JPMorgan Chase & Co. (NYSE:JPM) reported robust fourth-quarter earnings for 2024, exceeding analysts' expectations. The banking giant posted an earnings per share (EPS) of $4.81, surpassing the forecasted $3.95. Revenue also outpaced projections, reaching $43.74 billion against the anticipated $41.25 billion. This strong performance prompted a positive market reaction, with the stock rising 1.35% in premarket trading.
Key Takeaways
- JPMorgan's EPS of $4.81 beat the forecast by 21.8%.
- Revenue increased to $43.74 billion, exceeding expectations by $2.49 billion.
- Stock price rose by 1.35% in premarket trading following the earnings report.
- Net income for the quarter stood at $12.9 billion.
- Continued strong performance in Investment Banking and Asset Management.
Company Performance
JPMorgan Chase demonstrated significant growth in the fourth quarter of 2024, with net income reaching $12.9 billion. The company's investment banking and markets divisions contributed to record revenues in asset and wealth management. This performance aligns with JPMorgan's strategic focus on expanding its private banking and international operations, as well as its investments in AI and technology.
Financial Highlights
- Revenue: $43.74 billion, up from $41.25 billion forecasted
- Earnings per share: $4.81, exceeding the $3.95 forecast
- Net income: $12.9 billion
- Return on Tangible Common Equity (ROTCE): 19%
- Expenses: $22.6 billion, a 4% year-on-year increase
- Credit costs: $3.1 billion
Earnings vs. Forecast
JPMorgan's EPS of $4.81 represented a significant beat over the forecasted $3.95, marking a surprise percentage of approximately 21.8%. This performance is notably stronger than in previous quarters, reflecting the company's robust operational strategies and successful market positioning.
Market Reaction
Following the earnings announcement, JPMorgan's stock rose by 1.35% in premarket trading, reaching $250.81. This positive movement reflects investor confidence in the company's ability to deliver strong financial results. The stock's performance is within its 52-week range, suggesting stability amid broader market trends.
Outlook & Guidance
Looking ahead, JPMorgan anticipates net interest income (NII) excluding markets to be approximately $91.5 billion for 2024, with total NII expected at $92.5 billion. The company also projects a card net charge-off rate of around 3.4%. These figures indicate a cautious yet optimistic outlook, with potential challenges in interest rate environments being closely monitored.
Executive Commentary
"Our goal is always to serve our clients," stated Jamie Dimon, CEO of JPMorgan Chase. CFO Jeremy Barnum added, "We remain asset sensitive to Fed cuts," highlighting the company's strategic positioning amid potential interest rate changes. Dimon also emphasized the value of cash in turbulent times, reflecting the bank's prudent capital management approach.
Q&A
During the earnings call, analysts inquired about JPMorgan's capital deployment strategies and potential market liquidity challenges. The management addressed these concerns by detailing their flexible capital allocation and robust market-making capabilities in fixed income and equities.
Risks and Challenges
- Potential interest rate cuts by the Federal Reserve could impact NII.
- Increasing competition from FinTech and new market entrants.
- Economic uncertainties may affect credit costs and charge-offs.
- Regulatory changes could pose compliance challenges.
- Global market volatility may influence investment banking revenues.
JPMorgan Chase's strong fourth-quarter performance and optimistic guidance underscore its strategic resilience and adaptability in a dynamic financial landscape.
Full transcript - JPMorgan Chase and Co (JPM) Q3 2024:
Conference Operator: Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's Third Quarter 2024 Earnings Call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation.
The presentation is available on JPMorgan Chase's website. Please refer to the disclaimer in the back concerning forward looking statements. Please stand by. At this time, I would like to turn the call over to JPMorgan Chase's Chairman and CEO, Jamie Dimon and Chief Financial Officer, Jeremy Barnum. Mr.
Barnum, please go ahead.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Thank you and good morning everyone. Starting on page 1, the firm reported net income of $12,900,000,000 EPS of $4.37 on revenue of $43,300,000,000 with an ROTCE of 19%. Touching on a couple of highlights. In CCB, we ranked number 1 in retail deposit share for the 4th straight year. In CIB, both IB fees and markets revenue were notably up year on year reflecting strength across the franchise.
In AWM, we had record quarterly revenues and record long term flows. Now turning to page 2 for the firm wide results. The firm reported revenue of $43,300,000,000 up $2,600,000,000 or 6 percent year on year. NII ex markets was up $274,000,000 or 1% driven by the impact of balance sheet mix and securities reinvestment, higher revolving balances in card and higher wholesale deposit balances, predominantly offset by lower deposit balances in Banking and Wealth Management and deposit margin compression. NIRxMarkets was up 1 excluding the prior year's net investment securities losses, it was up 10% on higher asset management and investment banking fees.
And markets revenue was up $535,000,000 or 8% year on year. Expenses of $22,600,000,000 were up $808,000,000 or 4% year on year driven by compensation including revenue related compensation and growth in employees partially offset by lower legal expense. And credit costs were $3,100,000,000 reflecting net charge offs of $2,100,000,000 and a net reserve bill of $1,000,000,000 which included $882,000,000 in consumer primarily in card and $144,000,000 in wholesale. Net charge offs were up $590,000,000 year on year predominantly driven by card. On to balance sheet and capital on page 3.
We ended the quarter with a CET1 ratio of 15.3 percent flat versus the prior quarter as net income and OCI gains were offset by capital distributions and higher RWA. This quarter's RWA reflects higher lending activity as well as higher client activity and market moves on the trading side. We added $6,000,000,000 of net common share repurchases this quarter, which in part reflects the deployment of the proceeds from the share from the sale of Visa (NYSE:V) shares as we have previously mentioned. Now let's go to our businesses starting with CCB on page 4. CCB reported net income of $4,000,000,000 on revenue of $17,800,000,000 which was down 3% year on year.
In Banking and Wealth Management, revenue was down 11% year on year reflecting deposit margin compression and lower deposits partially offset by growth in Wealth Management revenue. Average deposits were down 8% year on year and 2% sequentially. We are seeing a slowdown in customer yield seeking activity including in CD volumes and expect deposits to be relatively flat for the remainder of the year. Client investment assets were up 21% year on year driven by market performance and we continue to see strong referrals of new wealth management clients from our branch network. In home lending, revenue was up 3% year on year driven by higher NII partially offset by lower servicing and production revenue.
Turning to card services and auto. Revenue was up 11% year on year driven by higher card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition outstandings were up 11%
Speaker 2: due to strong account
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: acquisition and the continued normalization of Revolve. And in auto, originations were $10,000,000,000 down 2%, while maintaining strong margins and high quality credit. Expenses of $9,600,000,000 were up 5% year on year, predominantly driven by higher field and technology compensation as well as growth in marketing. In terms of credit performance this quarter, credit costs were $2,800,000,000 driven by card and reflected net charge offs of $1,900,000,000 up $520,000,000 year on year and a net reserve build of $876,000,000 predominantly from higher revolving balances. Next (LON:NXT), the Commercial and Investment Bank on page 5.
The CIB reported net income of $5,700,000,000 on revenue of $17,000,000,000 IB fees were up 31% year on year and we ranked number 1 with year to date wallet share of 9.1%. In advisory, fees were up 10% benefiting from the closing of a few large deals. Underwriting fees were up meaningfully with debt up 56% and equity up 26% primarily driven by favorable market conditions. In light of the positive momentum throughout the year, we're optimistic about our pipeline, but the M and A regulatory environment and geopolitical situation are continued sources of uncertainty. Payments revenue was $4,400,000,000 up 4% year on year, driven by fee growth and higher deposit balances, largely offset by margin compression.
Moving to markets. Total (EPA:TTEF) revenue was $7,200,000,000 up 8% year on year. Fixed income was flat, reflecting outperformance in currencies and emerging markets and lower revenue and rates. Equities was up 27% reflecting strong performance across regions largely driven by a supportive trading environment in the U. S.
And increased late quarter activity in Asia. Securities Services revenue was $1,300,000,000 up 9% year on year, largely driven by fee growth on higher market levels and volumes. Expenses of $8,800,000,000 were down 1% year on year with lower legal expense predominantly offset by higher revenue related compensation and growth in employees as well as higher technology spend. Average banking and payments loans were down 2% year on year and down 1% sequentially. In the middle market and large corporate client segments, we continue to see softness in both new loan demand and revolver utilization in part due to clients' access to receptive capital markets.
In multifamily, while we are seeing encouraging signs in loan originations as long term rates fall, we expect overall growth to remain muted in the near term as originations are offset by payoff activity. Average client deposits were up 7% year on year and 3% sequentially, primarily driven by growth from large corporates in payments and securities services. Finally, credit costs were $316,000,000 driven by higher net lending activity including end markets and downgrades partially offset by improved macroeconomic variables. Then to complete our lines of business, AWM on Page 6. Asset and Wealth Management reported net income of $1,400,000,000 with pretax margin of 33%.
For the quarter, revenue of $5,400,000,000 was up 9% year on year 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. Expenses of $3,600,000,000 were up 16% year on year, predominantly driven by higher compensation, including revenue related compensation and continued growth our private banking advisor teams as well as higher distribution fees and legal expense. For the quarter, long term net inflows were $72,000,000,000 led by fixed income and equities. And in liquidity, we saw net inflows of 34,000,000,000 dollars AUM of $3,900,000,000,000 and client assets of $5,700,000,000,000 were both up 23% driven by higher market levels and continued net inflows. And finally, loans were up 2% quarter on quarter and deposits were up 4% quarter on quarter.
Turning to corporate on page 7. Corporate reported net income of $1,800,000,000 Revenue was $3,100,000,000 up $1,500,000,000 year on year. NII was $2,900,000,000 up $932,000,000 year on year, predominantly driven by the impact of balance sheet mix and securities reinvestment including from prior quarters. NIR was a net gain of $155,000,000 compared with a net loss of $425,000,000 in the prior year, predominantly driven by lower net investment securities losses this quarter. Expenses of $589,000,000 were down $107,000,000 year on year.
To finish up, let's turn to the outlook on page 8. We now expect 2024 NII ex markets to be approximately $91,500,000,000 and total NII to be approximately $92,500,000,000 Our outlook for adjusted expense is now about $91,500,000,000 And given where we are in the year, we included on the page the implied 4th quarter guidance for NII and adjusted expense. And note that the NII numbers imply about $800,000,000 of markets NII in the 4th quarter. On credit, we continue to expect the 2024 card net charge off rate to be approximately 3.4%. So to wrap up, we're pleased with another quarter of strong operating performance.
As we look ahead to the next few quarters, we expect results will be somewhat challenged as normalization continues, but we remain upbeat and focused on executing in order to continue delivering excellent returns through the cycle. And with that, let's open the line for Q and A.
Conference Operator: Thank you. Our first question will come from the line of Jim Mitchell from Seaport Global Securities. You may proceed.
Jim Mitchell, Analyst, Seaport Global Securities: Hey, good morning. So Jeremy, as you highlighted, full year NII guidance implies a sizable drop in Q4 NII ex markets about 6%. So can you just maybe discuss what are the largest drivers of the sequential decline, including any initial thoughts on deposit behavior and pricing since the 50 basis point cut? And since it's related, I'll just throw out my follow-up question. I 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 2025?
Thanks.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Yes, sure, Jim. I'll try to answer both questions together to the best of my ability. So as we sit here today, the biggest single driver is of the sequential declines is in fact that we're expecting is in fact the yield curve. So that yield curve has changed a little bit since Daniel made his comments at the conference earlier in the quarter, but not that significantly. In terms of deposit balances, which is obviously another important factor here in light of the Fed starting the cutting cycle.
It feels to us like right now as I mentioned in my prepared remarks for consumer, we're pretty much in the trough right now as we speak. When you look at yield seeking behavior that has come down quite a bit. So that's no longer as much of a headwind all else being equal. And then if you look at checking account balances, those have been pretty stable for some time, which we see as an indication that consumers are kind of done spending down their cash buffers. So that's kind of supportive for consumer deposit balances.
And in that context, the other relevant point is the CD mix where with the rate cuts coming, we expect CD balances to price down with pretty high betas and probably the CD mix actually peaking around now. And then as you move to wholesale, we've actually already been seeing a little bit of growth there. And when you combine that with the sort of increasing view that many people in the market have that it's likely that the end of QT will be announced sometime soon, That's also a little bit supportive for deposit balances. So maybe I'll well I guess then you also asked me a little bit about next year. So I guess one thing to say right is that we did have a sequential increase in NII this quarter.
And as you may recall at Investor Day, I said that there was some chance that we would see sequential increases followed by sequential declines and that people should avoid kind of drawing the conclusion that we'd hit the trough when that happens. So that's essentially exactly what we're seeing now. But from where we sit now given the yield curve, assuming the yield curve materializes obviously, we do see a pretty clear picture of sequential declines at NIIX markets. But the trough may be happening sometime in the middle of next year, at which point the combination of balances, card revolve growth and other factors can return us to sequential growth, obviously. We're guessing it's pretty far out in the future and we'll give you formal guidance on all this stuff next quarter, but I think that gives you a bit of a framework to work with.
Jim Mitchell, Analyst, Seaport Global Securities: All right. Thanks a lot.
Sal Martinez, Analyst, HSBC: Thanks.
Conference Operator: Thank you. Next, we will go to the line of Steven Chubak with Wolfe Research. You may proceed.
Steven Chubak, Analyst, Wolfe Research: Hi, good morning. So Jeremy, I how are you? So I did want to ask on expenses just in light of some of the comments that Daniel had made recently. Just noting that consensus expense forecast for next year looked a little bit too light. I believe at the time it was just below $94,000,000,000 If we adjust for the one timers this year, that would suggest a core expense base that's just below $90,000,000 So a pretty healthy step up in expenses.
I know you've always had a strong commitment and discipline around investment. Just want to better understand where those incremental dollars are being deployed and just which investments are being prioritized in particular looking out to next year?
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Sure. So good question. And I agree with your numbers. I agree with the way you've normalized this year for the one time type of significant items and also where the consensus was when Daniel made his comments. And while we're at it, I would also just remind you on the NII comments at the time, the consensus for this year was 91.5 year it was 90%.
So that was implying at the time a sequential decline of 1.5%. And it was because we thought that decline wasn't big enough that we made the comments that we made. So I'm happy to expand more on that. But anyway to expenses, yes, so if you start for the sake of argument with a base of 90%, obviously inflation is normalizing and obviously we're always trying to generate efficiencies to offset inflation. But that having been said, if you assume 3% for the sake of argument on that base that's a few $1,000,000,000 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 on our growth strategies this year. So there's a not insignificant amount of annualization. You can't quite see that in the 4th 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 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 of 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.
The strategy hasn't changed and the plans haven't changed and we're just kind of executing with the same long term perspective that we've always had. I would note that relative to NII, obviously, we're in the 3rd quarter now and not the Q4. And 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 well for expenses and NII next quarter. But especially on expenses, we are in the middle of the budget cycle right now.
So we probably have a little less visibility there than we do at the margin on NII.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: And can I just give you a view of expense a little bit? When you call expenses very often, I call investments. As you actually go back to Investor Day, you'll see that we're adding private bankers in Asset Wealth Management, we're adding ETF in Asset Wealth Management, we're adding private bankers in International Private Banking, we're growing Chase Wealth Management, we've added some branches across the United States of America. We think there are huge opportunities in innovation economy that takes bankers and certain technology and stuff like that. Our goal is to gain share and everything we do is 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 constant productivity on various things. And also AI is going to go up a little bit. And I would put that as a category of just it's going to generate great stuff over time.
Steven Chubak, Analyst, Wolfe Research: 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 excess reserves at the Fed into securities. We saw the yield expand, which was encouraging despite the pressure at both the long end and Stoper contraction in the quarter. I was hoping you could just speak to your appetite to extend duration in this environment.
I know that you've had some aversion to that in the past, but do you anticipate redeploying additional excess liquidity just amid the expectation for deeper rate cuts?
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Yes, sure. So on extending duration, Steve, you know this obviously, but I just think it's important to say that all else equal, extending duration doesn't change expected NII if you assume that the policy rate follows the forwards, right? So point 1. Point 2, the curve remains inverted. And so even if you don't believe that the policy rate follows the forwards, extending right now is actually a headwind to short term NII.
Like that's not that wouldn't be a consideration for us either way, but I just think that's worth saying for the broader audience, it's quite different from the situation that you have with
Jamie Dimon, Chairman and CEO, JPMorgan Chase: the numbers. You're talking about mortgage at 6%. So like
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Yeah. 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 disclosed is the EAR. When the 10 Q comes out, you'll see that that number is a little bit lower. It'll come down from 2.8 to about 2.1 if our current estimates are correct.
That's for a number of reasons, some of which are passive, but some of those are active choices to extend duration a little bit. And in the end, the choice to manage and extend duration is really about balancing the volatility of NII against protecting the company from extreme scenarios on either side. And so right now if we wanted to extend as a result of different factors, we certainly could. We have the capacity inside the portfolio. But for now we're comfortable with where we are.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: And the one thing I can assure you is the forward curve will not be the same forward curve in 6 months.
Steven Chubak, Analyst, Wolfe Research: Well said. Well, thank you so much for taking my questions.
Speaker 2: Thanks, Steve.
Conference Operator: Thank you. Next, we will go to the line of Erika Najarian from UBS. You may proceed.
Erika Najarian, Analyst, UBS: My first question and thank you very much for answering all the NII questions so far, Jeremy. It's just, I guess, another follow-up. As you can imagine, once Daniel said what he said on stage in September, everyone's trying to figure out the over under for net interest income next year. So maybe a 2 part first question, the second being inspired by what Jamie just said. Number 1, NII is expected to be down 6% sequentially in 4th quarter.
I think year over year in 2025 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, could be a little bit worse year over year than the Q4 sequential rate. But that being said, 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 JPMorgan to have more cuts in the short end but steepness or less cuts but a little bit of a flatter curve?
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Right. Okay. You threw a curveball at the end there, Erica. I wasn't expecting that to be the end of your question. But let me answer the beginning of your question and then I'll also answer the end of your question.
So we see the current 2025 consensus for NII X markets to be at currently at 87 which is obviously lower than it was at the conference earlier in the quarter. So we're happy to see that move a little bit more in line to us. That still looks a little toppy, but it's definitely
Jamie Dimon, Chairman and CEO, JPMorgan Chase: in the
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: ballpark. Now that consists of I already mentioned previously that we sort of expect the NII trough sometime in the middle of the year. So you can kind of assemble the parts. You've got a 4th 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 resumes in the back half of the year, both deposit balances and the ongoing 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. Obviously, the mix of those things will play out in different ways. And as you point out, who knows what the yield curve will wind up doing.
But on our current assumptions, on the current yield curve and remembering that we're in the Q3 now, so we're doing this kind of early, that's what we think.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Can I just say something? First of all, next time I should give them
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: the damn number. I don't want
Jamie Dimon, Chairman and CEO, JPMorgan Chase: to spend all time in these calls like going through what they're guessing what NII is going to be next year. And I just can I just also point out that NII all things being equal is a number, but all things are never equal? And the yield curve, if you have a recession, the effect of the yield curve will be very different than you have continued growth. And there are decisions that are made non stop by us and the thing that happened in the marketplace. And I just I think we spend too much time on just this relevancy, so you get a model a number in your model.
And so it's going to be less than $87,000,000 next year, probably not a lot. We don't know and we don't know the environment. Good.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Okay. Now to your question about the EAR. So a few things to say in there. So as I already mentioned, we when that comes out, it will show a number of around 2.1. A very important thing to say is as you know, the experience of this rate cycle has been that our empirical EAR is meaningfully higher than our modeled EAR which is what we disclosed.
And the main reason for that is that retail deposit betas are have in actuality been lower than the modeled deposit beta. So as a starting point, you have to kind of adjust that EAR number to be bigger than the reported number, for those and a few other reasons actually. There's some nuances around how the dollar, non dollar sensitivity interact. And then there's your question, which is a little bit about the front end versus the back end. So what you see is that actually the front end EAR has gotten smaller and most of the EAR is now in the back end.
So it's definitely the case that all else being equal a steeper curve is better for us. But I think what I would also say is that this kind of empirical versus theoretical adjustment is disproportionately in the front end. So therefore, in order to answer your question, I would say, yes, we want a steeper curve, but having the Fed cut more than what's currently in the yield curve is definitely at the margin. In the context of next year's numbers, a headwind would be a headwind for us. We remain asset sensitive to Fed cuts.
Erika Najarian, Analyst, UBS: And if I can ask my second question. And Jamie, I completely understand your frustration. And to be fair, your long term shareholders really don't care about whether it's 87 or 85, right? They care about your return on equity. To that end, I mean, it's insane how much capital you generate each quarter, 72 basis points this quarter.
And so beyond the standard boilerplate questions you're going to get on buyback and organic growth, yada, yada, dividend increases. How should we think about JPMorgan deploying this capital? I mean, the world is generally your oyster, right? You're dominant already and you could use this capital to further enhance your business. And again, beyond that boilerplate conversation that you always get every quarter, how should your shareholders think about how you're thinking about the opportunities to deploy this capital?
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Okay. So first of all, when you say dominant, I'd be very careful on that. We've got some very tough competition, different in different countries, different around the world, FinTech Companies, direct lenders and MSP, I want to give you a very specific comment on direct lending and stuff like that. So our goal is always to serve our clients. And when I talk about some of these expenses, that is a deployment of capital.
And it's a deployment in a different way because you open branches, you initially experience an expense, but down the road, you need capital to support the deposits. Same for the innovation economy, same for private bankers, etcetera. If you look at it roughly, we have about at a minimum $30,000,000,000 of excess capital. And for me, it's not burning a hole in my pocket. I look at it as you own the whole company and you can't properly deploy it now, it's perfectly reasonable to wait.
And I've been quite clear that I think things are the future could be quite turbulent and asset prices in my view and you in life you've got to take a view sometimes are inflated. I don't know if they're extremely inflated or a little bit, but I prefer to wait. We will be able to deploy it. Our shareholders will be very well served by us waiting. And same thing with deploying capital, we can buy we could go buy $100,000,000,000 or 6% mortgages, increase our net income by a couple of 1,000,000,000 tomorrow.
We don't make decisions like that. The most important thing we do is serve our clients well, build the technology and do things like that. And we also know what the real excess capital is yet. So we're a little patient. We're going to be a little patient in rate and it'll be fine.
And so that's where we are and that's not going to change. And if it changes, we'll let you know. And we do talk to a lot of shareholders and they understand buying stock back at more than 2 times tangible book value is not necessarily the best thing to do because we think we'll have better opportunities to redeploy it or to buy back at cheaper prices at one point. Markets do not stay high forever.
Ebrahim Poonawala, Analyst, Bank of America: Thank you.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: And one last thing, cash is a very valuable asset sometimes in a turbulent world. And you see my friend Warren Buffett, stockpiling cash right now. I mean people should be a little more thoughtful about how we're trying to navigate in this world and grow for the long term for our company.
Conference Operator: Thank you. Our next question comes from Glenn Schorr from Evercore ISI. You may proceed.
Glenn Schorr, Analyst, Evercore ISI: Hi, thanks very much. And so glad Jamie didn't say what he was about to say because that's the answer to this question. So we've seen a couple more banks entering partnerships with alternative managers. We've seen limited loan growth for a few years now, market related also. Limited flows into fixed income funds, yet plenty of growth in private credit in general.
And you're one of the best asset managers on the planet, but in my view, less dominant in all things private credit. So maybe you could talk about what things you're working on and why that's too narrow of a view of your ability to serve all parts of clients' lending needs, not just the public markets and public lending side? Thanks.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Yes. So let me take time to cover this one, because obviously, it has become very important. People are talking about how they're growing and partnering and things like that. And so the first and foremost and this I'm going to talk about very strategic and then very tactical. I think they're both important.
1st and foremost, we are here to give our clients an agnostic view of the world and what the best products and services are for them. Therefore, when a client comes in, we will offer them both direct lending ourselves and syndicated lending or other specialized kind of lending. And they all have pluses and minuses. Direct lending could be done faster, maybe simpler covenants, unitranche. It is more expensive and you're seeing a little things go back and forth between syndicated lending and direct lending.
But we're going to offer the clients basically what's in their best interest and tell them what those products are across the thing. We mentioned before in the past that we allocated $10,000,000,000 of capital to make direct loans. We've actually deployed a lot of capital. Some of those already paid off, some of it done. So we are going to do it directly and we are going to 10 could be 20 or 30, not limited today.
I will say today we're extending we will do 500,000,000 we will do a 1,000,000,000 we will do more 1,000,000,000 we'll do it soul handed or we'll do with partners. Very importantly, we are not going to allocate ourselves to one partner. So we have and I think we've announced a bunch of co lenders, but that just creates more flexibility and more size. We're not going to use that flexibility to slow it down, have to get permission for everybody, because like I said, JPMorgan can underwrite it and own it like a bridge loan and syndicate it after the fact. So you could and we're going to use our own risk measures and stuff like that, again, all in the service of the client and making sure we're offering them the best thing.
And we're going to different strategy. We're not going to tie ourselves exclusively to one capital provider. I think that would limit what we could offer our clients. Probably we could be more price competitive. We could do some of the very specific thing and not the solution that fits the 3rd party capital provider.
That's our strategy. We're going to be there. We're going to do it. And we're going to do it in spite of the fact there's capital arbitrage taking place. So if you look at the arbitrage today, where the bank has to hold for things or insurance guide, they are dramatically different.
That's a disadvantage, but we've had those disadvantages in other business for a long time. We are going to do a try for the client. Remember, when we do visit the client, we also get other revenues often. So it isn't just the loan, we look at the whole relationship. So we're quite comfortable we can compete.
I just announced much bigger lending platforms and sizes and stuff like that. So I hope everybody presses on, they heard this too.
Glenn Schorr, Analyst, Evercore ISI: All right. Thanks for all that.
Conference Operator: Thank you. Our next question comes from the line of Jared Cassidy from RBC Capital Markets. Your line is open.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase0: Good morning, Jeremy and good morning, Jamie. Hey. Jeremy, when you guys look at your current capital ratios, they're obviously very healthy. Can you guys give us some color on the new Basel III? We don't know what the specifics are, but as Vice Chair, Barr touched on some of the specifics, it looks like capital requirements for yourself and your peers will come down a fair amount from the original proposal.
Are you guys thinking about that? Do you have any insights on how much it may fall from the original proposal to where you are today?
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Yes. When I say like $30,000,000,000 of excess, that is assuming bar speech like the $20,000,000 goes to $12,000,000 whatever it is more. It will be more than that because there are other factors involved. Now I was just giving the minimum excess capital. In my view it will be more, but it is what it is and we'll wait to see the final numbers.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: But Gerard, just maybe to give you a bit of color. So, yes, obviously, everyone paid a lot of attention to that speech. It was an important speech. But in the end, we actually just really need to see the proposal because the details matter a lot for this stuff. And so, detail and continue advocating as appropriate.
I know that you talk about requirements coming down relative to what was originally proposed, which is obviously true part of the speech. But I do think we need to be a little bit careful not to fall into the trap of saying that that's like progress just because the original proposal was so dramatically higher than what anyone thought was reasonable. And I would remind you which you obviously know that before this proposal came out, it was our position strongly felt that our then prevailing capital requirements were if anything already more than we needed. So we've got a long way to go here and I think our position which Jamie has been articulating very consistently is that they need to get it right, the right amount of work and importantly do it holistically. So it's not just RWA, it's RWA, it's G SIB, it's SCB, it's CCAR.
So that's really what we feel strongly.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: We just want the numbers to be done right and justified. If they had to go up, we'd be fine with that too. We just think they should be done with real diligence and real thought and a little bit of thought about cost benefit, what it does to the economy, where it pushes lending and things like that. So we're anxiously awaiting to see the actual detail because that's what's going to make all the difference.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase0: Very good. And then as a follow-up, in view of this excess capital on your comments a moment ago about direct lending, You look at your current cash and marketable securities on a risk weighted asset basis, you put it in your presentation of course $1,500,000,000,000 average loan is $1,300,000,000,000 When everything when the dust settles, you know what your capital requirements are. Can you frame now for us, can you levering up the excess capital with more loans, is that a path that might be considered over the next 2 or 3 years relative to where you are on a mix basis? I know you're going to grow your
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: loans, but I'm talking about the mix.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Absolutely positively not. Loans are an outcome of doing good business. We want to do good business. If it grows our balance sheet, we're fine.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: And I do think Gerard, it depends a lot on what type of loans you're talking about, right? So I think in the end, as Jamie says, like it's capital. We're going to deploy it ideally to grow the franchise organically and that could include loans that are almost good loans on a standalone basis as well as loans that are part of an overall relationship where we're getting other revenue as part of that. So it's the same strategy that we've always had, but I wouldn't think of it as like excess capital to be deployed against a particular product. I would think of it as it's there a rainy day.
Let's hope the environment doesn't deteriorate a lot, but if it does, we'll be ready. And there'll be opportunities hopefully to deploy it against the client franchise or against the stock and if not, over turn it.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase0: Very good. Appreciate the color and candor as always. Thank you.
Conference Operator: Thank you. Our next question comes from the line of Matt O'Connor with Deutsche Bank (ETR:DBKGn). You may proceed.
Speaker 2: Good morning. So lower rates was supposed to drive a pickup in loan growth and conversion of some of these investment banking pipelines. Obviously, we just had one cut edge early, but any beginning signs of this in terms of the interest in borrowing more and again conversion of the banking pipelines?
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: I would say, Matt, generally no, frankly, with a couple of minor exceptions. So I think it's probably fair to say that the out performance late in the quarter in investment banking fees was to a meaningful degree as I mentioned driven by DCM as well as to some degree driven by the acceleration of the closing of some M and A transactions. And I do think that some of that DCM outperformance is in the sort of types of deals that are opportunistic deals that aren't in our pipeline and those are often driven by treasurers and CFOs sort of seeing improvement in market levels and jumping on those. So it's possible that that's a little bit of a consequence of the cuts. As I think I mentioned, we did see for example a pickup in mortgage applications and a tiny bit of pickup in refi and our multifamily lending business.
There might be some hints of more activity there. But these cuts were very heavily priced, right? The curve has been inverted for a long time. So to a large degree, this is expected. So I'm not it's not obvious to me that you should expect immediate dramatic reactions and that's not really
Jamie Dimon, Chairman and CEO, JPMorgan Chase: what we're seeing. And I would just say
Speaker 2: in the debt markets, rates came down,
Jamie Dimon, Chairman and CEO, JPMorgan Chase: spreads are quite low and markets are wide open. So it kind of makes sense that people are taking advantage of that today. Those conditions may not prevail be the ongoing conditions late next year.
Speaker 2: And then specifically in the debit and credit card spend that you guys break out, you had nice growth year over year, up 6%, flat Q2. I know there's a lot of seasonality 2Q to 3Q. I think last year it was up about 1%. But are you seeing any kind of changes in the consumer spend, either the mix or some signs of a slowdown later in the quarter? Thank you.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: So I think what there is to say about consumer spend is a little bit boring in a sense, because what's happened is that it's become normal. So meaning, I mean, I think we're getting to the point where it no longer makes sense to talk about the pandemic, but maybe one last time. One of the things that you had was that heavy rotation into T and E as people did a lot of traveling and they booked cruises that they hadn't done before and everyone was going out to dinner a lot whatever. So you had the big spike in T and E, the big rotation into discretionary spending and that's now normalized. And you would normally think that rotation out of discretionary into non discretionary would be a sign of consumers battening down the hatches and getting ready for a much worse environment.
But given the levels that it started from, what we see it as is actually like normalization. And inside that data, we're not seeing weakening, for example, in retail spending. So overall, we see the spending patterns as being sort of solid and consistent with the narrative that the consumer is on solid footing and consistent with a strong labor market and the current central case of a kind of no landing scenario economically. But obviously, as we always point out, that's one scenario and there are many other scenarios.
Speaker 2: Got it. Thank you.
Conference Operator: Thank you. Our next question comes from the line of Mike Mayo from Wells Fargo (NYSE:WFC) Securities. You may proceed.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase1: Hey. Jamie, I think I've seen you comment on government this year more than any other time in your career. And August 2 op ed, Washington Post, Davos, you're talking about government. I think it was this week or last week on Bloomberg, you're saying bank mergers should be allowed. Your bus tour in August, you were asked, which is my question now, under what circumstances would you leave for government service?
And your answer then was, I love what I do. We get it. You love what you do, but under what circumstances would you consider government service? It seems like you'd be more likely to go now than in the past just based on the numerous comments that you've made. Is that right, wrong?
What's your thinking?
Jamie Dimon, Chairman and CEO, JPMorgan Chase: 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 government is very important to get this. And if you look at the world today, Mike, it is so important that we get things right for the whole geopolitical world. So I'm not just talking about the American economy.
So and we try to participate in policy at the local level, at the state level, at the federal level, at the international level to try to help that's our job. We try to grow economies and things like that. So nothing's changed in my view, my opinion or my interest. I just think it's very, very important that we try to help government do a good job.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase1: So if you were asked by the next administration to serve the country, would you be open to considering it?
Jamie Dimon, Chairman and CEO, JPMorgan Chase: I think the chance of that is almost nil, and I probably am not going to do it. But I've always reserved the right. I don't make promise to people. We don't have to. But no, I mean, I love what I do.
I intend to be doing what I'm doing. I almost guarantee I'll be doing this for a long period of time or at least until the Board kicks me out.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase1: Let me take the flip side of that question for those who are worried about you leaving. The other side of the question is, we're on these calls for the last couple of years, you're saying the stock is overvalued and I think part I think that's what you're saying. You're saying the stock market is overvalued and therefore all stocks are overvalued. And on the one hand, you guys you highlight on this call, AI, tech, market share gains, high returns, high capital. So do you think in some ways when you think about the value of your price and your ability to do buybacks, you're thinking more about an old school model for valuing your stock as opposed to a new school model that might put you in the category of more tech oriented firms, especially as it relates to your progress with AI?
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Well, listen, you're making a very good point, which is I think we have an exceptional company, exceptional franchises and the price point once you might buy the stock, but I'm not that exuberant about thinking even tech valuations or any valuations will state these very inflated values. And so I'm just we're just quite patient in that. And I think you're going to have to judge us over time about we've done the right thing to nothing. And remember, we can always do it. We haven't lost the money.
It didn't go away. It's sitting in store. The only time will be really wrong if the stock runs way up, we've got to buy at much higher prices. And I just I would be a real skeptic about that happening.
Conference Operator: Thank you. Our next question comes from Ebrahim Poonawala from Bank of America. Your line is open.
Ebrahim Poonawala, Analyst, Bank of America: Hey, good morning. I guess, just wanted to follow-up. You talked about private credit and the disruption to bank lending. Another area I would appreciate if you can address is we've been hearing a lot about likes of James Street and other market makers potentially disrupting fixed income trading. Is that a real risk?
And is there an opportunity for a firm like JPMorgan to actually compete on the private venue side on market making beyond sort of FICC activity?
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Yes, Raheem. The way I would frame that is not as a risk, but as a reality. Like we've always emphasized in all of our businesses that we operate in an extremely competitive environment and that applies to and that competitive environment isn't limited to competing against banks or traditional financial institutions. It extends in the consumer space to 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. 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.
Of course, there are some ways in which being a bank hinders our ability to do that. And one of the arguments that we've made going back to the capital liquidity regulations is that when you come to the impact on the kind of U. S. Capital markets ecosystem, which is the envy of the world, It's worked well in its current construct for a long time where some activities were inside the regulated perimeter and there was robust participation from unregulated capital of various sorts. And a world where more and more of that activity gets pushed outside of bank market makers is a meaningful change to that structure that is untested and it's unclear why you would want that.
And we've cautioned that if that's the intent of the regulations, it should be intentional and well studied. But in the meantime, we're going to adjust and compete to the best of our ability given the constraints of the current rule set.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Could I just add, so in the private markets, it remains to be seen how that develops. There is a little bit of that and some people are talking about making more active things in the private markets. In some ways, we're well positioned with that too because for that you need liquidity, market making, valuation, buyers and sellers on both sides to create liquidity. So that hasn't developed yet, but we're not we should we may have competition, but we'll be there when the time comes. And the second one is the public markets.
You have seen reports about deal inventories both corporate and treasuries and I do think that's ample. But again, we do it remember for clients. So we are large market makers in both sides of the markets for clients, both credit and treasuries. And I think it's a little different than some of the other people just trading for their own account. And so they're both competition from our standpoint, but we're there, we're going to do it, we're going to deploy more capital we want.
And we would even deploy more capital at lower returns if we really had to do that to service clients. So we're very conscious of it. There'll be competition on both sides. As Jeremy said, we sat here 10 years ago talking about the electrification of the business and can we keep up with that and so far we have.
Ebrahim Poonawala, Analyst, Bank of America: Got it. And just one quick one. And Jeremy, you mentioned QT stopping at some point. We saw the repo sort of market spike at the end of September. Give us your perspective on just 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 market? Thanks.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Yes. It's a good question, Ebrahim. But I think you've kind of answered your own question. In other words, like the argument out there is that the repo spike that we saw at the end of this quarter was an indication that maybe the market is approaching that lowest comfortable level of reserves that's been heavily speculated about and recognizing that that number is probably higher and driven by the evolution of firms liquidity requirements as opposed to some of the more traditional measures. And side point is just another reason why it's important to look at the whole framework holistically when we think about the regulatory response to the events of 2 springs ago.
You don't want those types of spikes and it raises some questions about why there isn't more readiness to deploy into those types of disruptions, albeit this one was relatively minor. But in any case, when you put all that together, it would seem to add some weight to the notion that maybe QT should be wound down and that seems to be increasingly the consensus that that's going to get announced at some point in Q4. So my only point was if you play that view through, it's a residual headwind for system wide deposit growth, which gets removed. And that's one of the reasons that we feel that we're probably in the trough of our
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Yes. So I just wanted to add a couple of policy things here. I'm not actually sure they can actually do that because you have inflationary factors out there, partially driven by QE. And also look at the volatility, it's not a risk to JPMorgan. It's a risk to the system.
And what banks have, I already mentioned the constrained balance sheet a little bit. So the banks will have 1,000,000,000,000 of dollars of cash and unable to deploy the repo markets. And is it a good policy thing that every time that happens, you can do it very safely, fully collateralize all things like that, providing what I call flexible financing in the marketplace, that that happens, the Fed has to step in every time. I think that becomes a policy issue that every time there's comes some kind of fluctuation in the market, people panic and the Fed's got to step in and provide stuff. And can they always do that if you have a slightly more inflationary environment going forward?
So I think you have to be very thoughtful about this. Now that's why we do think they should look at calibrating SLR and ECLR and CET1, all these things, particularly for this. So my view is, it is going to happen again. I can't tell you exactly when, but I'd be surprised if it doesn't happen again.
Ebrahim Poonawala, Analyst, Bank of America: Got it. Thank you both.
Conference Operator: Thank you. Our next question comes from the line of Betsy Graseck from Morgan Stanley (NYSE:MS). Your line is open.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase2: Hi, good morning.
Speaker 2: Hey, Betsy.
Conference Operator: Can you hear me? Hello?
Speaker 2: Yes.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase2: Can you hear me okay?
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Yes. Yes, we can hear you. Can you hear us?
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase2: Yes. Thank you. So one for Jeremy, one for Jamie. Jeremy and Jamie, sorry about the NII question I'm going to have, but it is more than half your revenue, so I kind of care about it. But when I'm thinking about the trough and then the build up, QT ending deposit growth, I mean that's part of the calculation for improvement as we go into 2025, right?
I should embed that outlook, Is that right? And that's embedded in how you're thinking about it. I know we don't have a number from you for NIA for 2025, but it is in there, right?
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Yes. In other words, it goes back to my prior point and to the point that I had in the prepared remarks about the consumer deposit balances in particular that
Speaker 2: there's a
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: bunch of different offsetting factors right now, right? You've got the yield curve, you've got card revolve. You've got balances. And balances have been a headwind. We now see it as neutral and they could potentially become a tailwind later in the year.
And one of the potential reasons for that is one of the potential tailwind one of the potential reasons for that is the potential end of QT, but emphasize the word potential to Jamie's point. You also obviously have a little bit of the fixed asset fixed rate asset reprice dynamics starting to flow through a little bit. While we're on NII just to annoy Jamie a little bit more, I do want to make a point that I didn't get a chance to make previously, which is there's a reason that we emphasized the implied Q4 run rate for the market's NII in the presentation, which is that if you take that and you annualize it, it gives you a launch point run rate, which is significantly higher than what's currently in the consensus and obviously what we've seen this year. And I'll give you the concise version of my usual speech that changes in markets NII are almost always bottom line neutral and offsetting NIR. But for the purposes 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 point.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase2: And so Daniel's comments in September were on NII in total or NII ex markets. Could you quantify that?
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Those were core NII or NIIX. So again, reiterating at the time, the 24 consensus was 91.5 percent, 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 still a little bit toppy.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase2: Okay. And then one for Jamie. Jamie, we did talk already quite a bit about the capital that you have, capital in store. Just wanted to understand how you're thinking about that opportunity set that's in front of you with regard to using it for potentially portfolio acquisitions. I realize that depositories are not on the docket, but we all know there's portfolios out there that might be looking for a home.
And could you give us a sense as to how interested you might be in acquiring assets at this stage?
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Yes. So I mean, asset acquisitions, I mean, I always want our people to be looking at those things and thinking about those things and being but if you listen to what I'm saying about my question about the world, I'm not we it's hard for me to say that we're going to be in the market to buy credit assets.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase2: What about
Jamie Dimon, Chairman and CEO, JPMorgan Chase: loans? Yes. That's a whole different matter, because when it comes to clients, we earn credit asset spread and we usually have other stuff. That if our bankers can deploy capital that way, of course, we want to do more. And our CIO could deploy capital in multiple ways, we would probably do more.
And we ask all the time, can we do more in affordable housing, can we do more in things we're actually quite comfortable. And yes, if we can find ways to deploy capital, we would be happy to do that. But we don't put us in
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase1: a different versus category. Private label credit card.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: And private label credit card. I don't know if you like stretch.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase2: I'm just wondering about private label credit card, for example, is that something that would help clients?
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Almost no chance. But having it's very important. While I say that, I always tell the management team, second yes me. I mean, we've done private label. I know what it is.
We've been there. I have a lot of issues with it. But is it possible that somebody is different one day in a different thing? Yes, it's possible. So I don't want to cut it off.
Marion Lake says to me, Jamie, not being clearly the world's changed. We're going to change. But right now, I would say no, there's no chance.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase2: Thank you so much.
Conference Operator: Thank you. Our final question will come from Sal Martinez with HSBC. Your line is open.
Sal Martinez, Analyst, HSBC: Hey, good morning. I'm not going to ask about a specific NII in 2025, but I did want to delve into the how to think about your deposit margin and volume dynamics in the CCV over the next few years. You have seen decent amount of pressure in the deposit margin, 2.6%, down about 30 basis points, deposit balances have come down. So it's put some pressure on deposit NII. But deposit margins are still well above where they were when rates were at levels that are consistent with where the forward curve is now has been going.
So I guess, how do we think about both volumes and margin dynamics if rates do come down, say the level that are consistent with the forward curve? I know the forward curve is likely going to be wrong, but that's the reference point you have. And conversely, volume offsets, you mentioned, Jeremy, retail deposits becoming a tailwind. I guess, how much of a tailwind could they be, especially as you are expecting to gain quite a bit of market share in retail deposits? So just give us a sense of sort of the push and pull of these
Speaker 2: dynamics that really help drive the
Sal Martinez, Analyst, HSBC: deposit, the value of the that really help drive the deposit, the value of the deposit franchise? Sure. Yes. Thanks for the question, Saul. And I think you've
Speaker 2: laid out
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: your the building blocks there already. Just for simplicity, I'm going to try to 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 CCP 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
Speaker 2: from a firm wide perspective and look at the evolution of
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: the rate paid in the context of the deposit margin defined for these purposes are simply the deposit margin defined for these purposes are simply the difference between the policy rate and the weighted average rate paid and the consumer deposits was unsustainably high. And that was going to have to correct one way or the other. Either deposits were going to reprice at the product level through checking and savings and or we were going to see a ton of internal migration I. E. Growth in the CD mix and or we would see a lower policy rate.
So as we sit here right now, of course, we make pricing decisions in the context of market competition at any given moment, looking at what the environment is for deposits. But it we have not needed to reprice in order to retain primary bank relationships, which was also our core strategy. We were never going to chase sort of the hot money at the margin. We've leaned in heavily to CDs and gotten to the current level of CD mix and that's been a good strategy. And from where we sit now, we now have the margin coming down as a result of the policy rate coming down.
It seems that that puts us in a pretty comfortable position from a pricing perspective. We think the CD mix has probably peaked. Now on the way down, it's not going to go back down to 0 where it was at the beginning of the cycle. That's an important thing to realize. So all else equal, that creates a little bit of margin compression.
And then through all of that, obviously, a lower yield environment should mean that there's a little bit less outflow from consumer deposits as I mentioned. We're seeing a lot less yield seeking behavior. So then when you overlay onto that what you mentioned which is our long term share growth in CCB deposits in no small part as a function of the brand strategy and the build out and the fact that only about a quarter of our top 125 markets in CCB are at that 15% share number. So we believe there's big opportunity to grow the rest of it and be on track to the type of like average annual share growth of the order of 30 basis points or 40 basis points that we've seen historically. That's how you kind of assemble a tailwind from normalized deposit margin and balance growth in consumer.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: Jeremy, correct me if you think I'm wrong. The abnormal time period was in rates for between 0% and 1% to 2%. Other than that, if you look at if you were going to say what are normal deposit margins in the normal banking business, forget people going up really hot money, that happens, 2% to 2.5%. Absolutely. Okay.
Jeremy Barnum, Chief Financial Officer, JPMorgan Chase: Yes, we agree.
Sal Martinez, Analyst, HSBC: Okay. That's helpful. So it sounds like you're a little bit above that, but there's still some pressure, but you're not dramatically above those levels.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: We're in very good returns in business and wealth banking and wealth management. We're growing market share. And when we build branches and stuff like that, we don't necessarily assume current margins, we look at what would be normal margins over time.
Sal Martinez, Analyst, HSBC: Yes.
Jamie Dimon, Chairman and CEO, JPMorgan Chase: And we're very comfortable with building very nice business for you all.
Sal Martinez, Analyst, HSBC: Got it. Okay. That's helpful. Thanks a lot. That's all I got.
Speaker 2: Thanks, Thanks, everyone. Thank you.
Conference Operator: Thank you all for participating in today's conference. You may disconnect at this time and have a great rest of your day.
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