Q3 2024 JPMorgan Chase & Co Earnings Call

Speaker Change: Good morning, ladies and gentlemen. Welcome to JPMorgan Chases III, 2,024 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.

Operator: Order 2024 earnings call. This call is being recorded. Your line will be muted for the duration of the call.

Operator: We will now go live to the presentation. The presentation is available on JP Morgan Chase's website. Please refer to the disclaimer in the back concerning forward-looking statements. Please stand by.

Speaker Change: The presentation is available on JPMorgan Chase's website. Please refer to the disclaimer in the back concerning forward-looking statements. Please stand by.

Operator: At this time, I would like to turn the call over to JP Morgan Chase's Chairman and CEO, Jamie Dimon, and Chief Financial Officer, Jeremy Barnum.

Speaker Change: At this time, I would like to turn the call over to JPMorgan Chase's Chairman and CEO, Jamie Dimon, and Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead.

Operator: Mr. Barnum, please go ahead. Thank you.

Jeremy Barnum: I'm Good morning, everyone. Starting on page one, the firm reported net income of $12.9 billion, EPS of $4.37 on revenue of $43.3 billion with an ROGCE of 19%. Touching on a couple of highlights, and CCB, we ranked number one and retail deposit chair for the fourth straight year. In CIV, both IV fees and markets revenue were notably off year on year, reflecting strength across the franchise. In AWM, we had a record quarterly revenues and record long-term flows. Now, turning to page two for the firm-wide results. The firm reported revenue of $43.3 billion off $2.6 billion, or 6% year on year.

Jeremy Barnum: Thank you, I'm good morning, everyone. Starting on page 1, the firm reported net income of $12.9 billion, EPS of $4.37 on revenue of $43.3 billion with an ROTC of 19%.

Jeremy Barnum: Touching on a couple of highlights, and CCB, we ranked number one in Retail Deposit Share for the fourth straight year. In CIB, both IBCs and markets revenue were notably off-year on-year, reflecting strength across the franchise.

Jeremy Barnum: and AWS, we had a record quarterly revenues and a record long-term flows. Now, we're turning to page two for the far and wide results.

Jeremy Barnum: The firm reported revenue 43.3 billion of 2.6 billion or 6% year on Europe.

Jeremy Barnum: An IIX markets was up $274 million, or 1%, driven by the impact of balance sheet mix and securities reimbursement, higher revolving balances in card, and higher wholesale deposit balances. Predominantly offset by lower deposit balances in banking and local management, and then deposit margin compression. And IIX markets was up $1.8 billion, or 17%, but excluding the prior years in that investment securities losses, it was up 10% on higher asset management and investment banking fees. An market's revenue was up $535 million or 8% year on year. Expenses of $22.6 billion were up $888 million, or 4% year on year, driven by compensation, including revenue-related compensation and growth and employees, partially offset by lower legal expense.

Jeremy Barnum: An IIX Markets was up 274 million, or 1%, driven by the impact of balance sheet mix and securities reinvestment, higher revolving balances in card, and higher wholesale deposit balances.

Jeremy Barnum: Predominantly Offset by lower deposit balances in banking and love management and then deposit margin compression.

Jeremy Barnum: and IRX Markets was off 1.8 billion or 17% but excluding the prior years in that investment security's losses, it was up 10% on higher asset management and investment banking fees.

Jeremy Barnum: and Marcus Revenue was up 535 million or 8% year on year.

Jeremy Barnum: Expenses of 22.6 billion, were off 808 million or 4% year on year, driven by compensation, including revenue-related compensation and growth and employees, partially offset by lower legal expense.

Jeremy Barnum: And credit costs were $3.1 billion, reflecting net charge-offs of $2.1 billion, and in that reserve building $1 billion, which included $882 million in consumer, primarily in card, and $144 million in wholesale. That charge offs were up $590 million year on year, predominantly driven by card.

Jeremy Barnum: and CardiCost were 3.1 billion reflecting net charge off of 2.1 billion and in that reserve building 1 billion, which included 882 million in consumer primarily in card and 144 million in wholesale.

Jeremy Barnum: Manchard jobs were of 590 million year on year, predominantly driven by car.

Jeremy Barnum: On to balance sheet and capital on page 3, we ended the quarter with a C-T1 ratio of 15.3%, flat versus the prior quarter as net income and OCI gains were offset by capital distributions and higher RWA. This quarter is RWA reflects higher lending activity, as well as higher client activity and market moves on the trading side. We added $6 billion of net common share repurchases this quarter, which in part reflects the deployment of the proceeds from the sale of these shares, as we have previously mentioned.

Jeremy Barnum: Under Balanced Edent Capital, and Page III.

Jeremy Barnum: We ended the quarter with a C-T1 ratio of 15.3% blood versus the prior quarter as netting common OCI gains were offset by capital distributions and higher RWA. This quarter is RWA reflects higher lending activity as well as higher client activity and market moves on the trading size.

Jeremy Barnum: We added 6 billion of net common share repurchases this quarter, which, in part, reflects the deployment of the proceeds from the share from the sale of visa shares, as we have previously mentioned.

Jeremy Barnum: Now let's go to our businesses, starting on CCB on page 4. CCB reported net income of $4 billion on revenue of $17.8 billion, which was down 3% year on year. In banking and wealth management, Correvenue was down 11% year on year, reflecting deposit margin compression and lower deposits, partially also by growth and wealth management revenue. Average deposits were down 8% year on year and 2% sequentially. We are seeing a slowdown in customer yields, he can activity, including in CD volumes, and expect deposits to be relatively flat for the remainder of the year. Klein investment assets were up 21% year on year, driven by market performance, and we continue to see strong referrals of new wealth management clients from our branch network.

Jeremy Barnum: Now, let's go to our businesses, starting on CCB on H4.

Jeremy Barnum: He's to be reported in that income of 4 billion on revenue of 17.8 billion, which was down 3% year on year.

Jeremy Barnum: In banking and wealth management, Correvinu was down 11% year on year, reflecting deposit margin compression and lower deposits, partially offset by growth and wealth management revenue.

Jeremy Barnum: Average deposits were down 8% year on year and 2% sequentially.

Jeremy Barnum: We are seeing a slowdown in customer yields to connectivity, including in CD volumes, and expect to posit to be relatively flat for the remainder of the year.

Jeremy Barnum: Klein investment assets were up 21% you on here, driven by market performance, and we continue to see strong referrals of new wealth management clients from our branch network. In a landing, revenue was up 3% you on here, driven by higher NII, partially offset by lower servicing and production revenue.

Jeremy Barnum: In a landing, revenue was up 3% year on year, driven by higher NII, partially offset by lower servicing and production revenue. Turning to card services in auto, revenue was up 11% year on year, driven by higher card NII on higher revolving balances. Card outstandings were up 11% to the strong account acquisition and the continued normalization of a wealth, and auto originations were 10 billion down 2% while maintaining strong margins and high quality credit. Expenses of 9.6 billion were up 5% year on year, predominantly driven by higher field and technology compensation, as well as growth and marketing.

Jeremy Barnum: Turning to card services in auto, revenue was up 11% year on year, written by higher card NII and higher revolving balances.

Jeremy Barnum: Card Outstanding's Rob 11% could destroy an account acquisition and the continued normalization of the vault. And an auto-originations were 10 billion down 2% while maintaining strong margins and high quality credit.

Jeremy Barnum: Expenses of 9.6 billion, roughly 5% year on year, predominantly driven by higher field and technology compensation, as well as growth and marketing.

Jeremy Barnum: In terms of credit performance this quarter, credit costs were 2.8 billion, driven by card, and reflected net charge loss of 1.9 billion out 520 million year. And in that reserve, build of 876 million predominantly from higher revolving balances.

Jeremy Barnum: In terms of credit performance this quarter, credit costs were $2.8 billion during my card and reflected net charge offs of $1.9 billion out of $520 million a year, and in that reserve build of $876 million predominantly from higher revolving balances. [inaudible]

Jeremy Barnum: Next, the commercial and investment bank on page 5. The CIV reported net income of 5.7 billion on revenue of 17 billion. IV fees were up 31% year on year, and we ranked number 1 with year-to-date wallet share of 9.1%. And advisory fees were up 10%, benefiting from the closing of a few more steals. Underwriting fees were up meaningfully, with that up 56% and equity up 26%, primarily driven by favorable market conditions. In light of the positive momentum throughout the year, we're optimistic about our pipeline, but the M&A and regulatory environment, and geopolitical situation are continued sources of uncertainty.

Jeremy Barnum: Next, the commercial and investment bank on page 5.

Jeremy Barnum: The CIV reported net income of 5.7 billion on revenue of 17 billion.

Jeremy Barnum: IVF, or up 31% year on year, and we ranked number 1 with year to date while at share of 9.1%. And advisory fees were up 10% benefiting from the closing of a few more steels. Underwriting fees were up meaningfully, with that up 56% and equity up 26% primarily driven by favorable market conditions.

Jeremy Barnum: In light of the positive momentum throughout the year, we're optimistic about our pipeline, but the M&A and regulatory environment and geopolitical situation are continued sources of uncertainty.

Jeremy Barnum: Payments revenue was 4.4 billion, up 4% year on year, driven by fee growth and higher deposit balances, largely offset by margin compression. Moving to markets, total revenue was 7.2 billion, out 8% year on year. Fixing income was flat, reflecting our performance in currencies and emerging markets, and lower revenue in rates. Equity was up 27%, reflecting strong performance across regions, largely driven by a supportive trading environment in the US and increased late core activity in Asia. Security services revenue was 1.3 billion, out 9% year on year, largely driven by fee growth on higher market levels and volumes.

Jeremy Barnum: Payments revenue was 4.4 billion up 4% year on year, proven by Fee Growth and Higher Deposit Valences, largely offset by margin compression.

Jeremy Barnum: Moving to markets, Total Revenue was 7.2 billion of 8% of your on-ear.

Jeremy Barnum: Fixing Home was flat, reflecting our performance in currencies and emerging markets and lower revenue in rates. Equity is was up 27% reflecting strong performance across regions, largely driven by a supportive trading environment in the U.S. and increased late core activity in Asia.

Jeremy Barnum: Security Services Revenue was 1.3 billion, up 9% year, largely driven by fee growth on higher market levels and volumes.

Jeremy Barnum: Expenses of 8.8 billion were down 1% year, with lower legal expense predominantly offset by higher revenue-related compensation and growth and employees, as well as higher technology spend. Average banking and payment loans were down 2% year on year and down 1% sequential. In the middle market and large corporate client segments, we continue to see softness in both new loan demand and revolver utilization, and part to the client's access to receptive capital markets. In multi-family, while we are seeing encouraging signs and loan originations as long-term rates fall, we expect overall growth to remain muted in the near-term as the originations are offset by payoff activity.

Jeremy Barnum: Expenses of 8.8 billion were down 1% year, with lower legal expense predominantly offset by higher revenue-related compensation and growth and employees, as well as higher technology spend.

Speaker Change: I've read banking and payments loans were down 2% year on year and down 1% eventually.

Speaker Change: In the middle market and large corporate client segments, we continue to see softness in both new loan demand and revolving utilization, and part to the client's access to receptive capital markets.

Speaker Change: and Multifamily while we are seeing encouraging signs and loner of generations as long-term rates fall. We expect overall growth to remain muted in the near-term as the generations are offset by payoff activity.

Jeremy Barnum: Average client deposits for up 7% year on year and 3% sequentially, primarily driven by growth from large corporate and payments and security services. Finally, credit costs were 316 million, proven by higher net lending activity, including in markets and downgrades, partially offset by improved macroeconomic variables.

Speaker Change: Average client deposits for up to 7% year on year and 3% sequentially, primarily driven by growth from large corpus in payments and security services.

Speaker Change: Finally, credit costs were 316 million proven by higher net lending activity, including in markets and downgrades, partially offset by improved macroeconomic variables.

Jeremy Barnum: Then, to complete our lens of business, AWM on page 6. Asked in all management reported net income of 1.4 billion, with pre-tax margin of 33%. For the quarter, revenue of 5.4 billion was up 9% year on year, driven by growth and management fees on higher average market levels and strong net inflows, investment valuation gains compared to losses in the prior year, and higher brokerage activity, partially offset by deposit margin compression. Expenses of 3.6 billion, or up 16% year on year, predominantly driven by higher compensation, including revenue-related compensation and continued growth and our private banking advisor teams, as well as higher distribution fees and legal expense.

Speaker Change: Then, to complete our lines of business, AWM on page 6.

Speaker Change: Acid in all of management, reported an ending come of 1.4 billion with pre-tax margin of 33%.

Speaker Change: For the quarter, revenue of 5.4 billion was up 9% year on Europe, driven by growth in management fees on higher average market levels and strong net inflows, investment valuation gains compared to losses in the prior year, and higher brokerage activity, partially offset by deposit margin compression.

Speaker Change: Expenses of 3.6 billion or up 16% year on year, predominantly driven by higher compensation, including revenue-related compensation and continued growth and our private banking advisor teams, as well as higher distribution fees and legal expense.

Jeremy Barnum: For the quarter, long-term net inflows were $72 billion, led by fixed income and equities. And in liquidity, we saw net inflows of 34 billion. AWM of 3.9 trillion in client assets of 5.7 trillion, will both up 23%, driven by higher market levels and continued net inflows. And finally, loans were up 2% quarter-on-quarter and deposits were up 4% quarter.

Speaker Change: For the quarter long-term net implos were 72 billion, led by 16 common equities. And then liquidity, we saw an inflow of 34 billion.

Speaker Change: A.O.M. of 3.9 trillion in coin assets of 5.7 trillion will both up 23% through my higher market levels and continued net inflows. And finally, loans were up 2% for run quarter and deposits were up 4% for run quarter.

Jeremy Barnum: Turning to corporate on page 7, Corporate reported net income of 1.8 billion. Revenue was 3.1 billion, up 1.5 billion year on year. And I was 2.9 billion, up 932 million year on year, predominantly driven by the impact of balance sheet max and securities reinvestment, including from prior quarters. And IR was a net gain of 155 million compared with a net loss of 425 million in the prior year, predominantly driven by lower net investment securities losses this quarter. Expenses of 589 million were down 107 million year on year.

Speaker Change: Turning to Corporate on V87.

Speaker Change: Corporate reported net income of 1.8 billion. Revenue was everything 1 billion of one and a half billion year on year. And now I was 2.9 billion, up 932 million year on year. Predominantly driven by the impact of balance sheet mix and securities reimbursement, including from prior quarters.

Speaker Change: An IR was a net gain of 155 million compared with a net loss of 425 million in the prior year. Predominantly driven by lower net investment securities losses this quarter.

Speaker Change: Expenses of 589 million were down 107 million year on year.

Jeremy Barnum: To finish off, let's turn to the outlook on page 8. We now expect 2024 NIX markets to be approximately 91.5 billion in total NII to be approximately 92.5 billion. Our outlook for adjusted expense is now about 91.5 billion. And given where we are in the year, we included on the page the implied fourth quarter guidance for NII and adjusted expense. And note that the NII numbers imply about 800 million of markets NII in the fourth quarter. On credit, we continue to expect the 2024 card net target operate to be approximately 3.4%.

Speaker Change: To finish off, let's turn to the outlet on page 8. We now expect 2024 NII X-Markets to be approximately 91.5 billion and total NII to be approximately 92.5 billion.

Speaker Change: Our outlook for adjusted expense is now about 91.5 billion.

Speaker Change: And given where we are in the year, we included on the page the implied fourth quarter guidance for NII and adjusted expense. And note that the NII numbers imply about 800 million of markets NII in the fourth quarter.

Speaker Change: On credit, we continue to expect the 2024 card net charging offer aid to be approximately 3.4%.

Jeremy Barnum: So, to wrap up, we'll please with another quarter of strong operating performance. As we look ahead to the next few quarters, we expect results will be somewhat challenged as normalization continues. But we remain upbeat and focused on executing in order to continue delivering excellent returns through the cycle.

Speaker Change: So, to wrap up, we'll please with another quarter of strong operating performance. As we look ahead to the next few quarters, we expect results will be somewhat challenged as normalization continues. But we remain upbeat and focused on executing in order to continue delivering excellent returns through the cycle.

Operator: And with that, let's open the line for Q&A. Thank you. Please stand by.

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

Jim Mitchell: Our first question will come from the line of Jim Mitchell from C. Port Global Securities. You may proceed.

Speaker Change: Our first question will come from the line of Jim Mitchell from C.Port Global Securities. You may proceed.

Jeremy Barnum: Hey, good morning. So Jeremy, as you highlighted, full year and I got supplies, you know, sizable drop in Q4 and I X Markets, about 6%. So, can you just maybe discuss what are the largest drivers of the sequential decline, including any initial thoughts on deposit behavior and pricing since the 50 basis point cut? And since it's related, I'll just throw out my follow-up question. I realized the forward curve is moving around a lot, but, you know, since Dan brought it up a month ago. Can you frame how you're thinking about the NII trajectory for 25?

Jim Mitchell: Hey, good morning. So Jeremy, as you highlighted...

Jim Mitchell: Full year NII got supplies, but you know, size will drop.

Jim Mitchell: and Q4 and I X-Markets, about 6% so can you just maybe discuss...

Jim Mitchell: What are the largest drivers of the sequential decline, including any initial thoughts, on the positive behavior and pricing since the 50 basis point cut? And since it's related, I'll just throw out my follow-up question. I realized the forward curve is moving around a lot, but since Dan brought it up a month ago, can you frame how you're thinking about the NII trajectory for 25? Thanks.

Jeremy Barnum: Thanks. Yeah, sure, Jim. I'll try to sort of answer both questions together. That's fine, Bill. So, as we said here today, you know, the biggest single driver of this sequential decline isn't fact. There were expecting, isn't fact the yield curve. So, you know, that yield curve has changed a little bit since Daniel made this comment at the conference earlier in the quarter, but not that significantly. In terms of deposit balances, which is obviously another important factor here in light of the starting the cutting cycle. It feels to us like right now, as I mentioned in my prepared remarks for consumer, we're pretty much in the trough right now as we speak.

Speaker Change: Yeah, sure, Jim. I'll try to answer both questions together. That's my ability. So as we hear today, you know, the biggest single driver is of the sequential declines is in fact that we're expecting is in fact the yield curve. So, you know, that yield curve has changed a little bit since Daniel made his comment at the conference earlier in the quarter, but but not that significant.

Speaker Change: In terms of deposit balance, which is obviously another important factor here in might of the starting the cutting cycle.

Speaker Change: It feels to us, like right now, as I mentioned in my prepared remarks for consumer, we're pretty much in the trough right now, as we speak, you know, when you look at yield-seeking behavior, that has come down quite a bit, so that's no longer as much of a headwind all else being equal. And then if you look at checking account balances...

Jeremy Barnum: You know, when you look at yield-seeking behavior, that has come down quite a bit, so that's no longer as much of a tip of a headwind, all being equal. And then if you look at checking account balances, those have been pretty stable for some time, which we see as an indication that consumers are kind of done spending; not enough cash buffers. So, that's kind of supportive for consumer deposit balances. And in that context, the other relevant point is the CDMAX where, you know, with the raid cuts coming, we expect the CD balances to price down, you know, with pretty high betas and probably the CDMAX actually peaking around now.

Speaker Change: Those have been pretty stable for some time, which we see as an indication that consumers are kind of done spending not a cat-catch buffers. So that's kind of supportive for consumer deposit balances, and in that context, the other relevant point.

Speaker Change: is the CDMIX where, you know, with the rate cuts coming, we expect the CD balances to price down, you know, with pretty high betas, and probably the CDMIX actually peaking around now. And then as you move to wholesale, we've actually already been seeing a little bit of growth there. And when you combine that with the sort of increasing view that many people in the market have, but it's likely that the end of UT will be announced sometime soon. That's also a little bit supportive for deposit balances.

Jeremy Barnum: And as you move to wholesale, we've actually already been seeing a little bit of growth there, and when you combine that with the sort of increasing view that many people in the market have, but it's likely that the end of QT will be announced sometime soon. That's also a little bit supportive to deposit balances. So, maybe I'll, well, I guess then you also asked me a little bit about next year. So, I guess one thing to say, right, is that we did have a sequential increase in an AI disorder, and as you may recall, at Investor Day, I said that there was some chance that we would see sequential increases followed by sequential decline, and the people should avoid kind of drawing the conclusion that we'd hit the trough when that happened.

Speaker Change: So...

Speaker Change: Maybe I'll, well I guess then you also asked me a little bit about next year so I guess one thing to say right is that we did have a sequential increase in NII this quarter and as you may recall at investor day I said that there was some chance that we would see sequential increases followed by sequential declines and the people should avoid kind of drawing the conclusion that we'd hit the trough when that happened so that's essentially exactly what we're seeing now but from where we sit now given the yield curve swimming yield curve materializes obviously we do see a pretty clear picture of sequential declines at NIIX markets.

Jeremy Barnum: So, that's essentially exactly what we're seeing now, but from where we sit now, given the yield curve, swimming the yield curve materializes obviously, we do see a pretty clear picture of sequential declines at an AIX markets. But the trough may be happening sometime in the middle of next year, which point, you know, the combination of balances, carnival growth, and other factors can, you know, return us to sequential growth. Obviously, we're guessing it's pretty far out in the future, and we'll give you four more guidance on all this stuff next quarter, but I think that gives you, you know, a bit of a framework for it.

Speaker Change: But the trough may be happening sometime in the middle next year, which point, you know, the combination of balances, card revolve growth, and other factors, can return us to sequential growth, obviously. We're guessing it's pretty far out in the future, and we'll give you formal guidance on all this stuff next quarter, but I think that gives you a bit of a framework to work with.

Unknown Attendee: of Liz.

Unknown Attendee: Alright, thanks a lot. Thanks. Thank you.

Speaker Change: Alright, thanks a lot.

Speaker Change: Thanks. Thank you.

Steven Chubak: Next, we'll go to the line of Steven Chubak with Wolf Research. You may proceed.

Speaker Change: Thank you. Next, we'll go to the line of Stephen Chubar with Wolfe Research. You may proceed.

Steven Chubak: Hi, good morning. So, Jeremy, how are you?

Speaker Change: Hi, good morning.

Speaker Change: so jere me i

Jeremy Barnum: So, I do want to ask on expenses just in light of some of the comments that Daniel had made recently. Just noting that content is expense forecast for next year, looked a little bit too light. I believe at the time, it was just below 94 billion. If we just for the one time or this year, that would suggest a core expense base that's just below 90. So, pretty healthy step up in expenses. I know you've always had a strong commitment, discipline around investment. Just want to better understand where those incremental dollars are being deployed.

Speaker Change: How are you? So I do want to ask on expenses just in light of some of the comments that...

Speaker Change: Daniel had made recently, just noting that content is expensive for cash for next year. Looked a little bit too light, I believe at the time it was just below 94 billion.

Speaker Change: If we'd just for the one timers this year...

Speaker Change: that would suggest a core expense base that's just below 90. So a pretty healthy step up in expenses.

Speaker Change: I know you've always had a strong commitment to discipline around investment. Just want to better understand where those incremental dollars are being deployed.

Jeremy Barnum: And just which investments are being prioritized in particular, looking out to next year. So, good question. I grew with your numbers. I grew with the way you've normalized this year for the one-time type of significant items. And also where the consensus was when Daniel made this comment. And while we're at it, I would also just remind you on the NII comments. At the time, the consensus for this year was 91 and a half. And for next year, it was 90. So, that was implying at the time. It's a quintal decline of one and a half.

Speaker Change: and just which investments are being prioritized and particular looking out to next year.

Speaker Change: All right, so good question, and I agree with your numbers. I agree with the way you've normalized this year for the one time type of a significant items.

Speaker Change: and also where the consensus was when Daniel made his comments and while we're at it I would also just remind you on the NII comments at the time the consensus for this year was 91 and a half and for next year it was 90 so that was implying at the time as sequential decline of 1 and a half and it was because we thought that decline wasn't big enough that we made comments that we...

Jeremy Barnum: And it was because we thought that decline wasn't big enough that we made comments that we made.

Jeremy Barnum: So, I'm happy to expand more on that. But anyway, to expenses. Yeah. So, if you start with the sake of argument with the base of 90, obviously inflation is normalizing. And obviously we're always trying to generate efficiencies to offset inflation. But, you know, that having been said, that if you're some three percent of the sake of argument on that base, that's a few billion dollars right out of the gates, that we're working again. So that's one thing. The other thing is that we have continued to execute our growth throughout these this year. So, there's a not insignificant amount of annualization.

Speaker Change: Management, so I'm happy to expand more on that. But anyway, to expenses, yeah, so if you start for the sake of argument with the base of NID, obviously inflation is normalizing and obviously we're always trying to generate efficiencies to offset inflation. But...

Speaker Change: You know, that haven't been said, if you're some three percent of the sake of argument on that base, that's a few billion dollars wide out of the gates.

Speaker Change: that we're working against. So that's one thing. The other thing is that we have continued to execute our growth strategies this year, so there's a not insignificant amount of annualization. You can't quite see that in the fourth quarter numbers, because of...

Jeremy Barnum: You can't quite see that in the fourth quarter numbers because of the seasonality of incentive comp. But if you were to strip that out, you would see probably some sequential increases. And so, the thing that annualization as an additional head of end. The other thing that's worth noting is that we do, you know, expect fees and volume-related businesses to grow next year. And so, all else being equal, that would come with a higher expense loading. So, when you assemble those, you know, that goes a long way to explain why sort of that content of summer that slightly below 94 just seemed light.

Speaker Change: of the seasonality of incentive comp. But if you were to strip that out, you would see probably some sequential increases, and so the common annualization as an additional headwind. The other thing that's worth noting is that we do expect fees and volume related businesses to grow next year. And so all else being equal, that would come with a higher expense loading. So when you assemble all those, that goes a long way to explain why sort of that consensus number that slightly below 94 just seemed light. In terms of priorities and investments, really nothing has changed. Like the strategy hasn't changed.

Jeremy Barnum: In terms of, you know, priorities and investments, really nothing has changed. Like the strategy hasn't changed. The strategy hasn't changed. And the plans haven't changed.

Jeremy Barnum: And we're just kind of executing with the same long-term perspective that we've always had.

Speaker Change: Strategy hasn't changed, and the plans haven't changed, and we're just kind of executing with the same long-term perspective that we've always had. I would note that relative to NII, obviously, we're in the third quarter now, not the fourth quarter, and the old days we didn't use to give you the guidance until investor day and late February , so we will give you formal expense guidance next quarter for both expenses and NII next quarter, but especially on expenses, we are in the middle of the budget cycle right now. So we probably have a little less disability there than we do at the margin on NII.

Jeremy Barnum: I would note that, relative to NII, obviously, we're in the third quarter now, not the fourth quarter.

Jeremy Barnum: And, you know, in the old days, we didn't use to give you the guidance until Investor Day in late February. So, we will give you formal expense guidance next quarter for both for expenses and NII next quarter. But especially on expenses, we are in the middle of the budget cycle right now, so we probably have a little less visibility there than we do at the margin. on the NII.

Jeremy Barnum: I can't just give you a bit of a view of expensive little bit of like, but you call expenses very often, I call investments, and you actually go back to investor day, and you'll see that we're adding private bankers in asset bulk management, we're adding ETF in asset bulk management, we're adding private bankers in international private banking, we're going to Chase bulk management, we've added some branches across the United States of America. We need a huge opportunity to innovation economy that takes bankers and certain technology. Stuff like that, go to a game share and everything you do we get really good returns on it, so I look at that. These are opportunities for us, these are not expenses that we have to actually punish ourselves on, and we do get and we show you kind of extensively, you know, the cost and productivity on various things. And also AI's is going to go up a little bit, and I would put that as a category of this. It's going to be generating great stuff over time.

Speaker Change: And can you give you a bit of a view of expensive or better life? And you call expenses very often, I call investments.

Speaker Change: and you actually go back to in Vustel III.

Speaker Change: You'll see that we're adding private bankers in Asimov management, we're adding ETF and Asimov management, we're adding private bankers and international private banking, we're going chase folk management, we've added some branches across the United States of America, we need a huge opportunity to innovation economy that takes bankers and certain technology and stuff like that, it'll also gain share, and everything we do, we get really good returns on it, so I look at that, these are opportunities for us, these are not [inaudible]

Speaker Change: Spencer that we have to actually punish ourselves on, and we do get, and we show you kind of extensively.

Speaker Change: Cosmic Productivity on various things, and also AI's is going to go up a little bit, and I would put those in categories that's going to be generally great stuff over time.

Unknown Attendee: Now, thank you both for the color. Just a quick follow-up for me, just drilling down into NII, it appears you redeploy the fair amount of cash or access reserves at the Fed into securities. We saw the yield expand, which was encouraging despite the pressure at both the long end and silver contraction in the corridor.

Speaker Change: Thank you both for the color. Just a quick follow-up for me, just drilling down into NII. It appears you redeployed a fair amount of cash or access reserves at the Fed, into securities. We saw the yield expand, which was encouraging despite the pressure at both the long end and so for contraction in the quarter. It was hoping you could just speak to your appetite to extendoration, this environment. I know that you had some aversion to that in the past, but do you anticipate redeploying additional access liquidity just amid the expectation for deeper raccox?

Jeremy Barnum: You know, so many of you could just speak through appetite to extenderation this environment. Now, I know that you've had some aversion to that in the past, but do you anticipate redeploying additional access liquidity just amid the expectation for deeper rate cuts? Yeah, sure. So, on extending durations, if you know this obviously, but I just think it's important to say that all SQL extending duration doesn't change expected in III if you assume that, you know, the policy rate follows the forward, right? So, 0.1, 0.2, the curve remains inverted, and so even if you don't believe that the policy rate follows the forward, extending right now is actually a headwind to defer term in III.

Speaker Change: Yeah, sure. So, on extending durations, if you know this obviously, but I just think it's important to say that all SQL extending duration doesn't change, expected an II, if you assume that the policy rate follows the forward, right? So, 0.1, 0.2, if you have a curve remains inverted, and so even if you don't believe that the policy rate follows the forward, extending right now is actually a headwind to foreterm an II, like that's not that wouldn't be a consideration for us either way, but I just think that's worth.

Jeremy Barnum: Like, that's not that wouldn't be a consideration for us either way, but I just think that's worth saying for the broader audience. It's quite different from the situation that you have with the numbers.

Speaker Change: Saying for the broader audience, it's quite different from...

Unknown Attendee: You know, people are more than 6%, so like, yeah.

Speaker Change: This is right now you're helping the numbers and the numbers are going by more than 6% so right, look at it.

Jeremy Barnum: Now, so when we think about the question of extending duration and really managing duration right now, a couple of things to say. So, obviously, a lot of different versions of duration, but one number that we disclose is the ER. When the 10-Q comes out, you'll see that that number is a little bit lower; it'll come down from 2.8 to about 2.1 if our current estimates are correct. That's for a number of reasons, some of which are passive, but some of those are active choices to extend duration a little bit. And in the end, the choice to manage and extend duration is really about balancing the volatility of an III against protecting the company from extreme scenarios on either side.

Speaker Change: Now, so when we think about the question of extending duration and really managing duration right now, a couple things to say, so obviously a lot of different versions of duration but one number that we disclose is the EAR, when the 10Q comes out, you'll see that that number is a little bit lower, it'll come down from 2.8 to about 2.1 if our current estimates are correct. That's for a number of reasons, some of which are passive, but some of those are active choices to extend duration a little. That's for a number of reasons, some of those are active choices to extend duration a little bit. That's for a number of reasons, some of those are active choices to extend duration, some of those are active choices to extend duration a little bit.

Speaker Change: And in the end, the choice to manage and extendoration is really about balancing the volatility of NII against protecting the company from extreme scenarios on either side. And so right now, if we wanted to expand as a result of these different factors, we certainly could. We have the capacity inside the portfolio, but for now we're comfortable with where we are.

Jeremy Barnum: And so, right now, if we wanted to expand as a result of these different factors, we certainly could; we have the capacity inside the portfolio. But, you know, for now, we're comfortable with what we are. And the one thing I assure you is the full curve will not be the same full curve in six months.

Speaker Change: and the one thing I assure you is the polar curve will not be the same polar curve in six months.

Unknown Attendee: Well, sir, well, thank you so much for taking my question. Okay, that's helpful. So it's kind of like you're a little bit above that, but, you know, there's still some pressure, but, you know, you're not dramatically above those levels.

Speaker Change: Well said, well thank you so much for taking my questions.

Speaker Change: Thanks dear.

Speaker Change: Thank you, next week we'll go to the line of Erica and Najarian from UBS, you may proceed.

Speaker Change: My first question, and thank you very much for answering all the NII questions so far, Jeremy.

Speaker Change: I guess another follow-up as you can imagine, once Daniel said what he said on stage in September , everyone's trying to figure out the over-under for net increase income next year. So maybe at two parts first question, the second being inspired by what Jamie just said. Number one, NII is expected to be down 6%, the quenchally and fourth quarter. I think year over year in 25, consensus has it down 4% from your new level. So it sounds like consensus still has room to come down and based on the forward curve Jeremy, it could be a little bit worse year over year than the fourth quarter sequential rate.

Speaker Change: But that being said, as you know, as Jamie noted, we have no idea what the curve is going to look like, right? It's gyrated so much. And so as we think about the curve, is it better for JP Morgan to have more cuts in the short end but steepness or less cuts but a little bit of a flatter curve? Yeah, that's right.

Speaker Change: Right, okay, you through Crowball at the end there, God wasn't expecting that to be the end of your question. But let me answer the beginning of your question and then I'll also answer the end of your question.

Speaker Change: So we see the current 2025 consensus for NII, X-Markets to be at currently at 87, which is obviously lower than it was at the conference early in the quarter, so we're happy to see that move a little bit more in line to us. That still looks a little puffy, but it's definitely in the ballpark.

Speaker Change: Now, that consists of, I already mentioned previously that we sort of expect the NII trough sometime in the middle of the year, so you can kind of assemble the parts. You've got a fourth quarter run rate, you've got some sequential declines, you've got a trough in the middle of the year, and you've got a rough ballpark for the full year, so you can imagine that the trough probably is a little lower than those numbers and then to the extent that growth revolved. [inaudible]

Speaker Change: Resume from the back of the year, both deposit balances and the ongoing.

Speaker Change: Tailwind of Card Revolve, although that tailwind will be a little bit less than you might have otherwise thought. I mean, sorry, a little bit less than it was this year, but still a tailwind, you know, obviously the mix of those things will play out in different ways. And as you point out, who knows what the yield curve will end up doing, but on our current assumptions, on the current yield curve and remembering that we're in the third quarter now, so we're doing this kind of early, that's what we think. Now, let me say some, first of all, next time I should give a dim number. I don't want to spend all time on this call, like going through with your guessing with NII is going to be next year. And I just kind of social point out that NII, all things being equal is a number, but all things are never equal.

Speaker Change: and the yield curve, you know, if you have a recession, the effect of the yield curve will be very different than you have continued growth. And there are decisions that are made non-stop by us and the things that happen in the marketplace. And I just, I think we spend too much time on just this relevancy, so you get a model and you're a number of your model. And so it's going to be less than 87 next year, probably not a lot. We don't know, and we don't know

Speaker Change: Good. Okay, now, to your question about the EAR, so...

Speaker Change: If you think it's set in there, so as I already mentioned, when that comes out, it'll show a number of run 2.1

Speaker Change: A very important thing to say is as you know, the experience of this raid cycle has been that our empirical AER is meaningfully higher than our model DAR, which is what we disclose. And the main reason for that is that retail deposit betas are, you know, have an actuality than lower than the model deposit betas. So as a starting point, you have to kind of adjust that EAR number to be bigger than the reported number, for those, and a few other reasons actually, there's some nuances around how the dollar and non-dollar sensitivity interact.

Speaker Change: and then there's your question which is a little bit about the front end versus the back end. So what you see is that actually...

Speaker Change: The front end EAR has gotten smaller, and most of the EAR is now in the back end, so it's definitely the case that all else being equal, a steeper curve is better for us, but I think what I would also say is that this kind of empirical versus theoretical adjustment is disproportionately in the front end, so therefore in order to answer your question I would say yes we want a steeper curve, but...

Speaker Change: Having the Fed caught more than what's currently in the yield curve is definitely at the margin for the context of next year's numbers. I had one, would be ahead, one process. We remain as a sense of two Fed cuts.

Speaker Change: And if I can ask my second question, and Jamie, I completely understand your frustration and to be fair, your long-term shareholders really don't care about whether it's 87 or 85, right? They care about your return on equity. To that end, I mean, it's insane how much capital you generate each quarter, 72 basis points this quarter. And so beyond the standard boilerplate questions you're going to get on buyback and organic growth, yada yada, dividend increases, how should we think about JP Morgan deploying this capital? I mean, the world is generally your oyster, right? You're dominant already and you should use this capital to further enhance your business.

Speaker Change: And again, beyond that boilerplate conversation that you always get every quarter, you know, how's your shareholders think about how you're thinking about the opportunities to deploy this capital?

Speaker Change: Okay, so first of all, I wish I'd done and I'd be very careful in that. We've got some very tough competition.

Speaker Change: You know, different, different countries, different around the world, a thin-tech companies, you know, direct landowners and I am going to be, I want to give you very specific comment on direct landings, stuff like that. So our goal is always to serve our clients.

Speaker Change: and I'm not sure about some of these expenses, that is a deployment capital.

Speaker Change: and it's a deployment of different weight from your open branches, initially experiencing an expense, but down below you capital support to deposits.

Speaker Change: and the same for the innovation economy, the same for private bankers, etc. If you look at it roughly, we have about a minimum 30-minute access capital.

Speaker Change: And for me, it's not bringing a hole in my pocket.

Speaker Change: I look at as you own the whole company and you can't properly deploy it now, it's perfectly reasonable to wait and I've been quite clear that I think the future could be quite turbulent

Speaker Change: and asset prices, in my view, and life you've got to take of you sometimes, are inflated. I don't know if they're streaming inflated or a little bit, but I prefer to wait. We will be able to deploy it. Our share will be very well served by this weighting. And you know, Sanctuary Deploying Capital, you'll be able to go buy 100 billion dollars, 6% mortgages, increase our net income by a couple billion tomorrow. We don't make decisions like that. The most important thing we do is serve our clients well, build a technology and do things like that. And we also know what the real excess capital is yet. So we know that we're a little patient. We're going to be a little patient and weight and it'll be fine. And so that's where we are and that's not going to change.

Speaker Change: and it would change as you go light it up.

Speaker Change: Thank you.

Speaker Change: And one last thing, Cash is a very valuable asset, sometimes in a turbulent world. And you see my friend, Warren Buffett, you know, is Doc Pine Cash right now. I mean, people feel a little more thoughtful about how we're trying to navigate this world and grow for the long term for our company.

Speaker Change: Thank you, our next question comes from Glenn Chore from Evercore ISI, you may proceed.

Glenn Chore: Hi, thanks very much and so glad Amy didn't say it was about to say because I said the answer to this question. So we've seen a couple more banks and foreign partnerships with all our managers. We've seen limited long growth for a few years now, market-related also. Limited flows into fixing compounds yet plenty of growth in private credit in general.

Speaker Change: and you're one of the best ass managers on the planet, but I, in my view, less dominant in all things private credits. So maybe you could talk about what things you're working on and why that's to narrow the view of your ability to serve.

Speaker Change: All parts of clients lending needs not just the public markets and public lending side. Thanks.

Speaker Change: yesso me take times to cover this one obviously is very become very important people talking about how to growing in partner things like that and so the first inform and this age about very strategic and then very tactnical i think they're both important first and foremost we are here to give our clients and agnotic view of the world and with the best products and servves are for them

Speaker Change: Therefore, when a client comes in, we will offer them both direct lending, ourselves and syndicate a lending. Well, it's a special life car lending, and they all have plus or minus direct lending, could be done faster, maybe simpler coverings, unit charge, it is more expensive, and you see a little things go back and forth between syndicate lending and rec lending, but we're going to offer the clients, basically which in their best interest and tell them what those products are, of course the thing.

Speaker Change: We mentioned before in the past that we allocated $10 billion of capital to make direct loans, we've actually deployed a lot of capital so it was already paid off, so I've been done. So we are going to do it directly and we are going to attend to be 20 to 30, not limited today. I will say today we're extending, we will do 500 million, we will do a billion, we'll do more billion, we'll do it so handed or we'll do with partners.

Speaker Change: Very importantly, we are not going to allocate ourselves to one partner. So we have, and I think we've announced a bunch of co-lenders, but that just creates more flexibility and more size. We're not going to use that flexibility to slow it down and have to get permission for everybody, because like I said, JP Morgan could underwrite it and own it like a bridge loan and syndicate it after the fact. And we're going to use our own risk measures and stuff like that. Again, all in the service of the client and making sure we're offering them the best thing. And we're going to different strategies. We're not going to target ourselves exclusively to one capital provider.

Speaker Change: I think that was the limit when we could offer our clients, probably we could be more price competitive, we could do some of this very specific thing and not the solution, if this is the third party capital provider, that's our strategy. We're going to be there, we're going to do it, and we're going to do it in spite of the fact that this capital arbitrage is taking place. So if you look at the arbitrage today, we're going to bank has to hold the thing, but in a certain way they are dramatically different. That's a disadvantage. That's a disadvantage.

Speaker Change: But we've had those just advantages and other things for a long time.

Speaker Change: Thank you, our next question comes from the line of Jared Cassidy from RBC Capital Market. Your line is open.

Jared Cassidy: Good morning, Jeremy and good morning, JAMI.

Jared Cassidy: Jeremy, when you guys look at your current capital ratios, they're obviously very healthy.

Jared Cassidy: Can you guys give us some color on the new Basel III? We don't know what the specifics are, but as Vice Chair Bar touched on some of the specifics, it looks like capital requirements for yourself and your peers will come down a fair amount from the original proposal. How are you guys thinking about that? And you have any insights on how much it may fall from the original proposal to where you are today?

Jared Cassidy: Yep, I said, let's 30-day VexS, that is a swimming bar speech.

Speaker Change: The age of 20 goes to 12, whatever it is, and more, we ill be more than that, because there are other factors involved now, I was just keeping the minimum excess capital, it might make you know my deal would be more, but it is what it is and we're waiting to see the final numbers.

Speaker Change: But Drew, maybe to give you a bit of color. So, yeah, obviously everyone paid a lot of attention to that speech, it was an important speech. But in the end, we actually just really need to see the proposal because the details matter a lot for this stuff. And so our focus is on hoping to see the proposal so that we can process the detail and continue advocating as appropriate. That's great.

Speaker Change: I know that you talk about requirements coming down relative to what was originally proposed, which is obviously true pro-the speech, but I do think we need to be a little bit careful.

Speaker Change: Not to fall into the trap of saying that that's like progress, just because the original proposal was...

Speaker Change: So, dramatically higher than what anyone thought was reasonable and I would remind you which you obviously know that

Speaker Change: Before this proposal came out, it was our position strongly felt that our then profaling, copper requirements were, if anything, already, more than we needed. So we got a long way to go here and I think our position, which Jamie has been articulating very consistently.

Speaker Change: and some ways that they need to get it right.

Speaker Change: is the right amount of work and importantly, do it holistically.

Speaker Change: it's not just start of you a its part of you a c b it see r soyou know bus really what we feel strong we use we want the numbers to be right and justify if they had to go up be fly with that too you just think they should be done with real diligence real thought and a little bit of thought about cost benefit would haveit does the economy would put where pushes things like that so anxious way you see the actual detail that's what's goingto make all difference

Speaker Change: I'm very good and then there's a follow-up.

Speaker Change: In view of this excess capital on your comments a moment ago about, you know, direct lending, you look at your current cash and marketable securities on a risk-weighted asset basis, you know, you put it in your presentation, of course, 1.5 trillion, average loan is 1.3 trillion, when everything, when the dust settles, you know what your capital requirements are. Can you frame now for us? Can you, is levering up the excess capital with more loans? Is that a path that might be considered over the next two or three years? Related to where you are on a mixed basis, I know you're going to grow your loans, but I'm not going to bet the mix. Absolutely positive enough, lower your outcome of doing good business, we want your good business, if it grows our balance, you will find.

Speaker Change: and FB.

Speaker Change: and I do think so. It depends a lot on what type of Walter talking about, right? So I think in the end of Jimmy's son, it's like...

Speaker Change: is capital, we're going to deploy it ideally to grow the franchise organically, and that could include, you know, loans that are almost, you know, good loans on a stand-alone basis, as well as loans that are part of an overall relationship where we're getting other revenue as part of that. So, this is the same strategy that we've always had, but I wouldn't think of it as like excess capital to be deployed against a pretty...

Speaker Change: and I think they're part of that, I would think of it as...

Speaker Change: You know, it's there for a rainy day, let's hope the environment doesn't deteriorate the log, but if it does, we'll be ready. And there'll be opportunities hopefully to deploy it against the client franchise or against the stock, and if not, you know.

Speaker Change: Overturn it.

Speaker Change: Very good. Appreciate the color and candor as always. Thank you.

Speaker Change: Thank you, our next question comes from the line of Maddo Connor with Deutsche Bank. You may proceed.

Speaker Change: I would say Matt generally know frankly with a couple of minor exceptions so I think it's probably fair to say that the outperformance late in the quarter in investment banking fees was to a meaningful degree as I mentioned driven by DCM as well as to some degree different by the acceleration of the closing.

Speaker Change: and some MNA transactions. And I do think that some of that DCM, how performance is in the types of deals that are opportunistic deals that aren't in our pipeline and those are often driven by treasurers and CFOs.

Speaker Change: sort of seeing improvement in market levels and jumping on those. So it's possible that that's a little bit of a consequence.

Speaker Change: of the cards.

Speaker Change: As I think I mentioned, we did see, for example, a pick-up in mortgage applications and a tiny bit of pick-up in REFI and our multi-family lending business. There might be some hints.

Speaker Change: of more activity there. But, you know, these cuts were very heavily priced, right? The curve has been inferred at for a long time, so it was largely greedy. This is expected. So I'm not, it's not obvious to me that you should expect.

Speaker Change: Media, Chromatic Reactions, and that's not really what we want.

Speaker Change: and Erosin and the Death Markets.

Speaker Change: Don't...

Speaker Change: Race came down.

Speaker Change: Spread your quite low and mark it your wide open, so it's kind of makes sense that people take advantage of that today. Those conditions may not prevail and be the ongoing conditions you'll late next year.

Speaker Change: And then specifically in the debit and credit card spend that you guys break out, you know, you had nice quotes, you're a year, up to 6% flat QQ, and there's a lot of seasonality, two Q lenses in the consumer spend either the mix or some signs of a slowdown later in the quarter.

Speaker Change: Um, so I think what there is to say about consumer spend is a little bit boring in a sense because what's happened is that it's become normal. So meaning, you know, I mean, I think we're getting to the point where no one makes sense to talk about the pandemic but maybe one last time, you know, one of the things that you had was that heavy rotation into T&E as people did a lot of traveling and the book cruises that they hadn't done before and everyone was going up to dinner a lot, whatever. So you had the big spike in T&E, the big rotation, inter-discretionary spending, and that's now normalized and you would normally think that rotation out of discretionary into non-discretionary would be a sign of

Speaker Change: Consumers batting down the hatches and getting ready for much worse environment. But given the levels that it started from when we see it as is actually normalization and inside that data, we're not seeing weakening for example and retail spending. So overall we see the spending patterns as being sort of solid and consistent with the narrative that the consumers on solid footing and consistent with a strong labor market and the current central case of kind of no landing scenario economically but you know obviously as we always point out that's one scenario and there are many other scenarios.

Speaker Change: Got it, thank you.

Speaker Change: Thank you, our next question comes from the line of Mike Mayo from Wells Fargo Securities. You may proceed.

Mike Mayo: Hey, Jamie, I think I've seen you comment on government this year, more than any other time in your career.

Mike Mayo: August 2nd, op-ed, Washington Post, Davos, you're talking about government. I think it was this week or last week on Bloomberg, you're saying bank murder should be allowed. Your bus tour in August , you were asked, which is my question now, under what circumstances would you lead for government service? And your answer then was, I love what I do. We get it. You love what you do, but under what circumstances would you consider a government service? It seems like you'd be more likely to go now than in the past just based on the numerous comments that you've made. Is that right, wrong? What you're thinking?

Speaker Change: I think it's wrong. I've always been a American patriot and my country is more important to me than my company. And I think that the government is very important to get this energy. Look at the world today, Mike, it is so important that we get things right for the whole geopolitical world. I'm not just talking about the American economy. And we try to participate in policy. You know, at the local level, at the state level, at the federal level, at the international level, to try to help, you know, that's our job. You know, we try to grow economies and things like that. So, nothing's changed in my view, my opinion, or my interest. I just think it's very, very important we try to help come and do a good job.

Speaker Change: So if you were asked by the next administration to serve the country, would you be open to considering it?

Speaker Change: I think the chance is almost nil, and I probably am not going to do it, but I always reserve the right, I don't make promise to people, I don't have to do, but no, I love what I do, I tend to be doing what I do, and I almost guarantee I'll be doing this for a long period of time, or at least until the board kicks me out.

Speaker Change: Let me take to put aside that question, for those who are worried about you leaving. The other side of the question is, we're on these calls for the last couple of years, you're saying.

Speaker Change: The Stock is overvalued, and I think that's what you're saying. You're saying the stock market is overvalued, and therefore all stocks are overvalued.

Speaker Change: You know, on the one hand, you guys, you highlight on this call AI, tech, market share gains, eye returns, high capital. So, do you think, in some ways, when you think about the value of your price and your ability to buy back, you're thinking more about an old school model for valuing your stock as opposed to a new school model that might put you in the category of more tech-oriented, you know, firms, especially as it relates to, you know, your progress with AI.

Speaker Change: Well, listen, you're making a very good point, which is what I think we have an exceptional company, exceptional franchises, and the pride for it might be by the stock, but not that exuberant, but thinking even tech valuations or any valuations, will still have these very inflated values. And so I'm just, we're just quite patient in that. And I think you have to judge us over time, although we've done the right thing or nothing. And remember, we can always do it.

Speaker Change: We haven't lost the money. It didn't go away. It's sitting in store. The only time will be really wrong if the stock runs way up, you gotta buy it much higher prices.

Speaker Change: Thank you. Our next question comes from Ibrahim Punuwala from Bank of America. Your line is open.

Ibrahim Punuwala: Good morning. I guess, I just wanted to follow up, you talked about private credit and the disruption to bank lending. Another area I would appreciate if you can address is we were hearing a lot about, like so, James Leet and other market makers potentially disrupting fixed income trading is that a real risk. And if there are no opportunities for a phone like JPMorgan to actually compete on the private venue side or market making beyond traditional sort of fake activity.

Speaker Change: Derry Hymn, the way I would frame that is not as a risk, but as a reality.

Speaker Change: Like, you know, we've always emphasized in all of our businesses that we operate in an extremely competitive environment, and that applies to, and that competitive environment isn't limited to competing against banks.

Speaker Change: or traditional financial institutions, it extends in the consumer space to fintechs, and in the market-making space, it obviously increasingly is extending to some of the types of firms that you're referring to. Now, those firms are in many cases also clients, and that's the same type of dynamic that you see, for example, in the private credit space that we've discussed before. So there's no question that the ecosystem is changing, you've got new competitors, you've got changes in market structure, new dynamics. Thanks.

Speaker Change: And as with any business, we are innovating and adjusting and making sure that we're prepared to compete in all the traditional ways and all the new ways.

Speaker Change: Of course, there are some ways which being a bank hinders our ability to do that.

Speaker Change: One of the arguments that we've made going back to the capital, liquidity regulations, is that when you come to the impact on the US capital markets ecosystem, which is the envy of the world, it's worked well in its current construct for a long time, where some activities were inside the regulator perimeter, and there was robust participation from unregulated capital of various sorts.

Speaker Change: And a world where more and more of that activity gets pushed outside of bank bank market makers is a meaningful change to that structure that is untested and it's unclear why you would want that. And we've cautioned that if that's the intent of the regulations, it should be intentional and well studied. But in the meantime, we're going to adjust and compete the best for our ability given the constraints of the current rule.

Speaker Change: and Crazy Edson in the private markets. It remains to be seen how that develops and there is a little bit of that and some people are talking about making more active things in the private markets. In some ways, we're well positioned for that too because for that, you need liquidity, market making, valuation, buyers and sellers and both sides are great liquidity. So that hasn't developed yet, but we may have competition, but...

Speaker Change: Yeah, we'll be there on the time comes and the second one is the public markets. You have seen reports about your deal inventories both cooperated.

Speaker Change: and Treasuries, and I do think that's hampered a little bit. But again, we do it, remember, for clients. So we are a large market maker in both sides of the markets for clients and we'll credit and Treasuries, and a little different. Some of the other people are just trading for their own account. And so they both competition from our standpoint, but where they are, we're going to do it. We're going to deploy more capital we want. And we would even deploy more capital low returns if we really had to do that to service clients. So we're very conscious of it. They'll be competition both sides. And as Jeremy said, you know, we said here, I mean, 10 years ago, talking about the authentication of the business, and can we keep up with that, and so far we have.

Speaker Change: Got it. And just one quick one. And Jeremy, YouTube, I think mentioned QT stopping at some point. We saw the repo sort of market spike at the end of September . Give us your perspective on the risk of market liquidity shock as we move into year end. How and do you have a view on how quickly Fed should recalibrate QT or actually stop QT to prevent some. Thanks.

Jeremy Barnum: Yeah, it's a good question, Ebrahim. But I think you've kind of answered your own question. In other words, the argument out there is that the repost spike that we saw at the end of this quarter was an indication that maybe the market is approaching that lowest comfortable level of research that's been heavily speculated about and recognizing that that number is probably higher and driven by the evolution of firms' liquidity requirements as opposed to some of the more traditional measures. And, you know, side point, it's just another reason why it's important to look at the whole framework holistically when we think about the regulatory response to the events of two springs ago, you know, you don't want those types of spikes.

Jeremy Barnum: and Grace of some questions about why there isn't more readiness to deploy into those types of...

Jeremy Barnum: This one was relatively minor, but in any case, when you pull that together, it would seem to add some weight to the notion that maybe UT should be wound down and that's...

Jeremy Barnum: Games to be increasingly the consensus that that's going to get announced at some point in the fourth quarter. So, finally point was, if you play that view through, it's a residual headwind for system-wide deposit growth, which gets removed.

Speaker Change: and that's one of the reasons that we feel that we're probably in the trough of our deposit balances at the level of open. So I just wanted a couple of positive things here. I'm not actually sure they can actually do with that because you have inflationary factors out there, partially driven by QE. And also looking to volatility, it's not a risk to JPMorgan.

Speaker Change: It's a risk to the system, and with banks have, I've already mentioned you know, the constraint balance sheet a little bit, so the banks will have trillions of dollars of cash and unable to deploy the repo markets.

Speaker Change: And is it a good policy thing that every time that happens, because you can do it very safely, fully cloud-wise, all things like that, providing Michael flexible financing to the marketplace, that that happens if that has to step in every time. I think that becomes a policy issue that every time there's come some kind of fluctuation in the market, people panic, and the feds got to stop feeling and provide stuff. And can they always do that, if you have a slightly more inflationary environment going forward? So I think you have to be very thoughtful about this, and that's why you do think they should look at calibrating, L-S-R, E-C-L-R, and C-E-T-1, all these things, particularly for this. So my view is, it is going to happen again.

Speaker Change: I can't tell you exactly when, by the surprise, it doesn't happen again.

Speaker Change: God, thank you both.

Speaker Change: Thank you, our next question comes from the line of Betsy Grasic from Morgan Stanley. Your line is open.

Betsy Grasic: Oh, hi, good morning.

Betsy Grasic: In-bought scene here, me.

Betsy Grasic: Hello.

Betsy Grasic: and JPMorgan.

Betsy Grasic: Can you hear me okay?

Speaker Change: Yeah, we can hear you, can you hear us? Oh, yes, thank you. So one for Jeremy, one for Jamie, Jeremy, and Jamie, sorry about the NII question I'm going to have, but it is more than half your revenue, so I kind of care about it. But when I'm thinking about the, you know, the trough and then the build up, QT ending, deposit growth, I mean that's, you know, part of the calculation for improvement as we go into, you know, 2025, right? I should embed that outlock, is that right? And that's embedded in how you're thinking about it. I know we don't have a number from you for on I have for 2025, but...

Speaker Change: It is in there, right?

Speaker Change: Yeah, in other words, it goes back to my prior point and to the point.

Speaker Change: You know, I had the proper marks about the consumer deposit balances.

Speaker Change: in particular, that the ones are different offsetting factors right now, right? You've got the yield curve, you've got card revolved, you've got balances, and you know, balances have been a headwind, we now see it as neutral, and they could potentially become a tailwind, you know, later in the year, and one of the potential reasons for that is one of the potential tail, and one of the potential reasons for that is the potential end of duty, but you know, emphasize the potential to Jamie's point.

Speaker Change: I also want to wish they have a little bit of D.

Speaker Change: Fixed asset, fixed rate asset reprised dynamics starting to flow through a little bit. While we're on NII, just to annoy Jamie a little bit more, I do want to make a point that I didn't get a chance to make previously, which is there's a reason that we emphasized the implied fourth quarter run rate for the markets on III in the presentation, which is that if you take that and you annualize it, it gives you a launch point run rate, which is significantly higher. Then what's currently in the consensus, and obviously what we've seen this year. [inaudible]

Speaker Change: I'll give you the concise version of my usual speech that changes in markets NII or almost always bottom line neutral and offset in NIIR but for the purpose of trying to help you guys with your models, I would just encourage you to recognize what that launch point is, the number of cuts that are in the curve, the fact that that number has historically and in the recent past been quite liability sensitive. So you can draw your own conclusions about what that should mean. Again, shouldn't change the overall revenue expectation. It's just a balance sheet and income statement geography issue, but just for the sake of helping you tidy up models I wanted to make that.

Speaker Change: Point. And so Daniel's comments in September were on NII in total, or NIIX markets could you go for that? Go for a core NIIX. So again reiterating at the time, the 24 consensus was 91.5, the 25 consensus was 90 on NIIX. And our point was that that number, which remains an asset-sensitive number, indicated an insufficient amount of sequential decline year-on-year. The current consensus as we see it for NIIX markets is 87. And as we've noted, that's closer, albeit maybe

Speaker Change: OK, and then one for Jamie, Jamie, we did talk already quite a bit about the capital that you have capital in store. Just wanted to understand how you're thinking about that opportunity set that's in front of you with regard to using it for, you know, potentially portfolio acquisitions. I realize that depositories are not on the docket, but we all know there's, you know, in acquiring.

Speaker Change: Assets at the stage. Yeah, so I'm just your access acquisition. I mean, I always want our people to be looking at those things and thinking about those things and being, but if you listen to what I'm saying about my question about the world, you know, I'm not, it's hard for me to say that we're going to be in the market to buy credit assets. Thanks.

Speaker Change: I'm just wondering about, you know, private label credit card for example, is that something that would help clients?

Speaker Change: and Omicron Chance.

Speaker Change: But I've been having it very important. Well, I say that. I always tell the management team, second, yes, me. I mean, we've done private labor. I know what it is. We've been there. I have a lot of issues. But is it possible that something's different one day and a different, you know, thing? Yeah, it's possible. So I don't want to cut it off. Your Marian Lakes says to me, Jamie, you have to include the world's change. We're going to change. But right now, I would say, no, there's no chance.

Speaker Change: Thank you so much.

Speaker Change: Thank you. Our final question will come from Sal Martinez with HSBC. Your line is open.

Speaker Change: Hey, the morning, I'm not going to ask you about a specific NII in 25 but I did want to delve into the...

Speaker Change: How to think about your deposit margin.

Speaker Change: and Volume Dynamics in the CCBO in the next few years. You have seen a decent amount of pressure in the positive margin, 26, down about 30 basis points.

Speaker Change: The Department of Development has come down to get some pressure on the positive NII.

Speaker Change: But the Department of Arts is still, you know, well above, where they were, when rates were out level that are consistent with where the forward curve is now has been going. So I guess, you know, how do we think about...

Speaker Change: Both volumes and margin dynamics, if rates do come down to say the level of debt in our consisting of the fours, or I know the fours, because, you know, it's likely going to be wrong, but that's the message point you have.

Speaker Change: and conversely, volume offsets, you mentioned Jeremy retail deposits become in the tailwind. I guess how much of its tailwind can they be, especially as you are expecting to gain quite a bit of market share in retail deposits. So just give a sense of certain pushing pool of these dynamics that really help drive the deposits, the valued deposit franchise.

Speaker Change: Sure. Yeah, thanks for the question, Saul, and I think you've laid out your building blocks there already. Just for simplicity, I'm going to try and answer your question without referring to the disclosed CCB deposit margin number, just because that number is obviously the combination of the rate paid on the CCB deposits and the internal FTP into that, and that is a complicated thing that evolves as a function of the modeling of the betas and other things. So I think it's actually more helpful to look at this simply from a from wide perspective and look at the evolution of the rate paid in the context of the policy rage roughly and just set aside duration management and all those others.

Speaker Change: Lecture 2

Speaker Change: And I think when you do that, what you see is we've been saying for a while that the deposit margin defined for these purposes is simply the difference between the policy rate and the weighted average rate pay to the consumer deposits was unsustainably high. And that was going to have to correct one way or the other. Either deposits were going to reprise.

Speaker Change: at the product level through checking and savings. And, or we were going to see a ton of internal migration, IE, Growth and the CDMAX, and, or we would see a lower policy rate.

Speaker Change: So as we said here right now, you know, of course we make pricing decisions in the context of market competition and any given moment looking at what the environment is for deposits, but we have not needed to reprice in order to retain primary bank relationship, which was also a core strategy. We were never going to chase sort of the hot money at the margin. We've leaned in heavily to CDs and gotten to the current level of CDMX and that's been a good strategy.

Speaker Change: And from where we sit now, we now have the margin coming down as a result of the policy rate coming down. It seems that that puts us in a pretty comfortable position from a pricing perspective. We think the CDMX has probably peaked. Now, on the way down, it's not going to go back down to zero where it was at the beginning of the cycle. That's an important thing to realize. So, all that's equal, that creates a little bit of margin compression.

Speaker Change: And then, through all of that, obviously a lower yield environment should mean that there's a little bit less outflow from consumer deposits, as I mentioned, we're seeing a lot less yield seeking being.

Speaker Change: David, so then when you overlay onto that, what you mentioned, which is our long-term share growth in CCB deposits, and it was one part as a function of the branch strategy and the build-out and the fact that only about a quarter of our top 125 markets in CCB are at that 15% share number, so we believe there's big opportunity to grow the rest of it and be on track at the type of average annual share growth at the order of 30 or 40 basis points that we've seen historically. That's how you kind of assemble a tailwind from normalized deposit margin and balance growth in CCB.

Speaker Change: So, Jeremy, correct me if you think I'm wrong.

Speaker Change: The abnormal time period was in race for between zero and one to two percent.

Speaker Change: Other than that, if you look at what are normal deposit margins in the normal banking business, forget people going up to the very hot money if that happens. In 2% to 2%.

Speaker Change: Okay, that's helpful. So it's kind of like you're a little bit above that, but you know, there's still some pressure but you're, you're not.

Speaker Change: Kinetically above those levels. We're very, very, very, very good terms of returns and business development. Thank you to both management. We're growing market share. And when we build branches, stuff like that, we don't necessarily assume current margins. We look at what the normal margins over time. We're very comfortable with very most things for you all.

Unknown Attendee: We're going to read a very good terms of returns and business development at banking and wealth management. We're growing market share, and when we build branches, stuff like that, we don't necessarily assume current margins. We look at the normal margins over time. Yeah, we're very comfortable, very nice things for you all.

Speaker Change: Okay, let's hope thank you all, let's all I got.

Unknown Attendee: All right. Okay, that's helpful. Thank you all.

Speaker Change: Thanks for watching!

Operator: That's all I got. Thanks, Alex. Thanks, everyone. Thank you.

Speaker Change: Thanks for everyone, thank you.

Speaker Change: Thank you all for participating in today's conference. You may disconnect.

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

Speaker Change: Thanks for this time and have a great rest of your day.