want to welcome you back.

Betsy Lynn Graseck: So, I have a couple of questions here. Just one, Jamie, could you talk through the decision to raise the dividend, you know, kind of mid-cycle, it felt like, pre-CCAR, and also help us understand how you're thinking about where that payout ratio, that dividend payout ratio range should be, because over the past several years, it's been somewhere between 24 and 32 percent, and so this is suggesting we could be towards the higher end of that range, or even expanding above that. And then I also just wanted to understand the buyback and the keeping of the CET1 at 15% here. You know, the minimum is 11.9. I know it's, you know, we have to wait for the Basel III endgame re-proposal to come through and all that, but should we be expecting that, hey, we're going to hold 15% CET1 until we know all these rules?

Betsy: Thrilled to have you here and so well see.

Betsy: You're asking a perennial question. So we're earning a lot of money a capital a couple of months over and that's why we increased the dividend.

Betsy: If you're asking me what we like to do is to pay out something like a third a third a normalized earnings of course, it's hard to calculate always with normalized earnings are but we don't mind being a little bit ahead of that sometimes we'll book behind that sometimes you'd like to give people kind of consistent dividend guidance et cetera makes it far more important question is the 15% so look at the 15.

Betsy: Percent I'm going to oversimplify, it that basically will prepare us for the total Basel in getting to that roughly the specifics don't matter that much remember we can do a lot of things to change that in the short run or the long run but.

Betsy: It looks like Basel, III and gain may not be the worst case, it'll be something less than that so obviously wondering if that happens it would free up a lot of capital.

Jamie Dimon: Thanks.

Jamie Dimon: Yeah, so Betsy, before I answer the question, I want to say something on behalf of all of us at JPMorgan and me personally, thrilled to have you on this call. For those who don't know, Betsy's been through a terrible medical episode. And it's reminded all of us how lucky we are to be here. But Betsy, in particular, the amount of respect we have for not just your work but your character over the last 20 plus years has been exceptional. So, on behalf of all of us, I just want to welcome you back.

Betsy: And I'm going to say on the order.

Betsy: Of $20 billion or something like that.

Betsy: Yes.

Betsy: You know, we've always had the capital hierarchy. The same way, which is we're going to use capital to build our business first we paid the dividend steady dividend build the business and if we think it's appropriate to buy back stock, we're continuing to buy back stock at $2 billion a year I personally do not want to buyback a lot more than that at these current prices I think you've all heard me talk about the world.

Jamie Dimon: It's thrilled to have you here, and so you're asking a pertinent question. So we're earning a lot of money. Our capital cup runneth over.

Betsy: Things like that so waiting in preparation for Basel, hopefully, we'll know something later and then we can be much more specific with you all but in the meantime, there's also it's very important to put my there are short term uses for capital that are good for shareholders that can reduce our C. U E. C. T. One too so where you may see us do things in the short.

Jamie Dimon: And that's why we increased the dividend. And if you ask me, what we'd like to do is to pay out something like a third, a third of normalized earnings. Of course, it's hard to always calculate what normalized earnings are.

Jamie Dimon: But we don't mind being a little bit ahead of that sometimes, a little bit behind that sometimes. We'd like to give people kind of consistent dividend guidance, etc. I think the far more important question is the 15%. So let's look at the 15%. I'm going to oversimplify it. That basically would prepare us for the total Basel endgame today, roughly. The specifics don't matter that much. Remember, we can do a lot of things to change that in the short run or in the long run. But it looks like Basel 3's endgame may not be the worst case. It'll be something less than that.

Betsy: Run that increased earnings increased capital capital, but are using up their capital Jeremy mentioned on the.

Betsy: I'm one of the things that we know the balance sheet, how we use the balance sheet for credit and trading we could do things now so it's a great position to be and we're gonna be very very patient I urge all the analysts to keep in mind excess capital is not wasted capital its earnings in store, we will deploy it in a very good way for shareholders.

Betsy: In due course.

Speaker Change: Excellent. Thank you so much.

Speaker Change: Let's see I just wanted to add my my welcome back and thoughts as well and just a very minor.

Speaker Change: And as Jimmy sensor I think he just misspoke when he said $2 billion a year in buybacks. The trajectory is to trying to get a question in the quarter or otherwise.

Jamie Dimon: So obviously, when and if that happens, it would free up a lot of capital. And I'm going to say something on the order later, and then we can be much more specific with you all. But in the meantime, it's very important to keep in mind that there are short-term uses for capital that are good for shareholders that could reduce our CET 1.2. So you may see us do things in the short run that will increase earnings, increase capital, you know, things that are using up that capital. Jeremy mentioned one of the things that we know, the balance sheet, and how we use the balance sheet for credit and trading. We could do things now. So it's a great position to be in. We're going to be very, very patient. I urge all the analysts to keep in mind that excess capital is not wasted capital; it's earnings in store. We will deploy it in a very good way for shareholders in due course. Excellent! Thank you so much.

Speaker Change: I have nothing to add to jamie's very complete answer but are welcomed back Betsy.

Betsy: Okay. Thank you so much and I appreciate it looking forward to seeing you at Investor day on May 20th.

Speaker Change: Excellent us too.

Speaker Change: Alright.

Speaker Change: Thank you. Our next question comes from Jim Mitchell with Seaport Global you May proceed.

James Francis Mitchell: Hey, good morning, Jeremy can you speak to the trends Youre seeing with respect to deposit migration in the quarter, if theres been any change.

James Francis Mitchell: Have you seen that migration start to slow or not.

Jeremy Barnum: Yes. Good question, Jim I think the simplest and best centers that is not really so as we've been saying for a while migration from checking and savings to Cds is sort of the dominant trend that is driving the increase in weighted average rate paid in the consumer deposit franchise.

Jeremy Barnum: Continues we continue to capture that money in motion not at very high rates, we're very happy about what that means about the consumer franchise and level of engagement that we're seeing you know I'm aware that there is a little bit of a narrative out there about you know are we seeing the end of what people sometimes refer to as cash sorting we've looked at that.

Jeremy Barnum: I just wanted to add my welcome back thoughts as well and just a very minor edit to Jamie's answer. I think he just misspoke when he said $2 billion a year in buybacks. The trajectory is $2.25 billion. I have nothing to add to Jamie's very complete answer, but

Jeremy Barnum: Data, we see some evidence that maybe it's slowing a little bit we're quite cautious on that would really sort of.

Jeremy Barnum: Don't think it makes sense to assume that in a world where checking and savings is effectively.

Jeremy Barnum: Thank you to Jamie for a complete answer, but welcome back. Okay, thank you so much, and I appreciate it. Looking forward to seeing you at Investor Day on May 20.

Jeremy Barnum: Effectively zero in the policy rate is about 5% that youre not going to see ongoing migration and frankly, we expect to see that even in a world where even if the current yield curve environment were to change and meaningful cuts were to get reintroduced and we would actually start to see those we would still expect to see ongoing like.

Betsy Lynn Graseck: Excellent; us too.

James Francis Mitchell: Thank you. Our next question comes from Jim Mitchell with Seaport Global. You may proceed. Hey, good morning.

James Francis Mitchell: Jeremy, can you speak to the trends you're seeing with respect to deposit migration in the quarter? If there's been any change? Have you seen that migration start to slow or not?

Jeremy Barnum: Gration and yield seeking behavior. So it's quite conceivable and this is actually on the yield curve that we had in fourth quarter at six cuts and as we were still nonetheless expecting an increase in the weighted average rate paid asked that migration continues so I would say no meaningful change in the trends and the.

Jeremy Barnum: Yeah, good question, Jim. I think the simplest and best answer to that is not really.

Jeremy Barnum: So, as we've been saying for a while, migration from checking and savings to CDs is sort of the dominant trend that is driving the increasing weighted average rate paid in the consumer deposit franchise. As that continues, we continue to capture that money in motion at a very high rate. So we're very happy about what that means about the consumer franchise and the level of engagement that we're seeing.

Jeremy Barnum: For ongoing migration is very much still there.

Speaker Change: Okay, and just a follow up on that and just sort of bigger picture on NII is that sort of the biggest driver of your your outlook is that migration is that the forward curve as those balances it sounds like its integration, but just be curious to hear your thoughts on the biggest drivers of upside or downside.

Jeremy Barnum: This is referred to as cash sorting.

Jeremy Barnum: We've looked at that data. We see some evidence that maybe it's slowing a little bit. But we're quite cautious about that.

Speaker Change: So I mean, I think the drivers, let's say what's embedded in the current guidance is actually not meaningfully different from what it was in the fourth quarter, meaning it's the current yield curve, which you know is little bit stale now, but the snap from border and had roughly three Hudson it.

Jeremy Barnum: We really sort of don't think it makes sense to assume that in a world where checking and savings are paying effectively zero, and the policy rate is above five percent, that you're not going to see ongoing migration. And frankly, we expect to see that even in a world where the current yield curve environment were to change and meaningful cuts were to get reintroduced, and we would actually start to see those, we would still expect to see ongoing migration and yield-seeking behavior. So it's quite conceivable, and this is actually on the yield curve that we had in the fourth quarter that had six cuts in it. We were still, nonetheless, expecting an increase in the weighted average rate paid as that migration continues. So I would say there is no meaningful change in the trends, and the expectation for ongoing migration is very much still there.

Speaker Change: So it's the carnival curve, it's what I've, just said the expectation of ongoing internal migration there.

Speaker Change: There is some meaningful offsets from card for vault growth, which while it's a little bit less than it was in prior years. So it's still it's still a tailwind there we expect deposit balances to be sort of flat to modestly down.

Speaker Change: So that's a little bit of a headwind at the margin. There's obviously the wildcard of potential product level reprice, which we always say, we're going to make those decisions situationally as a function of competitive conditions in the marketplace.

Speaker Change: You know, there's obviously, but in a world, where we've got something like $900 billion of deposits paying effectively zero relatively small changes in the product level reprice can change the NII run rate by a lot. So the Arab banks here are pretty wide and we're always going to you know.

James Francis Mitchell: Okay, just a follow-up on that and just sort of the bigger picture on NII. Is that sort of the biggest driver of your outlook?

Speaker Change: Stick with our one trial, which has been not losing primary bank relationships and thinking about the long term health of the franchise when we think about deposit pricing.

James Francis Mitchell: Is it migration? Is it the forward curve? Is it balances? It sounds like it's migration, but I would just be curious to hear your thoughts.

Speaker Change: Right, Okay, great. Thanks for the color.

Speaker Change: Thanks.

John Eamon McDonald: Thank you. Our next question comes from John Mcdonald with Autonomous Research you May proceed.

Jeremy Barnum: Yeah, so I mean, I think the drivers or, let's say, what's embedded in the current guidance is actually not meaningfully different from what it was in the fourth quarter, meaning it's the current yield curve, which, you know, is

John Eamon McDonald: Thanks, Jeremy you had mentioned at a conference earlier this year.

John Eamon McDonald: The street might need to build in more reserve growth.

John Eamon McDonald: For the card growth you've had more reserve build we didn't see that this quarter or is that just kind of seasonal and it would you still expect the kind of growth math to play out in terms of card growth in reserve build needs.

Jeremy Barnum: It's the current yield curve.

Jeremy Barnum: So it's the Carnegie-Hill curve. It's what I just said, the expectation of ongoing internal migration. There is some meaningful offset from CARD revolving growth, which while it's a little bit less than it was in prior years, is still a tailwind there. We expect deposit balances to be sort of flat to modestly down, so that's a little bit of a headwind at the margin. And then there

Speaker Change: Yeah, John So in short, yes to both questions. So yes, the relative lack of grow or build this quarter is a function of the normal seasonal pattern of card, yes, we still expect 12% card loan growth for the full year and yes that still means that all else equal we think that consensus.

Speaker Change: For the allowance build for the back three quarters, it's still a little too low.

If you map out to that expected carve.

Jeremy Barnum: And we're always going to, you know, stick with our mantra, which has been not losing primary bank relationships and thinking about the long-term health of the franchise when we think about deposit prices.

Speaker Change: Obviously, there's the wildcard of what happens with our probabilities and our parameters on the output of our internal process of assessing.

Speaker Change: The scandal in the seasonal distribution and so on we're not speaking to that one way or the other so if you guys have your own opinions about that that's fine, but ordinarily just saying that based on the card loan growth that we expect a normal coverage ratios for that we do expect build in the back half of the year.

John Eamon McDonald: Right. Okay, great. Thanks for the call. Thank you. Our next question comes from John McDonald with Autonomous Research. You may proceed. Thanks.

Speaker Change: Okay got it and then just a follow up to make it super clear on the idea of the markets NII.

John Eamon McDonald: Jeremy, you mentioned at a conference earlier this year that the street might need to build in more reserve growth for the card growth you've had, more reserve build. We didn't see that this quarter. Is that just kind of seasonal? And would you still expect the kind of growth math to play out in terms of card growth and reserve build needs?

That outlook being revised down by 1 billion, but more a revenue neutral.

Speaker Change: I guess the obvious thing is there there's typically an offset in fee income and you don't guide to that but the idea would be the way you're structuring trades the way the balance sheets evolving there is some offset that you would expect in our markets fees from the lower markets NII correct.

Speaker Change: That is exactly right and specifically what's going on here.

Speaker Change: Just between the on balance sheet and off balance sheet, and the financing businesses and prime and so on within markets and you can actually see a little bit of a pop of the market's balance sheet in the supplement on these things are all related so fundamentally you can think of it as like we got a hold equities on the balance sheet noninterest bearing high funding expense negative for NII or we were.

Jeremy Barnum: Yeah, John, so in short, yes to both questions.

Jeremy Barnum: Obviously, there's the wildcard of what happens with our probabilities and our parameters and the output of our internal process of assessing, you know, the skew in the Cecil distribution and so on. But we're not speaking to that one way or the other. So if you guys have your own opinions about that, that's fine. But we're narrowly just saying that based on the card number that we expect and normal coverage ratios for that, we do expect build in the back half.

Speaker Change: Received that and total return for them through derivatives exactly the same economics no impact on that.

Speaker Change: That shifts as a function of the sort of borrow relationships in the marketplace in ways that are.

Speaker Change: Bottom line effectively neutral its second order effects, but they they change the geography quite a bit and that's what happened this quarter and that's why we've been emphasizing for some time that the market is the better number to focus on in terms of an indicator of how the core banking franchises performing.

John Eamon McDonald: Okay, got it. And then just to follow up, to make it super clear on the idea of the markets, NII, that outlook being revised down by a billion, but more revenue neutral. I guess the obvious thing is there, there's typically an offset in fee income, and you don't guide to that. But the idea would be the way you're structuring trades, the way the balance sheet's evolving, there's some offset that you'd expect in market fees from.

Got it thank you.

Speaker Change: Thank you.

Thank you. Our next question comes from Ebrahim <unk> with Bank of America. You May proceed.

Yeah.

Ebrahim: Hey, good morning.

Ebrahim: I guess just in terms of Jamie when you think about.

Ebrahim: The outlook for the economy would appreciate your thoughts on the health of the customer base, both commercial and consumer and when you think about higher for longer maybe the economy is still strong. So we don't get any rate cuts are you seeing that when you talk to your customers and the feedback youre getting from.

Jeremy Barnum: That is exactly right.

Jeremy Barnum: NII, CapEx, Omicron, Wolfe Research, Basel III, Evercore ISI, JPMorgan Chase & Co. NII, CapEx, Omicron, Wolfe Research, Basel III, Evercore ISI, JPMorgan Chase & Co.

Ebrahim: Your bankers with the momentum is picking up and I appreciate all the macro risk as James pointed out, but I'm, just getting trying to get to a sense of what youre.

Ebrahim: View is in terms of the most likely outcome based on what youre seeing from the customers.

Ebrahim: Yeah.

Speaker Change: I would say consumer customers are fine.

Jeremy Barnum: All right, thank you.

Jeremy Barnum: Thank you.

Speaker Change: Unemployment is very low home prices dropped stock price dropped.

Ebrahim Huseini Poonawala: Thank you. Our next question comes from Ebrahim Poonawala with Bank of America. Please proceed.

Speaker Change: The amount of income we need to service their debt is still kind of low.

Ebrahim Huseini Poonawala: Okay, good morning. I guess, just in terms of Jeremy, when you think about the outlook for the economy, I would appreciate your thoughts on the health of the customer base, both commercial and consumer. And when we think about hiring for longer, maybe the economy is too strong, so we don't get any rate cuts. Are you seeing that when you talk to your customers and the feedback you're getting from your bankers, where the momentum is picking up? And I appreciate all the macro risks Jamie's pointed out, but I'm just trying to get a sense of what your view is in terms of the most likely outcome based on what you're seeing today from the customers.

Speaker Change: But the extra money or the lower income folks is running out.

Speaker Change: Don't worry I'll be no.

Speaker Change: <unk>.

Speaker Change: And you see credit normalizing, a little bit and of course hiring some folks or more money, they're still spending it so whatever happens to customers in pretty good shape there.

Speaker Change: There you go into recession being pretty good shape.

Speaker Change: These are in good shape, if you look at it today.

Speaker Change: The conference is up their order books dropped their profits are up but I would caution people. These are all the same results of a lot of physical spending a lot of Q E et cetera, and so we don't really know what's going to happen and I also want to look at the year looking at two years or three years old or geopolitical effects in oil and gas and you know how much physical.

Speaker Change: Ben you actually take place our elections et cetera. So.

We're okay right now it does not mean, we're okay down the road.

Jeremy Barnum: I would say consumer customers are fine, unemployment is very low, home prices are up, stock prices are up, the amount of income they need to service their debt is still kind of low, but the extra money of lower-income folks is running out, not running out, but normalizing.

Speaker Change: If you look at any inflection point been okay. In the current time is always true don't truly 72 is true.

Speaker Change: Anytime you've had it so I just I'm just on the more cautious side.

Speaker Change: How people feel and confidence levels and what that doesn't necessarily stop you from having an inflection point and so.

Jeremy Barnum: So everything's okay today, but you've got to be prepared for a range of outcomes, which we are. And the other thing I want to point out, because all of these questions about interest rates and yield curves and NAI and credit losses, it's one thing to project them today based on not what we think in economic scenarios but the generally accepted economic scenario, which is the generally accepted rate cuts of the Fed. But these numbers have always been wrong.

Speaker Change: So everything is okay to date, but you got to be prepared for a range of outcomes, which we are.

Speaker Change: The other thing I want to point out because all of these questions about interest rates and yield curves.

Credit losses.

Speaker Change: One thing you projected today based on what you know not what we think an economic scenarios, but the generally accepted economic scenario, which is the generally accepted rate cuts at the of the fed but these numbers are always been wrong.

Jeremy Barnum: You have to ask the question, what if other things happen, like higher rates or this modest recession, etc., then all these numbers will change. I just don't think any of us should be surprised if and when that happens. And I just think the chance of that happening is higher than other people, but I don't know the outcome. We don't want to guess the outcome. I've never seen anyone actually positively predict a big inflection point in the economy, literally, in my life or in history.

Speaker Change: You have to ask the question, what if other things happen like higher rates with a modest recession et cetera, and all these numbers change I just don't think any of us should be surprised if and when that happens and I just think the chance. It happens is harder than other people.

Speaker Change: I don't know the outcome, we don't want against the outcome I've never seen anyone actually.

Speaker Change: Do we predict big inflection point in the economy literally in my life where in history.

Speaker Change: Yeah.

Jeremy Barnum: That's helpful. And just tied to that, as we look at commercial real estate, both for JP and for the economy overall, are higher rates alone enough to create more vulnerabilities and issues beyond office CRA? How would you characterize the health of the CRA market?

Speaker Change: That's helpful and just tied to that as.

Speaker Change: As we look at commercial real estate, both for J P and for the economy overall.

Speaker Change: Hi, Ed it's alone enough to create more vulnerability than it should be and also CRE. How would you guys. Just got it today the health of the CRT market.

Ebrahim Huseini Poonawala: Thank you.

Speaker Change: Yep.

Jeremy Barnum: I'll put it into two buckets. First of all, we're fine. We've got good reserves against office.

Ed: Yes, so I'll put I'll put it into two buckets first of all we're fine we've got good reserves against office. We think are multifamily spine. Jeremy can give you more detail on that if you want.

Jeremy Barnum: We think our multifamily is fine. Jeremy can give you more detail on that if you want. But if you think of real estate, there are two pieces. If rates go up, think of the yield curve, the whole yield curve, not Fed funds, but the 10-year bond rate. It goes up 2%. All assets, all assets, every asset on the planet, including real estate, is worth 20% less. Well, obviously, that creates a little bit of stress and strain.

Speaker Change: Real estate, there's two pieces.

Speaker Change: Rates go up I think of the yield curve the whole yield curve fed funds, but the 10 year bond rate and it goes up 2% all assets all assets every asset on the planet, including real estate is worth 20% less well, obviously that creates a little bit of stress and strain and keep up the roll those over and finance it more.

Jeremy Barnum: And, you know, people have to roll those over and finance them more. But it's not just true for real estate; it's true for everybody. And, you know, that happens. Leveraged loans, real estate will have some effect. The second thing is the why does that happen?

Speaker Change: Not just true for real estate is true for everybody.

And you know that happens leveraged loans real estate will have we will have some effect. The second thing is the why does that happen if that happens because we have a stronger economy well, there's not so bad for real estate, because people would be hiring and putting things out and other financial assets. If that happens because we have stagflation well that's the worst case all of a sudden you are.

Jeremy Barnum: If that happens, because we have a strong economy, well, that's not so bad for real estate because people will be hiring and putting things out, and other financial assets. If that happens, because we have stagflation, well, that's the worst case, all of a sudden, you are going to have more vacancies, you are going to have more companies cutting back, you are going to have less leases, it will affect, you know, including multifamily, and it will filter through the whole economy in a way that we people haven't really experienced since 19, since 2010. So I just put in the back of your mind why it is important, the interest rates are important, the recession is important. If things stay where they are today, we have kind of a soft landing that seems to be embedded in the marketplace.

Speaker Change: Going to have more vacancies you are going to have more companies putting back you are going to have less leases it will effect, including multifamily that will filter through the whole economy in a way that we.

Speaker Change: We haven't really experienced since 19 since 2010, so I just put it in the back of your mind why is important the interest rates are important the recession is important if things stay where they are today, we have kind of a soft landing this seems to be embedded in the marketplace.

Jeremy Barnum: You know, everyone, the real estate will muddle through. You know, obviously, it'd be idiosyncratic if you were in different cities and, you know, different types and B versus A buildings and all that. But, you know, people muddle through. They won't muddle through under higher rates during the recession. That would be tougher on a lot of folks and not just real estate. In fact, that happened.

Speaker Change: Every one of the real estate will muddle through.

Speaker Change: You know obviously be idiosyncratic if youre in different cities and different types of b versus eight buildings and all that but people.

Speaker Change: People muddle through it they won't muddle through under higher rates with the recession that would be tougher in a lot of folks and not just real estate if in fact that happens.

Speaker Change: Thank you so much.

Speaker Change: Thanks, everyone.

Speaker Change: Thank you. Our next question comes from Erika Najarian with UBS you May proceed.

Erika Najarian: Oh good morning.

Erika Najarian: Given that your response to <unk> question of that.

Erika Najarian: 15% CET one today prepares you for Basel III endgame as written.

Ebrahim Huseini Poonawala: Helpful. Thank you so much.

Jeremy Barnum: Thanks, everyone.

Erika Najarian: Thank you. Our next question comes from Erika Najarian with UBS. You may proceed. Hi, good morning. You know, given that your response to Betsy's question is that, you know, 15% CET1 today prepares you for Basel III endgame as written, you earn 22% on without the FDIC assessment, you know, ahead of investor day, I guess, six weeks from now, or five weeks from now, if you think about that 17% through the cycle target, if you're at the right capital level, per you guys, where are you over earning today?

Erika Najarian: You earned 22%.

Erika Najarian: On on without the FDIC assessment.

Erika Najarian: Ahead of Investor Day, I guess six weeks from now or a week from Alex we think about that 17% through the cycle target.

If you heard the right capital level for you guys where are you over earning today.

Erika Najarian: Okay.

Erika Najarian: So.

Speaker Change: Interesting framing of the question. So I think we've been pretty consistent about where we are over earning right. So obviously one major area is that we're over earning in deposit margin, especially in consumer.

Speaker Change: Why were expecting sequential declines of NII, why we've talked about compressing deposit margins and increases in weighted average rate paid so I think that's probably the single biggest source of let's call. It excess earnings currently.

Speaker Change: You've also heard Jamie you said that we're over earning in credit I mean wholesale charge offs have been particularly low but we have built for that so in the current run rates been less clear the extent of over earning.

Jeremy Barnum: Right, so, um... Interesting framing of the question, Erika. So I think we've been pretty consistent about where we're over earning, right? So obviously, one major

Speaker Change: And in card of course.

Speaker Change: While charge offs are now close to normalize essentially we did go through an extended period of charge offs being very low by historical standards. Although that was coupled with an eye also being low by historical standards. So from a bottom line perspective, it's not entirely clear what the net of that was but broadly it's really a deposit.

Jeremy Barnum: and that's sort of why we're expecting sequential to cons in NII. Why...

Jeremy Barnum: [inaudible]

Jeremy Barnum: Standards, although that was coupled with NII also being low by a bottom line perspective, it's not entirely clear what the net of that was. But you know, broadly, it's really the positive margin that's the biggest single factor and Um, you know, embedded in your question, I think, is a little bit of the...

Speaker Change: Margin, that's the biggest single factor in the overall.

Speaker Change: Embedded in your question I think there's a little bit of the what are you thinking about the 17% seat you want it in light of the current level of capital and so on and you did talk about at Investor Day.

Jeremy Barnum: What are you thinking about the 17% CT1 in my...

Jeremy Barnum: What are you thinking about the 17% CT1 in light of the...

Jeremy Barnum: I was hoping that we would have interesting things to say about that on Investor Day in light of potential updates to the Basel III endgame, given that, you know, the single most important factor for that 17% is how much denominator expansion we see through the Basel III endgame.

Speaker Change: I was hoping that we would have interesting things to say about that at Investor day in light of potential updates of the Basel III game given that the single most important factor for that 70% is how much denominator expansion do we see through this puzzle for in game at the rate, we're going we won't actually know that much more.

Jeremy Barnum: At the rate we're going...

Jeremy Barnum: at the rate we're going,

Speaker Change: The us by Investor day, So we might not have that much more to say except to reiterate what I've said in the past, which is that whatever it is it's going to be very good our returns in absolute terms very good in relative terms, we will optimize we will seek to reprice, we will adjust in various ways.

Jeremy Barnum: There's so much more about the

Jeremy Barnum: It is going to be very good.

Jeremy Barnum: Blue Terms, Very Good Terms, and Relative Terms. We will optimize, we will seek to reprice, we will adjust in various ways as to the best of our ability, but given the structure of the role as proposed...

Speaker Change: Best of our ability, but given the structure of the rule as proposed at least.

Jeremy Barnum: [inaudible]

Erika Najarian: Got it. And just as a follow-up question, you mentioned that the current curve that you set your NII outlook upon is stale. I guess, does it matter that it seems like the market fell in pricing and obviously no June cut, no September cut, and a toss-up in December, which should matter for this year? As we think about that $90 billion, does the, you know, if the price rate cuts out totally, does that matter much, given that it seems like June is the only one that would?

Speaker Change: There are a lot of this cannot be optimized away. So in the base case, you have to think of it as a headwind.

Speaker Change: Got it and just as a follow up question you know you mentioned that.

Speaker Change: Current curve.

Speaker Change: You set your NII outlook upon its sale.

Speaker Change: I guess does it matter that it seems like the market is on pricing and obviously no gene client no September patents, a toss up in December but should matter for this year.

Speaker Change: We think about that 90 billion.

Speaker Change: If we play place rate cuts out totally does that modern much given that.

Speaker Change: Also on that one.

Jeremy Barnum: Yeah, sorry. Okay. So just a few quick things on this. One, let's focus on NII-X, not on total NII. So I'd anchor you to Number Two, if you want to do the math for the changes in the average fund rate for the rest of the year and multiply that times the EAR, be my guest, it's as good an approach as any. But I would just once again remind you of the 900 billion of deposits paying practically zero, that, you know, very small changes there can make a big difference. And we've got other factors; we've got the impact of QT on deposit balances, etc, etc, etc. So we want to make sure that we don't get too precise here; we're giving our best guess based on a series of assumptions. And, you know, it's going to be.

Speaker Change: Yeah, sorry, so just quick things on this one let's focus on that I ask not on total on a I saw an aggregate of the 89 number two if you want to do math for like the changes of the average funds rate for the rest of the year and multiply that times are like <unk>. My guess is as good as in approaches any but I would just.

Speaker Change: Once again remind you of the 900 billion of deposits Bang practically zero that.

Speaker Change: Very small changes Eric can make a big difference and we've got other factors you've got the impact of Q T on deposit balances et cetera, et cetera et cetera. So we want to make sure that we don't get too precise here, we're giving you our best guess based on a series of assumptions and you know, it's going to be what it's going to be which.

Speaker Change: Which we know are going to be wrong.

Speaker Change: Yeah.

Speaker Change: Thanks.

Speaker Change: Thank you. Our next question comes from Ken <unk> with Jefferies. You May proceed.

Jeremy Barnum: You know are going to be wrong. Transcribed by https://otter.ai

Thanks, Good morning.

Ken: Jeremy I was wondering if you could expand a little bit on one of your your your your prepared comments when you talked about.

Jeremy Barnum: Thanks! Thank you. Our next question comes from Ked Usdin with Jeffries. You may proceed. Thanks, good morning.

Ken: We will have hopes and expectations for the investment banking pipeline to continue to move along we obviously saw the the good movement in ECM and DCM and the lag in advisory can you just talk about that you mentioned like potential cautiousness around the election, just what are you hearing from both the corporate side and the sponsor side with relates to M&A on like go no go type of feel and conversation levels.

Kenneth Michael Usdin: Jeremy, I was wondering if you could expand a little bit on one of your prepared comments. When you talked about it, you know, we all have hopes and expectations for the investment banking pipeline to continue to move along. We obviously saw the good movement in ECM and DCM and the lag in advisory. Can you just talk about that? You mentioned potential cautiousness around the election. Just what are you hearing from both the corporate side and the sponsor side as it relates to M&A on the go, no-go type of feel and conversation levels? And then what do you think we need to, you know, have to kickstart? You know, just another good level

Ken: And then what do you think we need to have to kickstart just another good level of IPO activity in the ECM market. Thanks.

Speaker Change: Sure, Yes, so let me take the IPO first so you know we had been a little bit cautious there are some some of the cohorts and vintages of Ipos has performed somewhat disappointingly and I think that narrative has changed to a meaningful degree. This quarter. So I think we're seeing better IPO performance, obviously equity markets have been under a little bit of pressure.

Speaker Change: Last few days, but in general we have.

Speaker Change: A lot of support there.

Always helps dialog is quite good you know a lot of interesting different types of conversations happening with global firms multinationals carve out type things. So dialog as good valuation environment is better or like sort of decent reason for optimism there, but you know of course with ECM.

Jeremy Barnum: Sure, yeah, let me take the IPO first. So, you know, we had been a little bit cautious there. Some, you know, cohorts and vintages of IPOs had performed somewhat disappointingly. And I think that narrative has changed, to me.

Speaker Change: There's always a pipeline dynamic and conditions were particularly good this quarter and so we caution a little bit there about pull forward.

Jeremy Barnum: So I think, you know, we're seeing better IPO performance. Obviously, equity markets have been under a little bit of pressure the last few days, but in general, we have a lot of support there, and that always helps. Dialogue is quite good, you know, a lot of interesting different types of conversations happening with global firms, multinationals, carve-out type things. So dialogue is good, the valuation environment is better, and there are decent reasons for optimism there. But, you know, of course, with ECM, there's always a pipeline dynamic, and conditions were particularly good this quarter, and so we cautioned a little bit there about pull forward, which is, you know.

Speaker Change: Even more acute I think on the DCM side, given that quite a high percentage of the total amount of debt that needed to be refinanced. This year has gotten done in the first quarter. So that's a factor.

Speaker Change: And then the question of M&A I think is probably the single most important question not only because of its impact on M&A, but also because of its knock on impact on D. C. I am through acquisition financing and so on.

Speaker Change: And you know there is a well known kind of regulatory headwinds there and that's definitely having a bit of a chilling effect.

Speaker Change: I don't know I've heard some narratives that maybe there's like some pent up demand.

Speaker Change: Knows how important politics are and all of this so you know I don't know what we're fundamentally.

Jeremy Barnum: And then, you know, the question of M&A is probably the single most important question, not only because of its impact on M&A but also because of its knock-on impact on DCM through acquisition, financing, and so on. And, you know, there's the well-known kind of regulatory headwinds there. And that's definitely having a bit of a chilling effect on me. I don't know. I've heard some narratives that maybe there's like some pent up deal demand. But who knows how important politics are in all this? So

Speaker Change: As I said I think on the press call happy to see momentum this quarter happy to see momentum in announced M&A, a little bit cautious about the pull forward dynamic a little bit cautious about the regulatory headwinds.

Speaker Change: And in the end, we're just gonna fight really hard for our share of the wallet here.

Speaker Change: Got it and I guess I'll just stick on the on the theme of capital markets.

Speaker Change: Not surprising at all that to see a little bit tougher comp in FIC. I think you guys have kind of indicated that maybe a flattish fee pool is a reasonable place and I know that's impossible to.

Speaker Change: To guide on but just maybe just talk through some of the dynamics in terms of activity across our fixed income and equities business and do you feel like this is the type of environment, where you know given that lingering uncertainty about rates clients are either more engaged or less engaged in terms of how they're positioning portfolios. Thanks.

Jeremy Barnum: You know, I don't know. We're fun too.

Jeremy Barnum: [inaudible]

Kenneth Michael Usdin: Got it. And I guess I'll just stick on the theme of capital markets. It was not surprising at all to see a little bit tougher comp in FIC. I think you guys have kind of indicated that maybe a flattish fee pool is a reasonable place, and I know that's impossible to guide on. But maybe just talk through some of the dynamics in terms of activity across the fixed income and equities business, and do you feel like this is the type of environment where, given that lingering uncertainty about rates, markets are either more engaged or less engaged in terms of how they're positioning portfolios? Thanks.

Speaker Change: Yeah really good question.

Speaker Change: I'd say in general that the sort of volatility and uncertainty in the rate environment. Overall on balance is actually supportive for the market as revenue pool, and I think that together with generally more balance sheet deployment as well as sort of some level of natural background growth as one of the reasons that the overall level of Mark.

Speaker Change: Revenue has stabilized at you know meaningfully above what was normal in the pre pandemic period, and while that does occasionally make us a little bit anxious like Oh, it's a sustainable and might there be downside here for now that does seem to be the new normal.

Jeremy Barnum: Yeah, really good question. I would say, in general, that the sort of volatility and uncertainty in the rate environment is, overall, actually supportive of the market's revenue pool. And I think that, together with generally more balance sheet deployment, as well as some level of natural background growth, is one of the reasons that the overall level of market revenue has stabilized at, you know, meaningfully above what was normal in the pre-pandemic period. And while that does occasionally make us a little bit anxious, like, oh, is this sustainable? Might there be a downside here? You know, for now, that does seem to be the new normal. And I do think that, you know, having rates off the lower zero bound and a sort of more normal dynamic in the global

Speaker Change: And I do think that you know having rates off the lower zero bound and sort of more normal dynamic in global rates, you know that not only affects the rates business, but the effects of foreign exchange business. It generally just makes asset allocation decisions more important and more interesting and so all of that creates risk management needs on active managers need to need to grow.

<unk> with it and so on and so forth. So I think that that those are some of the themes on the market side at the margin and yeah, we'll see how the rest of the year goes but.

Speaker Change: Seems to be behaving relatively normally I would say.

Yeah.

Speaker Change: Thank you. Our next question comes from Mike Mayo with Wells Fargo. You May proceed.

Hi.

Michael Lawrence Mayo: Again, I'm just trying to reconcile some of your concerns and your CEO letter.

Jeremy Barnum: All of that creates risk management needs, and active managers need to need to grapple with it and so on and so forth. So I think that those are some of the themes on the market side at the margin. And yeah, we'll see how the rest of the year goes. But you know, it sort of seems to be behaving relatively normally, I would say.

Michael Lawrence Mayo: For the 60 pages.

Michael Lawrence Mayo: See you put a lot of effort into that and it's appreciated but.

Michael Lawrence Mayo: Can you talk about scenarios tail risk macro risk geopolitical risk and all that over several years not weeks or months I get it on the other hand the firm.

Michael Lawrence Mayo: Thank you. Our next question comes from Mike Mayo with Wells Fargo. You may proceed.

Michael Lawrence Mayo: <unk> is investing so much more outside the U S. Whether it's commercial or some digital banking consumer or wholesale payments. So I'm just trying to reconcile kind of your actions with your your words and.

Michael Lawrence Mayo: Hi Jamie, I'm just trying to reconcile some of your concerns expressed in your CEO letter. I'm sure the 60 pages I can see put a lot of effort into that, and it's appreciated, but you talked about scenarios, tail risk, macro risk, geopolitical risk, and all that over several years, if not weeks or months. I understand that. On the other hand, the firm is investing so much more outside the U.S., whether it's commercial or some digital banking, consumer or wholesale payments. I'm just trying to reconcile your actions with your words and specifically, how are global wholesale payments going? You mentioned you're in 60 countries; you do business a lot more. How is that business, in particular, doing? Thanks.

Michael Lawrence Mayo: Specifically, how is global wholesale payments going you mentioned, you're in 60 countries and your business a lot more how is that business in particular doing thanks.

Speaker Change: Right, Mike So I'm, sorry to tell you that Jamie actually left us because he's a leadership offsite. That's why he was here remote so I think he he loves to call my hands for better for worse. So.

But let me let me try to address some of your appliance end and without sort of speaking for Jamie here I think that you know when we talk about the.

Speaker Change: The impact of the geopolitical uncertainty on the outlook.

Jeremy Barnum: Right, Mike, so I'm sorry to tell you that Jamie actually left us because he had a leadership offsite. That's why he was here remotely. So I think he, he left the call in my hands for better or for worse. So, um, but let me try to address some of your points. And without sort of speaking for Jamie here, I think that

Part of the point there is to note that the U S is not isolated from that right. If we have you know global macroeconomic problems as a result of geopolitical situations, that's not only a problem outside the U S that affects the global economy, and therefore, the Washington, Therefore, our corporate customers etcetera etcetera. So.

Jeremy Barnum: So, and in that context, you know, keeping in mind what we always say, that we invest in a cycle, that we sort of go, we don't go into countries and then leave countries, etc. Obviously, we adjust around the edges, we manage risks, we do make choices as a function of the overall geopolitical environment, but broadly, the notion that we would pull back meaningfully from one of the key competitive strengths that this company has always had, which is its sort of global character, because of a particular moment politically would just be inconsistent with how we've always operated. And in terms of the wholesale payments business, you know, it's going great, it's, you know, we're taking share, there's been a lot of innovation there, a lot of, you know, investment in technology, a lot of connectivity to payment systems in different countries around the world. And yeah, I'm sure we'll give you more color in other settings.

Speaker Change: And in that context, you know keeping in mind, what we always say that investment cycle that we sort of go go we don't go into countries and then we have countries et cetera, obviously, we adjust around the edges. We manage risks we do make choices as a function of the overall geopolitical environment, but broadly the notion that we would.

Speaker Change: Hold back meaningfully from one of the key competitive strengths that this company has always had which is it's sort of global character because of a particular moment geo politically with just being consistent with how we've always operated.

Speaker Change: And in terms of wholesale payments business.

Speaker Change: Great. It's.

Speaker Change: You know, we're taking share there's been a lot of innovation. There are a lot of investment in technology, a lot of connectivity to payment systems in different countries around the world.

Speaker Change: And yeah I'm sure, we'll give you more color and and other settings on that but it's a good story, it's a nice thing to see.

Jeremy Barnum: Just as a follow up to that then, why is it doing great in terms of wholesale payments given the dislocations in the world from wars to supply chain changes and everything else? Why are wholesale payments doing great?

Speaker Change: Just as a follow up to that then why is it doing great in terms of wholesale payments given such the.

Speaker Change: Yeah, the dislocations in the world from worst supply chain changes everything else why its wholesale payments doing great.

Jeremy Barnum: Well, I think one of the things about payments businesses is that, in some sense, they're, I mean, recession proof is probably the wrong word. And, in any case, we're not dealing with a recession. But you know, we're talking fundamentally about moving.

Speaker Change: Well I think one of the things about payments businesses is that and sometimes they're I mean recession proof is probably the wrong word and in any case, we're not dealing with a recession, but you know we're talking fundamentally about moving money through pipes around the world and that's the thing that people need to do more or less no matter. What so that's one piece, but I think the other piece is that our willingness to it.

Jeremy Barnum: Moving money through pipes around the world is something that people need to do more or less.

Jeremy Barnum: But I think the other piece is that, you know, our willingness to invest.

<unk>, which has always been a focus of yours is one of the key things separating us in this business right now and so we are seeing the benefits of that.

Jeremy Barnum: has been a focus of yours.

Jeremy Barnum: is one of the key things separating us in this business right now. And so we are seeing

Jeremy Barnum: All right, thank you. Thanks, Mike.

Speaker Change: Alright, thank you.

Speaker Change: Thanks, Mike.

Speaker Change: Yeah.

Glenn Paul Schorr: Thank you. Our next question comes from Glenn Schorr with Evercore. Please proceed.

Speaker Change: Thank you. Our next question comes from Glenn Schorr with Evercore you May proceed.

Glenn Paul Schorr: Thank you. Your commentary with Ken's questions was great and clear on investment banking for the near term and this year. I have a bigger picture question in terms of you're always so good at spelling out where you're over-earning. Do you feel like you're under-earning on the investment banking side? And I just used some of your own numbers from the past of like, look, the market has added like $40 trillion of equity market cap and $40 trillion of fixed income market cap in the last 10 years, yet the wallet is like 20% plus below the 10-year average. So is there just a bigger upside, and it's just a matter of when, not if?

Glenn Paul Schorr: Thank you.

Glenn Paul Schorr: Your commentary with tens questions with great unclear on investment banking for the near term and this year I have a bigger picture question in terms of <unk>.

Glenn Paul Schorr: Good spelling out where you're over earning do you feel like you're under earning on the investment banking side and I just use some of your own numbers from the past up like the market has.

Glenn Paul Schorr: Like 40 trillion dollars of equity market cap and 40 trillion of fixed income market cap less 10 years.

Glenn Paul Schorr: Yes, the wallet is like 20% plus below the 10 year average so.

Does that is there just a bigger upside and it's just a matter of when not if.

Speaker Change: Yes, Glenn in short, yes, I mean, I think we're not shy about saying that we're under earning in investment banking right. Now clearly we're below you know cycle averages as you pointed out we've been talking about when do we get back to the pre pandemic wallet, but as you know and you know at this point.

Jeremy Barnum: Yeah, Glenn, in short, yes. I mean, I think we're not shy about saying that we're under earning in investment banking right now. Clearly, we're below, you know, cycle averages, as you point out. We've been talking about when we get back to the pre-pandemic wallet. But as you know, and you know, at this point, it was like March 2020, right? It was the beginning of the plague.

Speaker Change: It was like March 'twenty 'twenty right. It was the beginning of the pandemic. So it's like four years ago at this point so.

Speaker Change: Theres been GDP growth, especially in nominal terms during that period and you would expect the wallet to grow with that so I do think there's meaningful upside in the investment banking fee wallet as Ive noted there are some some headwinds I think particularly in M&A, but over time, you would hope that the amount of M&A is a function.

Jeremy Barnum: So it's like four years ago at this point. There has been GDP growth, especially in nominal terms, during that period. And you would expect the wallet to grow with that. So I do think there's meaningful upside in the investment banking fee wallet. As I've noted, there are some headwinds, I think, particularly in M&A. But over time, you would hope that the amount of M&A is a function of the underlying industrial logic rather than the, you know, regulatory environment. So you can see some mean reversion there. And yeah, so that's why we're sort of leaning in, engaging with clients, making sure that we're appropriately resourced for, you know, a more robust level of the wallet.

Speaker Change: The underlying industrial logic, rather than the regulatory environment. So you could see some mean reversion there and yeah. So that's why we're sort of leaning in we're engaging with clients, we're making sure that we're appropriately resource for you know a.

Speaker Change: A more robust level of the wallet and fighting for every dollar share.

Maybe one other follow up.

Speaker Change: Youre always investing you clearly get paid and growth across the franchise as you do.

Speaker Change: Hi.

Speaker Change: But relative to a lot of other banks that have been.

Speaker Change: Been keeping expenses a lot closer to flat.

Speaker Change: Do you envision an environment or maybe I should rephrase that what type of environment will have jpmorgan pulled back on this tremendous investment.

Speaker Change: Pending wave that you've been going through.

Speaker Change: Sure so.

Speaker Change: First thing to say it was just somewhat obvious where I'm going to say it anyway is that there are some like auto governors and best right like some portion of the expense base is directly related to revenue, whether it's volume related commissions, whether it's incentive compensation, whether it's other things. So there are some you know auto correcting.

Glenn Paul Schorr: Well, maybe one other follow-up. You're always investing, and you clearly get paid in growth across the franchise, as you do. But relative to a lot of other banks that have been keeping the expenses a lot closer to flat, do you imagine an environment, or maybe I should rephrase that, in which type of environment would JPMorgan have pulled back on this tremendous investment spending wave that you've been going through?

Speaker Change: <unk> element of the expense base that would happen automatically as part of our normal discipline. So that's 0.1 0.2 is that independently of the environment. We are always looking for efficiencies.

Jeremy Barnum: Sure, so... I think the first thing to say, which is somewhat obvious what I'm going to say.

Speaker Change: It's a little bit hard to see it and in a world where you know we're guiding to I guess now with the special assessment out of $91 billion of expenses.

Jeremy Barnum: https://www.thevenusproject.com

Speaker Change: Hard to tell a story about all the efficiencies that are being generated underneath but that is part of the DNA as a company that does have an MBA you all the time as we grind things out and get the benefits of scale and in and tried to extract that efficiency.

Jeremy Barnum: Autocorrecting Elements of the Expense Base That Would Happen Automatically as Part of the Normal Discipline. So, that's point one. Point two is that, independently of the environment, we are always looking...

Speaker Change: And I think to get to the heart of your question, which is okay, and what type of environment, we make different strategic questions and in the end I think that would be that's a little bit about what that environment is really like so if you talk about like a normal recession with visibility on the cycle.

Jeremy Barnum: It's a little bit hard to see it,

Jeremy Barnum: Where, you know, we're guiding to. I guess now with the special assessment added $91 billion in expenses, it's hard to tell a story about all the efficiencies that are being generated underneath, but that is part of the DNA as a company that does that.

Speaker Change: We change our long term strategic investment plans, which are always built out from a financial modeling perspective, assuming resilience through the cycle no we wouldn't.

Jeremy Barnum: All the time, as we, you know, grind things out, get the benefits of scale, and try to extract that efficiency. And I think to get to the heart of your question, which is, okay, in what type of environment would we have different strategic questions? And in the end, I think that that tells you a little bit about what that environment is really like. So if you talk about a normal recession with visibility into the cycle, would we change our long-term strategic investment plans, which are always built up from a financial modeling perspective, assuming resilience through the cycle? No, we wouldn't. But could there be some environments that, for whatever reason, change the business case for certain investments or even certain businesses that lead us to make

Speaker Change: Could there be some environments that for whatever reason change the business case for certain investments or even certain businesses that lead us to make meaningfully different strategic choices, yes, but that would be because it is.

Through the cycle analysis has changed for some reason I just don't see us fundamentally making strategically different decisions. If the strategic outlook is unchanged simply because of the business cycle in the short term.

Speaker Change: Awesome. Thank you.

Thanks.

Thank you. Our next question comes from Matt O'connor with Deutsche Bank You May proceed.

Speaker Change: Yeah.

Matt O'connor: Good morning.

One use of capital is to move them to the trading businesses.

Matt O'connor: <unk> then we did see it in the trading assets going up.

Matt O'connor: Which is probably you probably see it in all of them, but also up a lot year over year.

Speaker Change: But not necessarily translate into higher revenues and I know they don't like matchup necessarily each quarter, but maybe just elaborate like how you're leaning into trading with the balance sheet and how you expect that to benefit your.

Speaker Change: But not necessarily translate into higher revenues and I know they don't like matchup necessarily each quarter, but maybe just elaborate like how you're leaning into trading with the balance sheet and how you expect that to benefit your.

Jeremy Barnum: and Strategic Choices

Jeremy Barnum: You know, yes, but that would be because the cycle analysis has changed for some reason. I just don't see us fundamentally making different strategic decisions if the strategic outlook is unchanged simply because of the business cycle in the short term.

Speaker Change: Overtime.

Speaker Change: Yeah sure. So let me let me break this question down into a couple of different parts. So I think what Jamie It was sort of suggesting is that you know you can think of a concept that's kind of like strategic capital over tactical capital for lack of a better term and what he's kind of saying is that in a moment, where you were carrying a lot of excess capital for strategic reason.

Glenn Paul Schorr: Awesome. Thank you.

Matt O'connor: [inaudible] Thank you. Our next question comes from Matt O'Connor with Deutsche Bank. You may proceed.

Speaker Change: And you.

Speaker Change: Have the ability at least in theory to deploy portions of that with kind of like roll into relatively short duration assets or strategies or client opportunity isn't whenever a walmart for whatever reason and why.

Matt O'connor: Good morning. You mentioned one use of capital is to lean into trading businesses with your balance sheet. And we did see the trading assets going up QQ, which is probably seasonal, but also up a lot year over year, but not necessarily translated into higher revenues. And I know they don't necessarily match up perfectly each quarter. But maybe just elaborate on how you're leaning into the trading with the balance sheet and, you know, how you expect that to benefit you over time.

Speaker Change: Well it might be thought of as a tactical science. So he's just pointing out that that's an option that you have in and.

Speaker Change: The extent to which this quarter's increase in markets.

Markets are everybody is a reflection of that maybe a little bit but probably not.

Speaker Change: I agree with you that it's hard in any given quarter or two specifically length of changing capital in <unk> and <unk> to a change in revenue, there's just too many moving parts there but for sure. One thing. That's true is that you know the higher run rate of the markets businesses as a whole that.

Jeremy Barnum: Yeah, sure. So let me break this question down into a couple different parts.

Jeremy Barnum: So I think what Jamie was sort of suggesting...

Jeremy Barnum: to have the ability, at least in theory, to deploy portions of that into relatively short-duration assets or strategies or client opportunities at any moment, for whatever reason, in what might be thought of as a tactical sense.

Speaker Change: We talked about a second ago is linked also to higher deployment and our balance sheet into those businesses.

Speaker Change: As you well know, we pride ourselves on being extremely analytical and extremely disciplined in how we analyze capital liquidity balance sheet deployment, you know juice and capacity utilization et cetera in the markets business and we don't just chase revenue. We go after returns fully measured.

Jeremy Barnum: We are also linked to higher deployment of the balance sheet into those businesses. So, as you well know, we pride ourselves on being extremely analytical and extremely disciplined in how we analyze capital liquidity, balance sheet deployment, G-SIB capacity utilization, etc. in the markets business, and we don't just chase revenue. We go after returns fully measured. And that's part of the DNA, and we continue to do it, and we will. So that we are still operating under multiple...

You know that's part of the DNA and we continue to do it and we will so you know that.

Speaker Change: That we still are operating under multiple binding constraints and obviously the environment is complex so the ability to sort of throw it on a capital it up at opportunities is not quite that simple hours, but big picture.

Speaker Change:

Are clearly in a very very strong capital position, which is in no small part in anticipation of all the uncertainty, but it does also mean that if opportunities arise between now and when the Basel III game is final we are very well positioned to take advantage of those opportunities.

Jeremy Barnum: [inaudible]

Jeremy Barnum: and when the Basel III

Jeremy Barnum: We are very well positioned to take advantage of those opportunities.

Matt O'connor: Got it. And then just separately, within the consumer card businesses, you highlighted volumes are up 9% year-over-year, obviously, you know, still a very strong piece. Any trends within that that are worth noting in terms of, you know, changes in spend categories? either overall or among certain segments. Thank you.

Speaker Change: Got it and then just separately within the consumer card differences you highlighted volumes were up 9% year over year, obviously still a very strong pace.

Any trends within that are there.

Speaker Change: Loading in terms of changes in spend categories.

Speaker Change: Either overall or among certain segments. Thank you.

Speaker Change: Maybe a little bit Jimmy already alluded somewhat to this so I do think you know spend is fine, but not boomy broadly speaking I would say.

Jeremy Barnum: Spend is fine, but not boomy, broadly speaking, I would say.

Jeremy Barnum: You know, you can look at it a lot of different ways, inflation, cohorts, et cetera, but when you kind of triangulate that, you get back to this kind of flattish picture. There is a little bit of evidence of, you know, substituting discretionary spending for non-discretionary spending, and I think the single most notable thing is just this effect where, while it is true that real incomes have gone up in the lowest income cohorts, within that, there is obviously a probability distribution, and there is some, or rather just a distribution of outcomes, and there is some set of people whose real incomes are not up, And what you observe in the spending patterns of those people is, you know, some meaningful slowing rather than what you might have feared, which is sort of growth.

Speaker Change: Did you know you can look at it a lot of different ways inflation cohorts et cetera, but when you kind of triangulate thought you'd get back to this kind of flattish picture.

Speaker Change: There is a little bit of evidence of.

Speaker Change: Substituting out of discretionary and non discretionary.

I think the single most notable thing is just as a fact, where in the well. It is true that real incomes have gone up in the lowest income cohorts within that there's obviously, a probability distribution and there's some or rather just a distribution of outcomes and there are some set of people whose.

Speaker Change: Real incomes are not up there down and who are therefore struggling a little bit. Unfortunately.

Speaker Change: And what you observe in the spending patterns of those people is something meaningful slowing rather than what you might have feared which is sort of aggressive levering up. So I think that's you know maybe an economic indicator of sorts. Although this portion of the population is small enough that I'm not sure the reader cautious about.

Jeremy Barnum: I think that's, you know, maybe an economic indicator of sorts, although this portion of the population is small enough.

Jeremy Barnum: for the reader, the cost is that big.

Speaker Change: Big but it is encouraging from a credit perspective, because it just means that people are behaving rationally and and that's sort of normal post pandemic type of way.

Jeremy Barnum: But it is encouraging from a credit perspective because it just means that people are behaving kind of rationally and in a sort of normal post-pandemic type of way as they manage their own balance sheets. And that's sort of on the margin of good news from a credit perspective.

Speaker Change: As they manage their own balance sheets, and that's sort of the margin good news from a credit perspective.

Matt O'connor: Okay, that's helpful. Thank you very much.

Speaker Change: Okay. That's helpful. Thank you very much.

Gerard Sean Cassidy: Bye. Thank you. Our next question comes from Gerard Cassidy with RBC Capital Markets. You may proceed. Hi, Jeremy.

Thanks.

Speaker Change: Thank you. Our next question comes from Gerard Cassidy with RBC capital markets. You May proceed.

Gerard Sean Cassidy: Hi, Jeremy.

Jeremy Barnum: Hey Gerard, how are you doing?

Gerard Sean Cassidy: Hey, Gerard how are you doing good things.

Gerard Sean Cassidy: Good, thanks. Notwithstanding your guys' outlook for uncertainty, and of course Jamie talked about it in his shareholder letter and addressed it also on this call when he was here earlier, can you guys share, or can you share with us the color on what's going on in the corporate lending market in terms of spreads seeming to be getting tighter? You know, it's not reflecting, I don't think, a real fear out there in the global geopolitical world. And any color on what you guys are seeing in the leveraged loan market as well?

Gerard Sean Cassidy: Notwithstanding your guys outlook for uncertainty and of course, Jamie talked about it in the shareholder letter and addressed is also on this call. When he was here earlier.

Gerard Sean Cassidy: Can you guys hear or can you share with us the color on what's going on in the corporate lending market in terms of spreads seem to be getting tighter.

It's not reflecting I think a real fear out there in the global geopolitical world and any color just on what you guys are seeing in the leveraged loan market as well.

Jeremy Barnum: Right. So I think what's true about spreads in general, you know, just broadly credit spreads, including secondary markets and, you know, to some extent, the leveraged lending space, is that they're exceptionally tight. So I'm sure that's reversed a little bit in the last few days. But, you know, broadly throughout the quarter, we've really seen credit spreads tighten quite a bit. You even see that a little bit in our OCI this quarter, where, you know, losses in OCI that we would have had from higher rates have been meaningfully offset by tighter credit spreads in the portfolio. So broadly, you know, sort of in keeping with the big runoff that we saw in equity markets and the general sort of bullish tone, you saw quite a bit of credit spread tightening.

Speaker Change: Right. So I think what's true about spreads in general you know just broadly credit spreads, including secondary markets and you know to some extent the leverage lending space that they're exceptionally tight.

Speaker Change: I'm sure that's reversed a little bit in the last few days, but broadly throughout the quarter, we've really seen credit spreads tightened quite a bit you even see that a little bit in our OCI. This quarter or were you know losses in OCI that we would've had from higher rates have been meaningfully offset by tighter credit spreads in the portfolio. So broadly.

Speaker Change: Sort of in keeping with the big run up that we saw in equity markets and the general sort of a bullish tone you you saw quite a bit of a credit spread tightening that in secondary markets that I think has manifested itself a little bit in the leverage lending space in the normal way that it does and that you know there's a lot of you know.

Jeremy Barnum: That in secondary markets, that I think has manifested itself a little bit in the leveraged lending space in the normal way that it does. And that, you know, there's a lot of competition among providers for the revenue pool, and you start to see a little bit of loosening of terms, which always makes us a little bit concerned. And as we have in the past, you know, we are going to be very well prepared to lose share in that space if we don't like the terms. You know, we never compromise on structure there. So you are seeing a little bit of that. I think that, away from the leveraged lending space and the broader C&I space, there was

Speaker Change: Competition among providers for the revenue pool, and you start to see a little bit of loosening of terms, which always makes us a little bit concerned and as we have in the past you know we are going to be very well prepared to lose share in that space. If we don't like the terms you know we never we never compromise on structure there.

Speaker Change: So you are seeing a little bit of that I think that away from the leverage lending space in the broader C&I space. There was a moment you know a few months ago, where I think in no small part as a result of banks generally anticipating this more challenging capital environment and sort of disciplined and go a little bit their lending.

Speaker Change: We're seeing a little bit of widening actually in those corporate lending spreads I don't know if that trend has like survive you know the last few weeks and it taught us a little bit hard to observe in any case, but you know I would say broadly the dynamics are you know the tension between people trying to be careful with it.

Jeremy Barnum: Comment, you know, a few months ago, where I think, in no small part...

Jeremy Barnum: Unknown Attendee, David Karnovsky, Philippe Krakowsky, Manan Gosalia, JPMorgan Chase & Co.

Speaker Change: Our balance sheets, and the fact that overall asset prices and conditions are quite supportive and secondary market credit spreads have rallied a lot.

Gerard Sean Cassidy: Thank you. I guess, as a tie-in to that question and answer, we've read and seen so much about the private credit growth in this country by private credit companies. Can you give us some color on what you're seeing there as both a competitor but also as a client of JPMorgan, how you balance the two out where you may see them bidding on business that you'd like but, at the same time, you're supporting their business?

Speaker Change: Thank you and I guess, there's a tie in to that question and answer.

Speaker Change: We've read and seen so much about the private credit growth in this country by private credit companies.

Speaker Change: Can you give us some color on what Youre seeing there is both as a competitor, but also as a client of J P. Morgan how do you balance the two out where you may see them bidding on business that you'd like but at the same time, you're supporting their business.

Jeremy Barnum: Right, yeah. I think that tension between us as a provider of secured financing to some parts of the private credit, private equity community, you know, you're talking about different parts of the capital structure, but we do recognize that we compete in some areas, and we are clients of each other in other areas. You know, that's part of the franchise, and, uh... You know, it's all good. But narrowly on private credit, it is interesting to observe what's going on there. So I would say for us, the strategy there is very much to be product agnostic. It's not so much like, oh, is it private credit or is it syndicated lending? It's, you know, what does it take?

Speaker Change: Right, Yeah, I mean I.

Speaker Change: That tension between you know us as a provider of secured financing to some portions of the private credit private equity community you know youre talking about different parts of the capital structure, but we do recognize that that you know we compete in some areas and we are clients with each other in other areas and that's you know that's part of the franchise.

Speaker Change: As you know, it's all good at some level, but narrowly on private credit.

Speaker Change: It is interesting to observe what's going on there so I would say for us.

Speaker Change: The strategy there is very much to be product agnostic actually it's not so much like Oh is it private creditors of syndicated lending as you know what does it take to be good at this stuff and what it takes is stuff that we have and have always had and that we're very good at in each individual silos. So you have you know you need underwriting skill structure, even scale origin.

Jeremy Barnum: www.ncbi.nlm.nl

Jeremy Barnum: Distribution, Secondary Trading, Risk Appetite, Credit Analysis Capabilities, and you know, this is what we do, and we're really good at it. And you know, increasingly, what you see, actually, is that, as we do a little bit, as the private credit space gets bigger, it starts to make sense to actually bring in some co-lenders so that you can sort of do big enough deals without having undue concentration risks. I mean, even if you have the capital, you just may not want the concentration risk.

Speaker Change: Nation distribution secondary trading risk appetite part of analysis capabilities and you know this is what we do and we're really good at it and you know increasingly what do you see actually is that as you see us doing a little bit like the.

Speaker Change: Private credit space gets bigger.

Speaker Change: It starts to make sense to actually bring in some co lenders. So that you can sort of do big enough deals without having undue concentration risks I mean, even if you have the capital you just may not want the concentration risk and so in a funny way the private credit space becomes a little bit more like the syndicated lending space.

Speaker Change: Same time, the syndicated lending space being influenced a little bit by these private credit unit tranche structures gets pushed a little bit and the private credit direction in terms of like speed of execution and other aspects of how that business works. So.

Jeremy Barnum: At the same time, the syndicate is...

Jeremy Barnum: and other aspects of how the business works. So, you know, we're watching it. The competitive dynamics are interesting. Certainly, there's some pressure in some areas, but we really do think that our overall value proposition and competitive position here is second to none. And so, you know, we're looking forward to the future here.

Speaker Change: You know we're watching at the competitive dynamics are interesting certainly there's some pressure on some areas, but we really do think that our overall value proposition and competitive position here are second to none.

Speaker Change: So we're looking forward to the future here.

Jeremy Barnum: I appreciate the call. Thank you. Thank you. Our last question comes from Charles Peabody with Portales. Your line is open.

Speaker Change: I appreciate the color. Thank you.

Speaker Change: Thanks sure.

Speaker Change: Thank you our last question comes from Charles Peabody with Portelli. Your line is open.

Charles Peabody: Good morning. I have a couple of questions on the first Republic acquisition. Some of us obviously thought that would be a home run, and I'm glad to see that Jamie Dimon validated that in his annual letter. When you look at the first quarter, you know, it annualizes out to $2.7, $2.8 billion, you know, above the $2 billion that Jamie published in his letter. Now, I know you don't want to extrapolate that, but can you remind us what sort of cost savings you still have in that because this quarter did see expenses come down to $800 million. You're down from 900 million. And then secondly, is there an offset to that where the accretion becomes less and less? And that's why you don't want to extrapolate the 2728. So

Speaker Change: Good morning.

Charles Peabody: A couple of questions on the first Republic acquisition.

Some of that's obviously thought that would be a home run and I'm glad to see that Jamie Diamond validated that in his annual letter.

Charles Peabody: When you look at the first quarter.

Charles Peabody: Annualized to $2 72, 8 billion above the $2 billion at Janie published in the letter.

Charles Peabody: I know you don't want to extrapolate that but.

Speaker Change: Can you remind us.

Speaker Change: What sort of cost savings you still have in that because this quarter did see expenses come down to 800 million.

Speaker Change: Down from $900 million.

Speaker Change: And then Seth.

Speaker Change: Secondly.

Seth: Is there an offset to that where the accretion becomes less and less and that's why you don't want to extrapolate the $2 seven to eight.

Speaker Change: My first question.

Seth: Okay, Thanks, Charlie and I'm going to do my best to answer a question, while sticking to my sort of guns on not giving too much first republic's specific guidance, but I do think that that kind of.

Jeremy Barnum: Okay, thanks, Charlie. And I'm gonna do my best to answer your question while sticking to my sort of guns on not giving too much First Republic specific guidance, but I will.

Speaker Change: [noise] framework you are articulating is probably correct. So let me go through the pieces. So yes. The current quarter's results annualized to more than the 2 billion Jamie talked about yes, a big part of that reason is discount accretion, which was very front loaded as a result of short dated assets. So that's part of the reason that you see that converge.

Jeremy Barnum: But I do think that the...

Speaker Change: Yes, it's also true that we expect the expense run rate to decline later in the year.

Jeremy Barnum: Obviously, as I think, as I mentioned to you last quarter, from a full-year perspective, you just have the offset of the full-year calendarization effect. But there's maybe an embedded question in there too about, you know, we had talked about $2.5 billion of integration expenses. Integration is real, the expenses are real, and also the time spent on that is quite real. It's a lot of work for a lot of people. It's going well, but we're not done yet, and it takes a lot of effort. But broadly, I think that our expectations for integration expenses are probably coming in a bit lower than we'd originally assumed.

Speaker Change: As we continue making progress on integration, obviously as I think as I mentioned to you last quarter from.

Speaker Change: From a full year perspective, you just have the offset of the full year counters nation effect. There was maybe an embedded question in there too about you know we had talked about two and a half a billion dollars of integration expense.

Speaker Change: And you know the integration is real all the expenses are real and also the time spent on that is quite real and so a lot of work for a lot of people, it's going well, but we're not done yet on that.

Speaker Change: It takes a lot of effort, but broadly I think that our expectation for integration expense are probably coming in a bit lower than we'd originally assumed on the morning of the deal for a couple of reasons one is that.

Jeremy Barnum: Page PAGE of NUMPAGES www.verbalink.com

Jeremy Barnum: I think the framework around the time was understandably quite conservative and sort of assumed that we would kind of lose a meaningful portion of the franchise and would sort of need to size the expense base accordingly. And of course, it's worked out, to your point, quite a bit better than that, and therefore, the amount of expenses that is necessary to keep this bigger franchise is higher, and that means less integration expenses associated with taking down those numbers. It's probably also true that the integration assumptions were conservative. You know, they were based on some kind of

Speaker Change: The framework.

Speaker Change: Around the time was understandably quite conservative and sort of assumed that we would kind of lose a meaningful portion of the franchise and would sort of need to size the expense base accordingly.

Speaker Change: And of course, its worked out to your point quite a bit better than that and therefore the amount of expenses that is necessary to keep this bigger franchise is higher and that means less integration expense associated with taking down those numbers. It's probably also true that the integration assumptions were conservative you know they were based on kind of more tips.

Jeremy Barnum: more typical type of man-gamma-nay assumptions as opposed to the particular nature of this deal, including the FDIC and so on and so forth. So yeah, I think that probably is a pretty complete answer to your question. Thanks, Charlie.

Speaker Change: Or type of bank M&A assumptions as opposed to the particular nature of this deal, including the FDIC and so on and so forth.

So yeah, I think that's probably a pretty complete answer your question. Thanks Charlie.

As a quick follow up.

Jeremy Barnum: There's a quick follow-up. You know, where are the next home runs going to come from?

Speaker Change: Where are the next homeruns is going to come from it and this is more strategic beyond just J P. Morgan.

Charles Peabody: And this is more strategic beyond just JPMorgan. But, you know, there's probably going to be more regional bank failures, whether it's this year or next year, and opportunities to pick those up. But what you're seeing is that private equity and family offices are setting up to participate in this next round of bank failures. Do you know Mnuchin's buying of NYCB is clearly to create a platform for the roll-up of failed banks? And then there are other family offices that have filed shelf registrations for bank holding companies whose specific purpose is to buy failed banks. So where do you think that these opportunities are going to be competed away by private credit? And as part of that, do you think the regulators are going to view private credit as a different party?

Speaker Change: They're probably going to be more regional bank failures, whether its this year next year and opportunities to pick those up.

Speaker Change: But what youre seeing is that private equity and family offices are setting up to participate in this next round of bank failures.

<unk> is clearly to create a platform for roll ups of failed banks.

Speaker Change: And then there are other family offices that have filed shelf registration score bank holding companies, whose specific purpose is to buy buildings. So weird.

Speaker Change: Do you think that these opportunities are going to be competed away by my private credit and as part of that do you think the regulators are going to be private credit.

Speaker Change: A different.

Speaker Change: Party and less attractive party versus bank takeovers at Fairbanks.

Speaker Change: That's my question.

Jeremy Barnum: Right.

Speaker Change: Right, Okay, and Charlie Theres, a lot in there and to be honest I, just don't love the idea of spending a lot of time on this call are speculating about bank failures like who you are.

Jeremy Barnum: You obviously have a particular view about the next wave in the landscape. I'm not going to bother debating that with you. But, you know, I guess I'll just try to say a couple of things to best answer your question. Like, as we talked about earlier.

Charles Peabody: Obviously, you have a particular view about the next wave in the landscape I'm not going to fall.

Speaker Change: Other debating that with you.

But you know I guess, let me just try to say a couple of things doing my best answer to your question like.

Jeremy Barnum: As we talked about earlier...

Speaker Change: We talked about earlier you know we have a lot of capital and you know as Jamie says the capital's earnings in store and right now we don't see a lot of really compelling opportunities to deploy the capital.

Jeremy Barnum: Capital. And, you know, as Jamie says, capital is earnings in store. And right now, we don't see a lot of really compelling opportunities to deploy capital. But you know, if opportunities arise, despite the uncertainty about the Basel III endgame, we will be well positioned to deploy it. I think embedded there is also sort of a question about the FDIC and the FDIC's attitude towards different types of bidders. And obviously, there's a lot of thinking and analysis happening about the entire process and some recent forums and speeches on bank resolution, and so on and so forth. And, you know, I think we can all agree that it's better, although it's equal for the system, to have as much capital available and as many different types of capital available to ensure that things are stabilized if anything ever goes wrong. But the mechanics of how you do that when you're talking about banks are not trivial and should not be underestimated. So I guess that's probably as much as I have on the

Speaker Change: But if it offered introduce arise despite the uncertainty about the Basel III, we will be well positioned to deploy it I think embedded there is also sort of a question about the FDIC and the <unk> attitude towards different types of bidders and obviously theres a lot of you know.

Speaker Change: Thinking and and and analysis happening about the entire process and some recent forums and speeches on bankruptcy solution and so on and so forth.

Speaker Change: I think probably we can all agree that it's better all else equal for the system to have as much capital available in as many different types of capital available.

Speaker Change: To ensure that things are stabilized if if anything ever goes wrong, but the mechanics of how you do that when you're talking about banks are are not trivial and not to be underestimated. So.

Speaker Change: I guess, that's probably as much as I have on that.

Jeremy Barnum: Thank you.

Operator: We have no further questions at this time. Thank you, everyone. Thank you all for participating in today's conference. You may disconnect at this time and have a great rest of your day.

Thank you.

Speaker Change: Thanks.

Okay.

Speaker Change: We have no further questions at this time.

Speaker Change: Thank you everyone.

Speaker Change: Thank you all for participating in today's conference you may disconnect at this time and have a great rest of your day.