JPMorgan Chase & Co. — 2024 Q1

Yes. So Betsy, before I answer the question, I want to say something on behalf of all of us at JPMorgan and me personally. I'm thrilled to have you on this call.

Betsy, I just wanted to add my welcome back thoughts as well. And just a very minor edit to Jamie's answer. I think he just misspoke when he said $2 billion a year in buybacks, the trajectory. It's $2 billion a quarter.

I'm sorry, $2 billion a quarter.

Otherwise, I have nothing to add to Jamie's very complete answer. But welcome back, Betsy.

Excellent. Us too.

Yes, a good question, Jim. I think the simplest and best answer to that is not really. So as we've been saying for a while, migration from checking and savings to CDs is sort of the dominant trend that is driving the increase in weighted average rate paid in the consumer deposit franchise. That continues. We continue to capture that money in motion at a very high rate. So we're very happy about what that means about the consumer franchise and the level of engagement that we're seeing.

Yes. So I mean, I think the drivers of, let's say, what's embedded in the current guidance is actually not meaningfully different from what it was in the fourth quarter, meaning it's the current yield curve, which is a little bit stale now, but the snap from quarter end had roughly 3 cuts in it.

Yes, John. So in short, yes to both questions. So yes, the relative lack of build this quarter is a function of the normal seasonal patterns of Card. Yes, we still expect 12% card loan growth for the full year. And yes, that still means that all else equal, we think the consensus for the allowance build for the back 3 quarters is still a little too low if you map it to that expected card loan growth.

That is exactly right. And specifically, what's going on here is this shift between the on-balance sheet and off-balance sheet in the financing businesses and prime and so on within Markets. And you can actually see a little bit of a pop of the Markets balance sheet in the supplement, and these things are all related.

So I would say consumer customers are fine. The unemployment is very low. Home price dropped, stock price dropped. The amount of income they need to service their debt is still kind of low. But the extra money of the lower-income folks is running out -- not running out, but normalizing. And you see credit normalizing a little bit.

Yes. So I'll put it into 2 buckets. First of all, we're fine. We've got good reserves against office. We think the multifamily is fine. Jeremy can give you more detail on that if you want.

Given that your response to Betsy's question is that 15% CET1 today prepares you for Basel III endgame as written. You earn 22% on -- without the FDIC assessment. Ahead of Investor Day, I guess, 6 weeks from now or 5 weeks from now, as we think about that 17% through-the-cycle target, if you're at the right capital level per you guys, where are you overearning today?

Right. So interesting framing of the question, Erika. So I think we've been pretty consistent about where we're overearning, right? So obviously, one major area is that we're overearning in deposit margins, especially in consumer. And that's sort of why we're expecting sequential declines in NII, why we've talked about compressing deposit margins and increases in weighted average rate paid.

Got it. And just as a follow-up question. You mentioned that the current curve that you set your NII outlook upon is stale. I guess, does it matter? That it seems like the market down-pricing; and obviously no June cut; no September cut; and a toss-up in December, which shouldn't matter for this year. As we think about that $90 billion, does the -- if we price rate cuts out totally, does that matter much? Given that it seems like June is the only one that...

Yes. Sorry, Erika. So just quick things on this. One, let's focus on NII ex, not on total NII. So I'd anchor you to the $89 billion. Number two, if you want to do math for like the changes of the average funds rate for the rest of the year and multiply that times the EAR, like be my guest. Looks like as good as an approach as any.

Which we know are going to be wrong.

Sure. Yes. Let me take the IPO first. So we had been a little bit cautious there. Some cohorts and vintages of IPOs had performed somewhat disappointingly. And I think that narrative has changed to a meaningful degree this quarter. So I think we're seeing better IPO performance. Obviously, equity markets have been under a little bit of pressure the last few days. But in general, we have a lot of support there, and that always helps.

Yes, a really good question. I would say, in general, that the sort of volatility and uncertainty in the rate environment overall on balance is actually supportive for the Markets revenue pool. And I think that, together with generally more balance sheet deployment as well as sort of some level of natural background growth, is one of the reasons that the overall level of Markets revenue has stabilized at meaningfully above what was normal in the pre-pandemic period.

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

Well, I think one of the things about payments businesses is that, in some sense, they're -- I mean, recession-proof is probably the wrong word. And in any case, we're not dealing with a recession, but we're talking fundamentally about moving money through pipes around the world. And that's a thing that people need to do more or less no matter what. So that's one piece.

Yes, Glenn, in short, yes. I mean, I think we're not shy about saying that we're underearning in Investment Banking now. Clearly, we're below cycle averages, as you point out. We've been talking about when do we get back to the pre-pandemic wallet. But as you know, at this point, it was like March 2020, right, it was the beginning of the pandemic. So it's like 4 years ago at this point. So there's been GDP growth, especially in nominal terms during that period, and you would expect the wallet to grow with that.

Sure. So I think the first thing to say, which is somewhat obvious, but I'm going to say it anyway, is that there are some like auto-governors in this, right? Like some portion of the expense base is directly related to revenue, whether it's volume-related commissions, whether it's incentive compensation, whether it's other things. So there are some auto-correcting elements of the expense base that would happen automatically as part of the normal discipline. So that's point one.

Yes, sure. So let me break this question down into a couple of different parts. So I think what Jamie was sort of suggesting is that you can think of a concept that's kind of like strategic capital versus tactical capital, for lack of a better term.

Maybe a little bit. Jamie already alluded somewhat to this. So I do think spend is fine but not boomy, broadly speaking, I would say. You can look at it a lot of different ways, inflation cohorts, et cetera. But when you kind of triangulate that, you get back to this kind of flattish picture.

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

Right. Yes. I mean, I think that tension between us as a provider of secured financing to some portions of the private credit, private equity community, now you're talking about different parts of the capital structure. But we do recognize that, that we compete in some areas and we are clients of each other in other areas. And that's part of the franchise, and it's all good at some level.

Okay. Thanks, Charlie. And I'm going to do my best to answer your question while sticking to my sort of guns on not giving too much First Republic-specific guidance. But I do think that kind of framework you're articulating is broadly correct. So let me go through the pieces.

Right. Okay, Charlie, there's a lot in there. And to be honest, I just don't love the idea of spending a lot of time on this call speculating about bank failures. Like you obviously have a particular view about the next wave in the landscape. I'm not going to bother debating that with you. But I guess let me just try to say a couple of things, doing my best to answer your question.

Thank you, everyone.