JPMorgan Chase & Co. Stock

We'd like to get started with JPMorgan Chase. As you folks know, JPMorgan is our largest bank here in the United States with over $5 trillion in assets. We are very pleased today to have Charles Bristow, H.e's the Head of Treasury and Chief Investment Officer at JPMorgan. He joined JPMorgan back in 1998. And in 2014, '15, he became the Global Co-head of the -- Head of Rates trading in the EMEA region and has steadily moved up through that time period, of course. So Charles, thank you very much for joining us.

What we'd like to start off with is rate expectations. JPMorgan has been known to have a differentiated view on the trajectory of interest rates over the years. And the market currently is expecting 3 additional hikes through the end of '27. So do you think the market has it right? Or what's your guys' view?

I was just wondering if your notes they were live because when you first drafted it, it might have been different. I mean the market probably doesn't actually have it right, but the market -- it's always worth remembering the market is like probability weighted. It could be 5%, and it could be none kind of thing. We've ticked down a long way for -- we've come back a long way for how many hikes are priced into the end of '27, and it's just over 2 now, as you say. That's getting, I think, to the lower end of the range of what's credible. So I think probabilistic, the market is not a million miles off. But if I think about like where are the tail risks right now, we'd still be a little bit cautious on to the upside.

For what it's worth for us, I don't think like what the policy outcomes in 2027 matter very much at all. I think what really matters for us in terms of running the portfolio is what over time is the market going to settle on as being like the inflation propensity of the economy, and therefore, what kind of neutral rate is the Fed going to need to set. And that's been the sort of medium-term reckoning that's been going on, right? If you think 4 years ago, you had medium-term rate forward getting back to like 3% and now they're at 5%. That's been the real paradigm shift is this realization that we're in a high growth, high investment, high inflation propensity, much higher neutral rate environment. And I think the Fed is acknowledging that, but that's led to this sort of curve steepening, much higher medium-term rate environment. And I think for some people, that kind of leads to challenges in the investment portfolio. I think if you're a bank, that's the bit that really matters. If you're invested for 2027, by definition, by the end of 2027, those investments have rolled off. If you're invested in 10 years, you better be at the right neutral rate.

Yes. If we talk about duration, has the Fed's shift from holding rates flat to rising rates changed how you plan to manage your balance sheet from a duration profile of the firm?

Not structurally. I mean our approach to managing the balance sheet has always been much more about being prepared to navigate the 2 ends of the spectrum and being strong in both ends of the spectrum. So the reason for a bank portfolio to carry length in this duration, this is a bit of a banking 101, so it's the wrong room for it. But is we get -- by length, by having duration length, we get earnings stability. Like that's a tick. But we have portfolio losses risk. That's a minus, right? And so you've got to look at what does the balance sheet look like if your portfolio is stressed versus what kind of earnings volatility are you willing. So it's very much about stress testing the outcomes. And obviously, Fed raising rates was always an outcome we were prepared for. So it doesn't fundamentally change anything. I think if you look at things like reported [ EAR ], you could see in Q3, our [ EAR ] ticks down, but that's really because of deposit convexity. We're just recognizing that there's a higher pass-through. But no, being structurally balanced to be strong at both end of the spectrum is the thing.

I think the other point is we have tended to avoid longer-dated investments for a long period of time with a view that the market just wasn't correctly pricing, us moving back into this more like late 80s, 90s paradigm of big infrastructure investments, both by government and private sector. That thesis has been our differentiator, and that's really been the main driver, I guess, of why the portfolio has remained strong and the balance sheets remain strong even in this move to higher rates.

All I would say on that is, at current pricing, it's a little harder to maintain that stance than it was 4 years ago. So I think you sort of start to look at it and go, the market is more fairly priced.

Yes. Many of us in this room think about AOCI and held-to-maturity portfolio. So has the rise in rates changed how you view HTM securities? And does the HTM hedging proposal that's out there with FASB, does that change how you may manage that securities portfolio?

I mean, directionally, for sure. I think it's great that FASB -- FASB, by the way -- did an excellent job of engaging with the Street, like really talking to people who are deep in the weeds of thinking about bank investment portfolios. They had them all up to -- where are they, Connecticut or somewhere? Sorry, that was a very British thing say, wasn't it Connecticut? But they really engage with like what is the thing that drives it.

I'll give you look a little bit of kind of how do we think about HTM. There's 2 things that are quirky about HTM. And obviously, our CEO loves to talk about HTM. One thing about HTM is it is hugely more capital efficient than AFS. And as such, there is a small risk for kind of more credit-sensitive instruments, you could be incented to own things that you might not otherwise own because of the capital benefit. And own them in a way that's very, very structurally illiquid like, i.e., you can't sell them. And that can just lead people to maybe make poor balance sheet decisions motivated purely by accounting treatment. That, I think, is a point that's totally aside. But the other thing about HTM, when you couldn't hedge it, you had to think about how much duration you were willing to hold in HTM through the lens of -- as I said before, you want a firm like to JPMorgan to be strong at both ends of the rate range.

In a high rate environment, we will need less fixed rate assets. So we need to stress test ourselves to say, in a high rate environment, we can unwind all our swaps, we can sell all our AFS, but we're still left with the duration that's in HTM, right? And so that really in stress testing ourselves, that puts an upper bound on your HTM duration. If you can hedge it, it doesn't, right? It immediately kind of frees up that constraint about managing through the cycle without having to kind of take the unnecessary volatility in the AOCI capital, which obviously is actually a regulatory input. Otherwise, you're carrying CET1 just as a buffer for rate volatility, which is pretty inefficient use of CET1. So directionally, and on the margin, yes, it definitely allows us to take low credit -- a little more low credit rate instrument risk in HTM. So it's certainly a positive direction of travel.

Got it. Moving over to deposits. This rate hiking cycle started at an elevated level of rates compared to what we saw in 2022, of course. How are you guys thinking about deposit betas in this rate cycle relative to what you also are in '22, '23?

I mean, interestingly enough, we went into the '22, '23 cycle still with a lot of fairly new and unseasoned deposits. So I think going into '22, '23, you had 2 effects going on, both of which were going to be very rate sensitive to either balances or rate paid. And I think it's very important to say that balances and rate paid is an interchangeable concept, right? The sort of -- the average depositor hadn't yet sort of, if you like, kind of woken up. We have been low rates for so long, right? So '22, '23 from a rate setting perspective, I guess, was a bit of an awakening. There was some money in motion, but plus there was very unseasoned money that hadn't found its natural home.

And so though obviously, in -- as a bank, our deposit strategy is to hold on really, really operating deposits, right, low beta deposits that are adjacent to high value-add activity, whether that's like payments flows or custodian balances in our custodian or checking in our retail, like that is our core strategy with CDs being the -- make sure that we give people a sort of top of the market rate for when they want to do something different. So obviously, in '22, '23, that was always going to be mainly manifested through the like normalization of balances than it was. by definition, going into this rate cycle, neither of those conditions actually is still there. Like the -- we've gone through this sort of normalized rate level for quite a period of time and rate-seeking behavior has had a long, long period to play through. And that's what we see.

And I think what's interesting is if you look at our deposit balances now, it's almost turned into a perfectly straight CAGR, right, which is just growing with payment volumes and security services balances and all those kind of things, which is very comforting. Like I think we feel that our deposit balance has reverted to something -- it's behaving like you would expect for a bank that's very, very concentrated into operating deposits. And so I don't massively expect that to change. The only difference will be if we sort of break the range. If we go into a different paradigm, then I think we have to be very thoughtful. And we are doing, as you'd expect us to do, like plenty of stress testing of what kind of things would happen if we break the range and we push back to like more unprecedented levels of policy rates. But that's more like preparing for the worst rather than expecting the worst.

Yes. No, no, understood. Regulators are finalized and working on a number of change to bank regulations that we're aware of, of course. Before getting into specifics, can you talk about why the reforms are needed?

Yes. I mean which one should we start with?

You can choose, stress test, Basel III, whatever you'd like...

There's a lot. Look, stress testing.

Yes.

The main thing to say about stress testing is it was a very opaque process that happened once a year with a very short implementation period with models that really didn't track. So there's a big organizational burden to implementing it inside the bank, where you sort of run it for yourself, you invest a huge -- I mean, that sits in my team. It cost us a huge amount of money to run that thing. And we run it and we do our own PPNR models and all that kind of thing. We've got a really good sense of what would happen to the institution if you go through the scenario that they kind of give you. And then you get back a number that says, "Oh, we don't agree, but we're not telling you why." So it was -- the opacity sort of led to a place like why are we spending all this money? Like what is this for? And it's once a year and then you tell, well, 3 months later, you got to be compliant as well.

So you've -- we've got capital volatility, you've got lack of governmental accountability or had. You've got short implementation period and you've got -- and so on. So I think what's been -- with stress testing, we're really -- though I still think there is a sort of slightly flawed concept of taking these -- let's just keep repreparing ourselves for a crisis that looks a bit like 2008. And I mean, we've all been around long enough to know that the same crisis never strikes twice. So the next crisis will be the thing that you're not prepared for, not the thing you are prepared for by definition.

Though it's a little flawed, we're really, really, really pleased about the increased transparency. Averaging is good. GMS moving to the average 2 scenarios is a good scenario because it kind of takes out the gaming. So all of that is really positive. And the PPNR models, they seem to have really invested in. They clearly rushed it through a little bit. There's a little bit of cleanup. I think we're expecting in the next few months, some NPLs on some tiny refinements. But it's a good direction of travel. And if we're going to do it, at least it's reasonable. And I think the Fed released what they see as the impacts for the system. I think they said about 20 bps. It's not like it's a game changer, right? It's not like they've massively loosened standards, but they're making it more user-friendly and more predictable and less volatile.

Do you think -- will it change the way you guys manage the firm? Or do you think it'll have any impact on capital requirements? Stress test, that is.

No. I mean, the short implementation period and the capital volatility ultimately turns into a buffer and it turns into a buffer that's not deployed in the economy. So yes, I mean, these sorts of -- making anything more predictable and less volatile ultimately gives us more usable capital.

Great. Right. Good point.

I shouldn't talk about excess capital ironically, anyway, through the cycle, let's say. So -- but I think we would -- we're diversified enough not to do things that we fundamentally don't disagree with because of a bad rule.

Right, right. Moving over to the other changes, Basel III and the G-SIB final rules. Maybe -- JPMorgan has been a prominent voice in saying the Fed didn't go far enough in the new proposal. What do you believe needs to change in the final rule and how do you think about the odds of the proposed changes actually being reflected in the final rule?

So yes, I mean, I think, again, it's a good direction of travel. I almost don't want to say it's great that they got around to recalibrating the coefficients given that, that was committed to over a decade ago. So that doesn't feel like a give me. That kind of just feels a little bit of an overdue repayment. It's a good direction of travel. I think, again, let's talk about capital volatility is an undesirable feature in an economy, right? That makes banking capital be inefficient. G-SIB being measured once a year with large kind of cliff edge step functions, the sort of 50 basis point buckets created a lot of inefficiency in the deployment of capital into the economy. You saw crazy 1-day moves in things like FX forward rates and funding rates and so on. Like that was just undesirable unnecessary. So big pluses, smoothing, smaller buckets, big pluses. Some recalibration, half a plus in that it was done, but it's still a little -- I still have to question why not fully do -- why not actually fully do the sort of recalibration back to the inception day.

We got to remember, U.S. Method 2 is already a heavily gold-plated version of Method 1. So to have gold plated it and then allow the gold plating to be progressive and given an opportunity to recalibrate to not actually take it back to the original intended level of gold plating, I guess that's a bit -- that hasn't been delivered on quite enough. And then it does feel like the kind of quirky change to short-term wholesale funding just feels a little bit like a plug, like a [ SOFR ]. So the 2 big -- if we had 2 big asks, and you ask me what I think the probability is, and it's not 100%. But the 2 big ask would really be do the recalibration of coefficient properly and don't make an arbitrary change to short-term wholesale funding, at least without explaining the policy, the sort of policy ambition for doing it.

And to belabor the point on that fraction, short-term wholesale funding only exists in the U.S. rules. The concept of it was to say, if your balance sheet is reliant on rolling funding again, rolling short-term funding to fund some assets, just recognize that if the system games up, you might need to actually sell the asset. So just hold a bit of capital. It's very equivalent to things like minimum repo haircuts, right? It's just to say, you might need to sell the asset and you probably won't sell it at par. That's fine. But that is a concept which applies equally to all banks, right? The bid side for an asset is the same bid side for every single institution.

When the Fed decided to add short-term wholesale funding as capitalization requirement in the first Method 2, they recognize that. So they specifically put RWA in the denominator so that it would be the same capital deduction for every institution. And they wrote a paper on it to explain why they wanted to do that. They haven't explained why they want to reverse it, but they did explain how they wanted to do it. So I just think that that's not a good process. Like if you want to reverse it, say why you were wrong, not use it as a plug because the only real policy ambition that you can have for saying you want -- I mean the only way you can interpret the current policy ambition is to say we want people with a broadly diversified set of liquidity sources to hold more capital against one of those sources. And we want people who are more narrowly funded against a less diversified set of liquidity sources to hold less capital. That can't be the policy ambition. So anyway, very long answer, but it's a frustrating one because It sometimes feels like we're getting given a bit of a plug.

Yes. If the final G-SIB proposal is what it is today, does that hurt your ability to compete? And how about the low ROA areas such as certain activities and markets, can they clear a return hurdle if a G-SIB surcharge is 5% or more?

So I think we would -- I mean, the answer -- the technical answer is that with some of the current proposed rules -- and by the way, like NIM cap is another one as well, the sort of operational risk NIM thing is another one. Some of these proposed rule makings add an extreme capital burden to very, very low risk intermediation business to the point that, no, it becomes not really credible for that business to hit a hurdle.

So on the margin, it takes away our ability to provide one of the functions that we should for the U.S. financial system. Like that is the sort of technical answer. Now then there's the practical company answer. If you're a JPMorgan client across multiple lines of business, we're not going to pick and choose which business we do with you, right? We're going to do the good stuff and the bad stuff and we're going to look at you holistically as clients. So no, it's not going to cause us to make -- for holistic clients of the company, no, we're going to treat them like good clients. I mean we're going to service them properly in all areas. But on the margin, does it mean that companies that really should be doing the low-cost intermediation business on the margin pull back from it, just invest it a little bit more? Yes, bad policymaking would do that, yes.

Got it. Capital return has always been a part of the investment thesis for the banks, particularly JPMorgan. And many of the folks in this room as well as other investors were surprised by the drop in the share repurchases in the third quarter. Can you go into some detail on how JPMorgan approaches capital management in the -- with the future trajectory of capital levels? And why was there a sudden change in the pace of repurchases?

I feel like if Jamie was at the back of the -- he'd say, I'll take this one. Poor Jeremy. I can't remember how many. I mean, I've been at JPMorgan, as you said in the intro, 28 years. And I can't remember how many times I've heard the speech about the hierarchy of capital returns and distribution and so on. So I'll just like to repeat it. The only thing we're ever really committed to is the dividend through the cycle, sustainable. After that, we have to look at what do we think over the medium term is the best use of our capital. And therefore, if we believe that there will be better uses for our capital in the near-ish future than just buying back stock today, then we retain.

But I also think it's very worth noting that we are already finding so much demand for our capital that if you look at, say, like our RWA growth CAGR, it isn't running at 3%, 4%. It's running at, give or take, double digits. That requires us not to distribute 100%, right? I mean people sort of ask what use will you have for that capital? And do you think you can find organic uses? Today, we have been finding organic uses. Some of our peers have had capital ratio drops in 3 digits. I mean our capital ratio drop is even -- so in a curious way, I think when your capital ratio is dropping, people querying why you slow buybacks is probably the wrong question. It's like it should be a great thing that we're finding organic use for the capital. And the other thing I'd say is you'll all have a model and you're better at this than I am because I'm a fixed income guy. But our cost of capital is low relative to the places where we're finding organic deployment opportunities.

So I think you've got to look at it through the lens of 2 things. One, we're already seeing a huge amount of growth in capital markets. We're participating in that and we're finding organic deployment. And secondly, the world is desperately short capital, and building, if you like, a war chest of capital at a low cost of capital rate, ready to sort of lean into opportunities that arise just seems prudent.

Yes. Got it. Before we open it up to the floor for some questions. Another question on SLR, the Supplementary Leverage Ratio reform. It's been in place about a year. What are your thoughts? And has it or has it not achieved what it was expected to achieve?

When they did that, and obviously, my team and I, among all the other sort of [ GSIs ] and so on were consulted, I very much had that as a -- this is a very good rule change. It won't matter until the next time it matters, but it's a good piece of housekeeping. Let's -- the sort of the wind was behind our back for regulatory cleanups, and it seemed like you should take the advantage. And we had to do some crazy things in 2021 in terms of like raising long-term debt because we saw deposit inflows. I mean, how silly is that? That was probably good. There's not that many fixed income buyers here. I know that it's funny when I do the round tables for our fixed income debt buyers, they thought that was awesome. But that's a silly thing really. It's like you get in one liability and you have to like issue another one, that makes no sense.

So SLR in recent history, because it was over calibrated, and it didn't have the right sort of release valves in it, created bad behavior, behaved -- imperfect behavior. So cleaning it up was always going to be a good thing to do. But I didn't really think it would -- it actually would be kind of necessary in the near years. In practice, in the last 18 months with this huge infrastructure build-out that we're seeing, I don't think it would have been possible. I don't think this economic period of time would have been possible without the SLR rule change. I mean there are institutions today who are big participants in that intermediation who really couldn't operate at the current level of balance sheet leverage without that rule change. So yes, actually, it was far more timely than we might have realized. And I think because of it, curiously enough, because of it, the U.S. has been able to lead the world in participating in the build-out of some of this sort of infrastructure that is -- I don't know, I mean, actually, I don't want to like take a view on whether it's a good thing or a bad thing. But the U.S. has been able to participate in this particular new economy build-out in a way that really would never have otherwise been able to do, I think.

That's very interesting. Let's see if there's some -- okay, hold on, microphones coming up from Johnny.

Mike Mayo, Wells Fargo. When you go to sleep at night and you dream about interest rates, what's a really good dream and what's a bad dream and where are we today in that continuum?

Mike, are you asking me my risk? I used to trade the rates options book in the CIB. And that was the last time I actually had like nightmares about interest rates. So the mark-to-market is a far crueler being. What really worries me? Look, I don't want to be too on script with this, but we stress test ourselves to both ends, as I said. So I feel prepared for both ends. So there's not like a nightmare scenario. But what actually worries me is more about a rate of change to higher rates. I'm not so concerned about it for JPMorgan because we've stress tested ourselves against getting there. But I do think if you see a rapid repricing to higher rates, you do risk kind of reentering this place where people's balance sheets won't have the ability to kind of reprice. You won't have the sort of pull-to-par effect. There will be a big a big confidence impact. And some of the sort of liability chasing that will go on could sort of become a bit self-fueling. So at a system level, the need -- the sort of breakaway rapid move to higher rates is the thing that concerns me much more. I think if we see a generic slowdown, we're well protected on the income for that policy period. I think it will be problematic for the medium-term sovereign debt ratios and so on. But I think that, that will be a relatively stable outcome. But if the move to higher rate needs to be too fast, it will have very nonlinear and unpredictable outcomes.

So your fear is the second half of 1994, yes?

Yes.

And any change due to the election to say, "Hey, we want to be more prepared for maybe a lower yield environment or anything like that?"

No, I mean I don't see anything in the election that has -- I mean you see the rates move on it has been pretty muted. I don't see any reason why the election massively changes your prognosis for short-term rates. I mean if anything, we're going to enter into a phase where the 2 parties are going to need to find a place to work together. And I think the only thing that they agree on is that there are certain things we need to spend on. They disagree on the things you need to spend on, but they could probably agree that -- the main thing they might agree on is you spend on both. So I don't think the nature of partnership is going to look like austerity. It's probably going to look like expansion. And in the short term, I think the dynamics driving inflation are very little now to do -- very little to do with that sort of immediate politics. We are we're far more in an environment, in my opinion, where we've got relatively interest rate insensitive aspects of the economy growing fast, but where the investments that are being made are viewed as an imperative and therefore, will keep being made. And yes, I think that's politically -- that dynamic is politically insensitive.

Up front, here. Scott?

Scott Siefers, TD Cowen. Can you just talk a little about how you think about things like deposit velocity potential over the next several years versus the last several. I guess, on the one hand, you appropriately noted, like customers have had plenty of rate-seeking opportunities the last several years. So we sort of know what things look like. On the other hand, sort of a potential new paradigm with things like agentic AI and how easy it would be to move money. So I guess, I'm just curious, even though I don't think anybody thinks there's any risk to like a JPMorgan, but you all are so well known for preparing things that are unlike prepared for things that are unlikely to happen. So I'm just curious how you think about things like that internally.

I think it's a very important question that banks have to grapple with. And I think implicit in your question, though, you said something that was spot on, which is in the coming years as opposed to now. I think we can acknowledge we're sort of going into a period of market structure, potential market structure change. And that that's going to be more like sort of Moore's Law sort of progressive but getting to a place where you might not in 10 years' time, recognize where you came from. So I think it's more of a like we need to track it and it needs to feed into the investment thesis.

I guess I can say something, right, really kind of silly like we would hope that -- and if a super intelligent agent had to recommend the best bank account in the world, then hopefully, that could be good for us, but that would sound actually far too clear. But I guess you have to remember, what are the motivations for people in their banking, right? I mean there is definitely a convenience function of having a number of days of cash ready to cover all of your all your payments and some unforeseens. So there is this -- I don't think what we're looking at is like fundamentally changing the business model of checking. We're not usually in the business model of high yield. So on the -- yes, on the margin, there's probably a slither where people could be more optimized. But generally, our customers -- I mean if you think about it, if you're a Chase customer, if you want a high-yielding product, you can go into the app and you can press one button, that is objectively still simpler than an agent, right? I'm not understating it, but I think these sort of agents becoming embedded in people's lives is likely to be slow and progressive.

The second thing is I think we're going to keep being bombarded with headlines about sort of AI risk, AI misbehavior and so on. And the growth of confidence in how agents behave when they act as your persona is going to be a bumpy road, right? I mean it feels like there's a bad -- there's more bad headlines today than good headlines about stuff that agents do. And obviously, as a company, one of the things we're going to really need to make sure that we do is, if you like, protect our customers for the actions of agents when they act inside our perimeter, like that's still part of our sort of system.

Anyway, it's an imperfect answer. I think that is very -- going to be very incumbent on us to understand what structural changes it can have in the economy over time. And to the extent that it creates incremental deposit velocity, what that means structurally for the economy. And on that last point, without making this specific about JPM Chase, the more velocity there is in deposits and the higher beta deposits have, then the more -- the less demand banks have for duration-bearing assets and credit raising availability. So I also would say that people need to be quite mindful about the second order effects of this in fixed income. Like there is a -- not that we're going to get there, but in extremis, high velocity deposits at 100 beta mean that banks leave all their money in cash. And that really kind of changes the question of where is leverage created in the economy. So yes, we'll see. But again, when you think about our kind of core investment thesis of like wanting to keep our long-dated balance sheet quite clean, it's probably on the margin only another reason to double down on that.

Before we're running out of time, I do want to get to some liquidity questions. And you mentioned a moment ago about the SLR being very successful maybe in allowing the country to grow the way it has in terms of the financing. JPMorgan has done in the past, liquidity is starting to become more of a constraint. What's the current state of liquidity in the banking system? And are you seeing any signs that liquidity is curtailing activity or causing stress in the markets?

I'm not seeing any signs of stress. But certainly, you can see very clear evidence at the level of the system, liquidity is a binding constraint. If you say download the U.S. kind of time series of HA data, which is a fun thing to do. It's like the sort of million miles high view of the economy. You see this inflection point around 12, 15 months ago, where you've got this period post '22 where banks are sitting on massive amounts of excess cash, a huge amount of lending capacity and lending resumes and lending really is sort of like a drawdown to cash. Then you kind of hit this point where the vast majority of lending starts to be funded by bank borrowing, like they take off, right? And you can really see now a very strong relationship between marginal lending and bank borrowing. And so yes, I mean, that is the fingerprint that liquidity is a binding constraint for the banking system.

So what does that mean? It means you've got sort of banks -- the cost of funding to people that borrow from banks kind of needs to be a spread on top of the bank's debt curve, not banks deposit costs. And I think maybe you kind of see that in the borrowing costs, right, of the hyperscalers and the like. So it is a constraint. And yet paradoxically institutions like ours have -- I mean, we have $1.3 trillion of actual like liquid assets. Now, of course, that directly feeds our outflows. But we also have almost -- we also have a huge amount of things like discount window capacity that we give 0 value to. And by the way, I'm not actually a proponent for giving it full value because you should think -- everyone needs a bit of contingency, but there is a very arbitrary distinction between the 2, right? There is a -- there are high-quality assets with no liquidity value. And then there is the thing just the other side of the line, which is like 100%. It's a little bit like the G-SIB, there's this like arbitrary cutoff, which is unreflective of the kind of behavior that banks in practice would exhibit in a stress. And that I think on the margin is quite curtailing liquidity capacity in the system.

Maybe as a final question. Obviously, we have a new Fed Chairman, Chairman Warsh. He stated that over time, he wants the Federal Reserve's balance sheet to shrink from its present levels. What are the implications of a smaller Fed balance sheet in the future? And will doing this make liquidity constraints even a bigger concern?

I think that -- it's such a concrete question. First of all, there are 2 things which I think are a little conflated, which is the risk profile of the Fed's balance sheet, I think, sometimes just gets paraphrased as the size of the Fed's balance sheet. I think in practice, many of the people who might be critiques of Fed policy might say it's really about the risk profile that they had an issue with. And of course, when the risk profile grew, the size grew, but it isn't -- that's kind of, if you like, coincident rather than causal.

Second thing is just numerically, if the Fed reduces the size of its balance sheet, then liquidity in the system reduces by a numerical amount equal to 1 minus the notional reduction times by 1 minus the outflows assumed on whatever wholesale deposit that would otherwise be. So yes, reducing the size of the Fed's balance sheet is a reduction to liquidity in a system, which is already, I think, operating at an optimized level of liquidity, i.e., the binding constraint. So they would naturally take our liquidity from the system. So I think they need to work hand in glove with policymakers. If they want to pursue that policy, they need to think about it holistically with liquidity reform to ensure that at a bare minimum, they offset. Otherwise, they will start to kind of drive liquidity clips or higher borrowing costs.

Are there any opinions from you on his initial start as Fed Chairman. What do you think? How is he doing? I know he's not been in office too long.

I mean there's no upside for me like kind of particularly criticizing the Fed chair, is there? No, I'll only say the positives.

Sure.

I love the fact that he's willing to revisit some things which have been status quo for a long time. There is no doubt that there is -- the data task force has the potential to be very interesting. We see it ourselves, we're so reliant as financial system on data that's 2, 3-month lagging, whereas best-in-class in the private sector are looking at real-time live data. The Fed can close that gap quickly and make much better decisions. So those task forces are a good move.

Good. Well, with that, we're running out of time here. Please join me in a round of applause, thanking Charles for being here.

Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's Third Quarter 2026 Earnings Call. This call is being recorded. [Operator Instructions]

Information concerning forward-looking statements and non-GAAP financial measures included in this presentation can be found in JPMorgan Chase's earnings press release and investor presentation posted on the Investor Relations website.

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.

Thank you very much, and good morning, everyone. The firm delivered net income of $15.3 billion, EPS of $5.57 and an ROTCE of 20%. These results included $658 million of net investment securities losses and corporate. Revenue of $50.9 billion was up 8% year-on-year. Excluding the net investment securities losses, revenue was up 9% year-on-year, largely driven by markets revenue, higher deposit balances and higher asset management fees and AWM and CCB. Expenses of $27.3 billion were up 12% year-on-year, largely driven by higher volume and revenue-related expenses as well as -- and wage inflation. And credit costs were $2.7 billion with net charge-offs of $2.2 billion and a net reserve build of $539 million.

In terms of the balance sheet, we ended the quarter with a standardized CET1 ratio of 13.9%, down 30 basis points versus the prior quarter as net income was more than offset by OCI losses, higher RWA and capital distributions. You'll note that we've updated the categories on the RWA walk to make it a bit more useful. This quarter's standardized RWA increase of about $52 billion is predominantly driven by an increase in lending across banking, markets and AWM as well as the impact of higher energy prices and increased market volatility.

Now moving to our businesses. CCB reported net income of $5.7 billion. Revenue of $21.2 billion was up 9% year-on-year, predominantly driven by higher balances in yield in card, asset management fees, deposit balances and auto lease income. A few points to highlight debit and credit spend grew 10% year-on-year with continued momentum across lending categories, including gas and travel supported by consumer demand.

Deposit growth of 4% year-on-year was stronger this quarter as we continue to grow our customer base across consumer and business banking, and we retained our #1 position in retail deposit share based on FTSE data. And by investment assets gross $1.4 trillion, up 15% year-on-year, driven by market performance and strong flows.

Next, the CIB reported net income of $8.2 billion. Revenue of $22.7 billion was up 14% year-on-year on strong performance across the businesses. IB fees were up 14% year-on-year, reflecting strong performance across products, notably in advisory. While our outlook remains constructive, supported by ongoing client engagement, evolving market conditions have recently slowed activity a bit, so we'll have to see how the quarter develops.

Markets fixed income was down 4% year-on-year, with lower revenues in commodities, rates and credit, largely offset by higher client flows in currencies in emerging markets. Equities was up 49% year-on-year with continued outperformance across the franchise, notably in prime and derivatives.

Turning to Asset & Wealth Management. AWM reported net income of $1.8 billion with a pretax margin of 36%. Revenue of $6.9 billion was up 14% year-on-year, predominantly driven by growth in management fees on higher average market levels, strong net inflows as well as higher loan balances. Long-term net inflows were $51 billion, largely driven by continued strength in fixed income. AUM of $5.2 trillion was up 13% year-on-year, and client assets of $7.9 trillion were up 15% year-on-year, driven by continued net inflows and higher market levels.

Finally, Corporate reported a net loss of $455 million, which included the net investment securities loss, as mentioned earlier, on revenue of $93 million.

Turning to the outlook. I'm going to update the full year guidance by giving you the fourth quarter, implied full year numbers are on the page. We expect fourth quarter NII ex Markets be approximately $25.5 billion and fourth quarter total NII to be about $28 billion. And as we've done for a couple of years, you'll note we gave you a central case for 2027 NII ex Markets of approximately $107 billion, which will refine for the next quarter. It's important to remember that this central case is based on a series of assumptions that are obviously highly uncertain even under the best of ourcumstances.

On expense, we expect the fourth quarter to be about $27.5 billion, with the implied full year increase, reflecting higher volume and revenue-related expense driven by continued elevated activity levels. Finally, we continue to expect the card net charge-off rate to be approximately 3.2%.

With that, we're now happy to take your questions. So let's open the line for Q&A.

[Operator Instructions] Our first question comes from Ebrahim Poonawala with Bank of America.

I guess maybe one question, just there's been a lot of discussion around all things AI over the last couple of months. And maybe if there are two things that you can address specifically. One, when we think about the disruption risk to agentic AI, I know you've talked about in the past, maybe just frame that given your visibility into the technology, how you think about that? And also the challenge of implementing agentic AI inside a bank, given the emergence of all the rogue agents and does that make it harder for a bank to actually deploy agentic AI as we think about just competitive challenges.

I'll start and you want to jump in, yes. Okay. So on the disruption point, a couple of things. There's obviously been a lot of focus on Smart Cash solution, which I think is a small piece of the overall state, but that is live now actually, as of last go weeks, very, very early days, and it remains kind of a targeted pilot type thing, but it is interesting to learn some things about what clients care about and sort of see how it works to kind of sell a product like this in the field. So -- more to come on that in the future. Early days interesting so far.

I think the bigger picture here is around -- there have been a couple of releases of personal agents this quarter, which have really gotten a bunch of attention in the market, and we saw a little bit of a response in bank stocks around those releases. And I guess the way we think about that, from our perspective is that -- on the one hand, it's nothing new and -- but that doesn't mean that we're complacent about it. So if you think about what is the nature of the competition that comes from these agents, it's really the intersection of two things that we've been talking about for a long time. One is yield-seeking flows. So obviously, we deal today and have dealt with all the various lots at rate cycles with a lot of competition from field in flows. And our strategy remains focusing on primary bank share, not chasing every dollar of yield-seeking money. So that doesn't mean that competitive pressure isn't real. It just means it's not particularly new.

The other piece is competition from Fintex for innovating and providing great customer experiences. We've also been talking about that for a long time and the criticality of ensuring that we have parity with them and that we're leaning in enough to make sure that we're giving people the experiences that they want through all the various channels, including digital.

And so in that sense, the kind of agentic personal agents, whatever stuff, it's just the intersection of those two things, and it's not new. As I said, that doesn't mean we're complacent about it. We're spending a lot of time on it, and it's going to be interesting to see how the space develops and what we ourselves offer there at some point. But when you take a really big step back from a competitive position, I think we really like our hand in no small part because of the sort of multiple decades of investment in the branch network, the value proposition and not least, costs that our customers have in us.

I'll just add, internally, we use agents to do good things here, and we're going to continue to do that. And we do -- we'll use it for customers, but I'll probably always be do a great job for customers. And so we're not against agents or agents something like that. There are polls you're using for customers. There is a defensive side, which is you got to make sure our customers aren't worked by it. And so that is of concern, but this -- think of that as an AI agentic concern, which is heightened because you don't want rogue agents, and there could be thousands of them. And -- so we've always been literally on the side of the client that people are using them, they should understand the risk. There's a liability transfer, they should understand liability transfer. If that is being misused, it shows being misused. So we have to make sure we protect our customer in the right kind of way. So we will be -- we're building tools to do that, too. In the meantime, we're not going to allow just any agent to come outside Asia to come in inside the company because it's just too risky for clients and for JPMorgan.

Got it. That's good color. And just separately, I think as we assess the risk of interest rates maybe moving even higher than what we saw in the third quarter. Maybe your latest thoughts around how you assess the resiliency of the economy to handle maybe a 6% rate on 10-year and just the Fed hiking a few times. Do you think the risk of a market event or just on the economy is meaningful as we kind of discount that?

We always prepare for all different events. And that's not the same as predicting them because we want to be a strong company, helping our clients our communities, countries around the world with the coin. So of course, things like that could happen. But we never take it off the table. It could happen for good reason, we still have demand for capital, a lot of productivity and things you're fine, we can have or a bad reason, and picking inflation around the world. It can happen not figure what's in the United States have what happens overseas. So we're not predicting it I've always thought there's a higher chance of other people. I still kind of think that, but that's not a prediction. That's just a of that as cautious preparation.

Our next question comes from John McDonald with Truist.

Jeremy and Jamie, was hoping, Jeremy, you could unpack the new outlook for 2027 NII, the central case that you gave, including some of the assumptions around the balance sheet growth, deposit pricing and the impact of higher rates.

Yes. Sure, John. No problem. So if you start with what we've given you is the NII ex market guide for fourth quarter, which is 21.5% and you annualize that, you get something like [ 102 ]. So we're essentially giving you guiding to $5 billion of growth from that to the [ 107 ] million. That $5 billion, probably about 1/4 of that, I would say, is related to the yield curve. So we remain asset sensitive and probably a little bit more asset sensitive than the EAR shows just because of the lower than modeled deposit betas. So about 1/4 of that is the hikes that are currently in the forward curve. I think there's one in December and then two through the first half of the year.

And the rest of it, I would actually describe pretty straightforwardly as just a continuation of the balance sheet growth and mix trends that you've seen this year. So both continued modest consumer deposit growth, continued wholesale deposit growth, probably wholesale a bit weaker than what was very strong this year, but we don't actually know. And then card loans is obviously can be a big driver of NII, continued at comp level. So actually a pretty straightforward story, I would say, as, but I gave you the caveat on the prepared remarks.

On one thing, I think there's more uncertainty rather a number than normal because of all the things going on around the world. So -- and obviously, it also relates to what we do which we could change at any point in time.

Okay. That's helpful. And Jeremy, on expenses, if we move over to there, do you have any preliminary thoughts on your investments and plans for next year are the other drivers of expenses and how those might line up with the current Street forecast for expenses next year?

Yes. So we try to draw a little bit of the sanction between NII and expenses in the sense that despite Jamie's comments, which are obviously true that we can modify the structure of the balance sheet to change the NII, in general, undisturbed, the NII is kind of a property of the balance sheet at a given point in time and is not that sensitive to the budget cycle, and therefore, we feel like we don't have a very good excuse at this point in the year ending that we don't have an opinion about 2027.

Expenses are a little different in the sense that they are still sent into budget cycle, and there are a lot of discretionary decisions to get made in there. And while we have some preliminary views, we're kind of not done with that. And you will remember, obviously, John, last year, we did point out that our preliminary return expenses suggested that the market's consensus was a bit off that seems to be quite a bit less true this year. So we see the consensus right now for 2027 expenses being around $114 billion. And our current preliminary read isn't too far from that. So kind of -- no news on that front, I would say, and let's see how the budget cycle finishes. And as Jamie points out, I think the uncertainty isn't just about the macro environment. It's also about how dynamic the investment picture is and the effects of AI, et cetera, et cetera, et cetera. So a lot of moving parts. But for now, the consensus doesn't seem too far off.

Our next question comes from Erika Najarian with UBS.

My first question just is on capital management. We were fielding a lot of inbound questions from investors in terms of the $1 billion buyback versus the normal cadence of around $7 billion. And I know that there's no normal cadence, and I know that buyback is the last priority, but perhaps take us through how you -- we should think about your capital priorities, particularly given that we're hearing that Basel III Endgame and G-SIB should be finalized at year-end.

Yes. So I think we've told you all that we have probably $30 billion or something of excess capital roughly just estimating what all the end games are, which we don't know, but that's plenty. But the capital hire has always been the same. After you pay a dividend, which hopefully be steady, we like -- we really like investing in organic growth, that is the highest and best use of capital for our shareholders. And obviously, buyback comes after that, particularly when stock prices are up.

So the positive news is the main reason the buyback is down, and it's got another to do with AOCI or guessing about the environment or maybe Basel III. We believe now, which is different than we told you in the past that we can redeploy that capital at very good returns over time. And redeploying that capital at very good terms over time is far better than buying stock at a 6% or whatever the earnings yield would be if you reported today, and that's simple. I mean that's good. That's good for shows.

And I'll give you one example, and I think there are many more, but the security resiliency initiative, we told you all we deployed $1.5 trillion over 10 years. And we haven't -- I don't think we disclosed the number, but the first year is probably over [ 200 ] already. and we'll disclose that and do some work on it. But I guess, it will be considerably more than that. And the world needs capital, the World needs advice, the world become more complex assets under management around the world are bigger. And so we think there's good news in the long run. And we can't tell you what it means for the next 6 months, but that's why we're doing it. We hope to deploy it very well for our shareholders.

Yes. And the only thing I would add to that, Erika, is just that if you notice what the journey has been on the CET1 ratio, I want to say that you started at something like 15.7%, and we're now at [ 13.9 ], during a period during which we've done a ton of internal deployment. So there's been a lot of organic growth in RWA and some of the investments that Jamie alludes to. And during that period, we've also done a bunch of buybacks. So -- but at this point, we -- as Jamie says, the speed with which we've been able to deploy organically relative to the amount of excess that we have and the environment seems pretty clear that it makes sense to keep

I want to -- on the investment bank a little bit. But they've hired a tremendous amount of very talented people in SRI and we're lucky to have Todd Combs here, investing some of the capital. They've had a lot of ideas, so not just meeting at this point. They've helped fund some interesting types of things. We have more ideas. They're doing a really great policy around it, too, which is what can you do to accelerate security resilience in the United States around its shipbuilding or -- and we had a big announcement in Philadelphia.

So I just -- I'm proud of them. We've had a bunch of people who retired to raise their hand. They're coming back more for patients than anything else. And so it's been just a great effort for the company. And as we pointed out, is global and the global response has also been exceptional. We have something across my desk, which is alone over $10 billion or $20 billion in financing in one country. So a lot more to come. I would put in the same category of American Dream initiative the innovation economy initiative, the commercial banking initiative around the world, these things are working. We think we're doing the right kind of good business at good returns.

As a follow-up here, that all sounds very positive for activity levels going forward in a very broad way. And Jamie, I know that you did some media over the past few weeks and talked about the pipeline. And maybe in that context, especially given market fears that the bond market route around the world has a chilling effect on activity levels. Maybe talk about what the pipeline looks like for activity levels in both the investment -- both "Wall Street and Main Street."

Before I do that, the bond volatility, the market, the fear is not going to change what we do. We serve clients with ticketing, we know that colon of the economic wins. It's the weather, that's not exactly referred to. The pipeline is fine. But I point out many times before, the pipeline is like an accordion. They can open close pretty quick. You've seen in the United States has been, as Jeremy said, it were delayed probably, we don't really know when we'll see. And I was in Europe recently, and the pipeline there is actually quite healthy and even more so in IPOs than we would have thought. So we just don't know and certainly the clients are doing a good job for the most important thing pipeline. We always forecast the pipeline as you call it, the probability the profit -- and we know one thing for sure. It will be wrong.

It's more to emphasize like when Jamie and I talk about not knowing, I think we mean we don't obviously know exactly what investment banking fee revenue is going to be in the fourth quarter. I think that we do know that the overall environment is robust and supportive and there's a lot of business that wants to get done and needs to get done. And as you point out, Erika, not surprisingly, given the rate sell-off, you're going to have the market take a little bit of a breadth and a pause to make sure buyers and sellers can meet on valuation terms. And so we did see a little bit of that slowdown in the second half of September, basically. And we'll see how that plays out into December. But -- I mean, sorry, into the fourth quarter. But the big picture I think, is pretty clear.

Our next question comes from Chris McGratty with KBW.

Just following up on the capital allocation. Maybe a comment or two on where you're less comfortable allocating capital to? It seems like there's plenty of opportunities to deploy it. Where are you pulling back? Where are you seeing structures or peers may be doing something you may not want to do?

I'm not going to give you a very specific stuff, but we're tightening up a little bit on credit. I think some of the credit terms have got a whole build those. And you've heard us talk about that before, and other people a little too much vehicle to we covenants at too much priming -- good assets, a little too much pushing on it. We just don't feel we have to chase that kind of stuff anymore.

Okay. Great. And then Secondarily, the health of the consumer is getting a lot of attention. I guess the question is durability to withstand these kind of rates I think you talked about 10% year-on-year spend in debit and credit. If we're a year from now, we still have rates where we are, what's your expectation for the ability for the consumer to hold on?

I mean, obviously, if you keep real rates very, very high for a long time, at some level, that's designed to slow down economic activity to fight inflation. And it's hard to imagine that, that wouldn't have an impact on the consumer. So far, what we see in the current data and what's been true, I would say, for the last few years, the consumer has been quite resilient in the face of a number of headwinds that under different circumstances you might have expected would present a challenge. But I think the conditional expectation of consumer credit help as a function of higher rates is a fairly nuanced question. But fundamentally, the picture is pretty simple, like the consumer is currently very healthy, primarily because of a healthy labor market. But if the Central Bank needs things to cool off and that involves a aggressive extended rate cycle almost by definition, that's going to involve higher unemployment, which will produce weaker consumer credit results.

Our next question comes from Ken Usdin with Autonomous Research.

On the consumer side, it's nice to see the 4% year-over-year CCB deposit growth. I'm just wondering, aside from agentic, just -- what are you seeing in terms of either rate-seeking behavior, is it the deposit margin has been up for the last few quarters, which is also good to see. And I'm just wondering, any change in your expectations for either growth or how you're adjusting to the current marketplace and competition for deposits?

Sure. Yes, it's an important question. It's a good question. I think the simple answer is no significant change to our core expectations here. I think we've seen kind of the reassertion of consumer deposit growth over the last couple of quarters as the yield-seeking flows have faded and that continues to be our basic expectation. So that's the big picture.

I do think that since that outlook was shaped, we have seen a somewhat higher rate environment, and that does raise the question of what will be the impact of that on consumer deposits. So in the normal course, you will obviously have higher rate paid from the high beta products from CDs and premium deposits. And all else equal, you would probably expect some amount of additional internal migration out of checking and savings into CDs for simplicity, resulting in a higher weighted average rate paid and maybe you see a little bit of additional outflow pressure, which results in, therefore, slightly weaker deposit growth. So that's all totally speculative.

And it's very much a function of which side of the argument you land on in terms of some people believe, well, all the cash sorting that's going to happen has already happened and therefore, these things are relatively insensitive to slightly higher rates. I don't personally believe that. I think it's probably a little bit more on a continuum than that. And therefore, I would expect a little bit of additional pressure. But in the end, it's a matter of degree no one really knows. And the good news, I would say, is that the for franchise performance is exceptionally strong, driven in no small part by the net new checking account acquisition, which I think we had like [ 650 ] this quarter or something. So it's really been very, very strong and it's proof of kind of the value proposition and the engagement that we're seeing through our marketing efforts and the power of the brand. So -- from a long-term perspective, that's the most important thing and the impact of rates in the near term, we'll just be what it does.

Excellent. One follow-up on the markets business. Obviously, we're seeing quite a bifurcation of just continued strength in equities. And as you mentioned earlier, just some tougher comps, I guess, and the impact of higher rates on FICC. Any change to just client demand for balance sheet usage? Is it kind of insatiable as it seems to be in the equities business, just the state of things in the markets business in terms of activity and kind of your willingness to we'll provide balance sheet, but more so the demand side, too?

Yes. So -- at a high level, I think the simple answer is no real change. So I like your time -- Yes. I like your inflation the Street, yes, exactly. I like your insatiable demand for capital point. That feels about right. I haven't heard anything to the contrary frankly, recently. But to Jamie's point about tightening up credit, that's a little bit of an overall point about just making sure we're really scrubbing everything -- and in this moment where AI is such an overwhelming theme. It's producing so much innovation and so many different pockets of capital being topped all kinds of different mechanisms, we just need to be really, really on top of things to make sure that nothing slips through.

Our next question comes from Mike Mayo with Wells Fargo Securities.

Can you say the degree that AI helps out JPMorgan? I saw you were ranked highly in a recent AI and bank pole. But I squint and I look at the earnings release, I'm trying to find the benefits, and I'm not sure if I can. I think you can update these numbers. You spend, what, $2 billion in AI and you have like $2 billion of benefits or maybe that scale if you could update that? And then also address the risk that AI agents will take deposits out of JPMorgan. And as far as that answer, maybe you can talk about that value proposition and the trust and the way you protect customers' privacy and the value they place on that.

Yes. So Mike, let me just tie you of a couple of things. So first of all, on the AI expense, you're right. I think we did say that in some media setting at some point. I think it's not exactly right, and I think we corrected it later. I think the -- at the time, and I think it is a little sale at this point, the AI expense number was significantly less than that. I want to say something like [ $700 billion ] annually or something like that. But more importantly, like there's a lot of counting effects there, right? If you sort of price out the amount of time we're all spending thinking about it, you should probably get a higher number, too. So it's, at this point, like not really something that you can ring fence. It's pretty well diffused inside the whole institution, and it's obviously like a very, very high priority.

On the question of benefits, you're right, we have quantified that in the past. I'm really trying to move away from that. I think that old quantification was accurate and correct as far as it went, but it included a lot of what you might call regenerative AI, machine learning type stuff that's particularly significant in consumer fraud prevention and so on. And that -- while that's relevant, I think when you and others ask about AI in the current moment, you're really asking about the impact of generative and agentic AI on productivity, on the expense line across a range of places, especially software engineering, but also other places.

And maybe you're asking about new exciting revenue opportunities at the margin. And so that, I think, is the more relevant focus right now. And I'm just very reluctant to spend a lot of energy quantifying it because it winds up wasting a lot of people's time inside the institution when we actually need to get them to focus on doing things.

So on that point, and in terms of the visibility of the benefits, I think you're right to point out that the benefits aren't observable in our current quarterly earnings. And I think that's probably not that surprising because as much -- as important and dramatic and exciting as this theme is, it takes a long time to really do things that are visible at an institution of our size. I can tell you that just anecdotally for me personally, the types of use cases and benefits that I'm starting to see even in my own technology organization that supports finance are increasingly exciting. We've done some experiments of some minor legacy tools that needed to be rewritten and then trying to see if we could essentially one shop the rewrite in like a couple of weeks and it didn't work perfectly, but you're starting to see some really exciting opportunities for acceleration and productivity change. So how long it's going to take for that to show up, we'll see. And obviously, some of those benefits are going to be offset with token costs, which is a whole other conversation. But we're excited. There's a lot going on.

And I guess your other question was the genetic question and the trust question. I think I addressed some of that earlier already. But at a high level, as Jamie pointed out, the True North here is protecting the client, so -- and the company, obviously, but narrowly focusing on agents giving customers access to money movement on their accounts. I think right now, some of the services that offer them do it through credential sharing and we have a long record of being against that way of doing things, screen streaming, et cetera, it's not secure. And so to the extent that we're able to block those, we are blocking them to protect customers and protect ourselves. And it's important that customers understand that if they give up their credentials, the agent and the agent does something that they don't want, that's going to be on that. And that's sort of not an ideal state of things. We are working on being able to do this correctly. So that's a piece of the puzzle.

And in the big picture, trust is clearly an asset, and we spent decades building it. And as I said previously, we like our hand in that respect. But we need to be clear that -- the fact that we're trusted is not an excuse for complacency or a reason to provide mediocre customer experiences. So we really need to do both at the same time.

And one short follow-up on the token costs. Do you get a benefit from scale with the token cost, say, versus a small bank? And are you also transitioning more toward kind of open model AI systems that can cost a lot less?

It's a little bit of everything. I would say our strategy is quite focused on minimizing lock-in and maximizing optionality and the ability to manage costs. So part of the strategy is model agnosticism, harness agnosticism and ability to run both proprietary models, but also open weight and open source models, some of which [indiscernible] So it's very much an all of the above strategy, designed to get the best of what's available at the best price and control our investments.

And there are tools coming that model routing, which in into the best quickest, cheapest you don't need the most expensive thing in query you have and very often people just use them when they're comfortable with. So -- and that's all coming to have that cost under control.

Our next question comes from Gerard Cassidy with RBC.

Can you guys share with us the deposit beta outlook, obviously, interest rates are starting to go up. The Fed fund futures are suggesting more rate increases over the next 3 to 6 months. And with your growth in your consumer deposit base since the last tightening cycle in '22, '23, how are you guys thinking about what you might see this time around? And also, obviously, we're starting from a much higher interest rate level than we did in '22. So could that mean deposit betas may not be as high this time around for you folks?

So it's a very good question, Gerard, actually, and I think it is an important thing for people to be thinking about because this particular rate cycle, this latest right cycle is arguably even more unprecedented than the last one, like we just don't have a lot of historical data about how people behave when you see rate hikes from the launch point that we've seen in the cycle. So it's been an unusual 10-plus years, I would say, and I think it's quite important for people to realize, especially people who are doing this by training models on historical data, that the historical data set is just not that rich. So it's very important to be kind of thinking out of the box.

In that context, though, I think locally, our beta story is pretty easy actually in the sense that you can almost think about the franchise as pretty barbelled between a bunch of very high beta deposits like most of wholesale as well as CDs and premium deposit and consumer and then a stack of very low beta deposits. And the question is probably less the pricing of any given product, although that's always going to respond to competition and to market conditions, and more the sort of migration behaviors across products in the cycle.

And I don't think we have -- like our local expectations are that it's going to behave roughly the way it has been behaving. But I do think it's right to note that this is a different cycle, and therefore, we have to be thinking about all scenarios as we always do.

Very good. And then pivoting over to a different question. The IMF came out very recently this month with the global stability report, and then you've talked about how the hedge fund industry has grown dramatically. And now in their eyes a systemic risk. Leverage finance, in particular, was highlighted as another high risk. Obviously, that you're against wheelhouse as with your peers and competitors. Can you share with us your insights on how you're managing these risks? And what do you worry about since these businesses now are so much bigger today than they were 10 or 15 years ago.

We worry about a lot of stuff. Now what the IMF thinks about.

Got it.

They are rolled because there's a lot of leverage in some of these.

Yes, yes. I mean it's not wrong, but it's also a little bit obvious, and I would also say it's not really new...

Right. I mean the hedge fund -- the hedge fund industry has been relevant to our franchise for decades now and a source of risk for the system for a long time now, and everyone knows that, including the hedge funds themselves that are increasingly institutionalized with very professional risk management and control over their margin relationships and stuff like that. So -- there is risk. Obviously, that's the business is knowing it and managing it and preparing for the But I would say that hedge fund leverage as a contributor of risk to the system is very much in the category of no one can It doesn't mean it's riskless, but we kind of know what it is.

There are a couple of units that happened recently, not huge. -- some of the equity side, some of the fixed income arbitrage type of size and they were handled pretty easily by the Street.

Our next question comes from Glenn Schorr with Evercore ISI.

One quickie follow-up on the whole agentic and AI impact across the positive portfolio. My question is your comfort level and ability to protect from the standpoint of how you and the regulators thinking about liquidity stress testing and liquidity risk management and just by the nature of the technology existing do things change? I don't know if I'm being too much into the future here, but...

Yes. No, I understand the question, Glenn. I mean, you can argue that it's sort of downstream of the narrative that the SVB run was a sort of social media phenomenon. And -- we were never big buyers of that idea. I think the better way to understand that situation was extremely concentrated and undiversified deposit base that was wholesale non-op and kind of monoculture in terms of who we're shaping the thinking around that. And so arguably, in a world with TV and fax machines, I think you probably would have gotten essentially the same answer in terms of the speed of the run. It might have been the processing of the fax machines into wires might have taken an additional 8 hours, but the core ingredients are worth the same.

So I think everyone's pretty eager to tell a sort of fast deposit run story in this new technology-enabled world. I'm just a little bit less persuaded that really have the effects there. And sure, therefore, like in the -- in a world with agentic consumer cash movement, it's easy to create a story where it becomes even easier to move cash under certain types of prices. But I think the right way to sort of ensure that your deposits are stable is to run the company with fortress principles so that people are confident in you. And the ease -- you're probably not supposed to be hoping that your deposits are stable because the money is difficult to move -- is what I would say.

I think that's fair. I appreciate that.

You make a big step further, we have $1.5 trillion in cash and marketable security. So not worried -- JPMorgan liquidity. But if you take a big step back, banking services are necessary, credit cards and debit cards and you money and insured deposits and need the branches. And one of the ways you earn that is NII from money to sister idle. But if you couldn't do it that way, over time, you do something different subscription. And of course, you're getting investment accounts combined with checking accounts. And so over time, there will be -- it will adjust. We want to do a great job for our clients and cost a lot of money to run these banking systems. Most of it is a fixed cost. So I'm not worried about over time. But in the short run, of course, you got to figure out how you want to handle that kind of stuff. And I do think you raise an issue which is different, which is should regulars be thinking about what they're going to do if somebody says, yes, of course, they should. It's a new world and with all these bots and ages and stuff like that, we could all get hurt and cause a problem may be. They obviously ready I try to be prepared for that.

Got you. One question on concentration risk. The public equity markets don't know anything about that and don't care, but bank loan books and bond books and insurance portfolios do. So I guess my question is this amazing hyperscaler race to expand compute power and everybody wants to finance it, the money and capital is there. But from your vantage point, can we finance it without breaking some concentration limit issues like can the market digest what the patter suggest for the spend?

Yes. It's a really good question, right? Because I mean, we think a lot about our current exposure to that. But arguably, the more important question is our appetite for future exposure in light of the kind of announced amount of CapEx that needs to happen in this ecosystem and the associated demand environment for capital from the system.

So I guess a couple of things. One, clearly, single issuer concentration is a thing that's going to get managed. And clearly, given the nature of these structures, you have to be sophisticated about assessing both your indirect exposure or your direct exposure, where you sit in the capital structure, the value of the collateral, like there's a lot of nuanced credit analysis that needs to be done correctly to assess your individual issuer exposure across the ecosystem. And you can assume that institutions are going to contain that. And I guess one thing that we've seen over the last year is just increasing usage of different parts of the capital markets ecosystem to get as much diversified financing of this build out as possible. And there is a lot of capital out there waiting to be deployed. So some of it will be from the banking system. Some of it will be from elsewhere. But I think at the system level, I don't know, some people are talking about crowding out effects, so that will be interesting to see.

But -- anyway, I think for us, we need to focus on our institutional risk opting -- institutional. And I think there, in addition to the obvious single name focus, the other thing to be very careful about is just the AI theme. Because the AI theme is so broadly diffused into the marketplace, it's not just traditional construction lending. Now increasingly, it's working capital revolvers. You also see the equity markets, it's kind of everywhere. And so you really need to be running stresses that past your resilience to a meaningful change in the overall premium across the entire enterprise. And that's something that we spend a lot of time thinking about.

Currently, our exposures are still quite modest in the context of our overall wholesale exposure, but that's not the same as saying that we would be immune to a major change in sentiment in the AI space. I think I would be surprised if anyone, frankly, was immune to at this point.

Next, we will go to the line of Manan Gosalia from Morgan Stanley.

I wanted to check in on the commercial banking side. What are you seeing with your core middle market clients? Is there an insatiable demand for capital there, too? Or as short-end rates move higher, the value of the curve moves higher? Are you seeing any pullback in demand there?

Yes. I don't think that when we talk about the insatiable demand for capital, we're talking about our core middle market clients. I think there, the theme for some time now has been people worried about other people while doing fine themselves. The theme is always like, "Oh, we run these surveys." And they're almost like, "Oh, I'm worried about this and I'm worry about that." And I was like, "How are you doing?" Oh, doing great. So it's kind of an interesting dynamic there.

No question at higher rates, I think input costs inflation, the diesel narrative, like these things are tough for middle market clients. And so we see them trying to manage that to the best of their ability. And I think it does create a little bit of caution in that space. But I think balance sheets are strong. People have been through a lot over the last few years, and so they're well prepared. But yes, I don't think insatiable demand for capital applies to that subset of the client base.

Got it. And then separately, Jeremy, on the liquidity side, in the past, you've noted that you need to see changes in the liquidity rules to fully realize the impact of freeing up excess capital. As we get closer to the regulators coming out with new liquidity proposals and if you do get more credit for discount window readiness, how would that change how you manage the balance sheet and over what time frame?

I think it's right for the regulators to look at all these things again. It's not just the discount window, it's FHLB, inconsistency between resolution and recovery, it's what counts as a QLA to start with how you do LCR. I think they should look at all that with the view that I think you can create safer banks with more deployed capital and more liquidity in intermediate markets. And that should be the goal. But you really -- it's hard to answer the question because this is going to be up to them. Either way, Jeremy will serve our clients and do a good job to take care of to do what we're supposed to do, but I think they should be doing that. So we'll see. We don't have to speculate what they're going to do with a lot of proposals out there, part of the international rules, but I applaud them for looking at it.

Yes. No, I think that -- I agree with everything Jamie said, and it's really particularly complicated across range of dimensions. I will note that at company update, we actually talked about this and in some time kind of gave you the answer because what we said at the time was that the problem with the situation where the system has a healthy amount of capital is relative to liquidity constrained is that just at the margin leads you to have your asset deployment being much higher risk density instruments essentially. And so a place where you're a little bit more balanced, would tend to move you towards lower risk density and it just enables you to serve a broader part of the economy, including mortgages, consumer lending, but also some of the more secured C&I type structure.

If they want to reduce the size of the Fed balance sheet, they're going to have to make some changes.

Our next question comes from Matt O'Connor with Deutsche Bank.

I was hoping you could talk more about how you're growing noninterest-bearing deposits when a number of peers aren't? And then just how you're thinking about that specific bucket of deposits in a higher rate environment if you can continue to grow?

Yes. I mean I think I've sort of addressed that point to some degree in connection with -- I think my answer to John's question on the 2027 and looking how we're feeling about consumer deposit growth. But I guess just to reiterate a couple of points, like number one, our net new checking account growth has been exceptionally strong, $650,000 this quarter. So people are reacting, they're responding well to the marketing, they are responding well to the brand, the value proposition to the sort of multi-decade investment and the product bundle that we offer our consumers. So I think that's really good news and has been a contributor to the kind of reassertion of consumer deposit growth.

As I noted, the question a little bit in this rate hiking cycle is going to be how those balances behave and how pricing pressure behaves and how much migration we see to higher bit of products and so on. And we'll see. I think we're relatively optimistic right now, and we wouldn't expect radical changes for like small local moves, but we do think a lot about the different rate regimes and how that can affect the positive beta. I think that's part of being prepared for everything.

Okay. And I guess I was thinking more specifically the noninterest-bearing deposits, which I think are more kind of in the commercial corporate side of things. So I was just trying to see if there's any color there in terms of like cash management products things that have been a key driver.

The cash -- most of the noninterest bearing is consumer, and that's because we're growing the business and you have different products for different types of consumers and think the wholesale side, commercial is much more competitive than that.

Yes. No, I think to be honest, the reporting is a little confusing in part because of the famous ECR product that sometimes makes it look like on the wholesale side, there are more nonbearing deposits, and there actually are that at effect of rules for how we have to report. So do you want to give more color on that, Matt, you can follow up with IR. But -- at a high level, I would say that wholesale deposits have been -- continue to be -- and in fact, the margin are a little bit more competitive. But the way to think about that is not that the product offering allows us to grow non-spring deposits. It's there's an overall margin that you earn on your deposits as part of the bundle of products, and that's a function of how good your service offering is. And we have quite a good track record there of winning share and winning mandates as a function of all of our products.

Our next question comes from David Chiaverini with Jefferies.

So JPMorgan's ROTCE target through the cycle is 17% versus the 21% today. Is there anything you're seeing either in the macro environment or competitive environment that could accelerate a path to 17%? Or is that not anywhere on the horizon?

We've always talked about the 17% being through the cycle times are pretty good now with high volume and high asset prices and fairly low credit losses and all that. So if you can earn [ 7% ] and consistently for a long period of time, and that's a really good return for shareholders. That's -- that's our goal. I don't want to change every time something happens in the marketplace. And so far, so good. And hopefully, we a good environment for a while. We just don't know when it's going to stop.

And we don't want to be pointlessly negative, and I won't sort of bore you with the speech. But if you just look across the entire franchise, every single business is performing exceptionally well. The conditions have just been exceptionally fair.

As with every company.

Yes. It's not just us. And so that hasn't historic true. Historically, you've tended to see a bit more internal diversification and high rate environment, some businesses do better than others and vice versa. So the conditions that we've had recently where essentially every part of the franchise is beating records are not typical by historical centers.

Makes sense. And then shifting to credit quality. You address the consumer side. Could you talk about the corporate credit health? It looks like you built some reserves on the wholesale side. Curious on your comments there.

Sure. Yes. The wholesale build is actually just from new activities. So it's not downgrades or change in the outlook or anything like that. So I would say that the corporate credit outlook is currently pretty stable. But obviously, there are issues out there, and we'll have to see how those flow through the performance of our borrowers, energy prices, fuel inputs, higher rates, these are all things that will create challenges in different pockets of the economy in the C&I space as well as the CRE space for that matter. So -- we'll see. But so far -- I mean, it's very early, obviously, but in general, we think corporate balance sheets are in quite good shape. And so there's been resilience, but there are a lot of pressures building up. So we'll have to see what happens.

Our final question comes from Kunpeng Ma from China Securities.

Kunpeng Ma from China Securities. I have a question on the revenue of the market business because you are seeing some volatilities in the market revenue across quarters. So I don't know whether we have a meaningful estimate of the growth through the quarter market business revenue. And also, if you can provide us with some of your thoughts on the key business momentum -- supporting such kind of estimate, that will be very hopeful.

Yes. So I had trouble exactly following your question, but I think you're asking me for a fourth quarter outlook for the markets revenue. And so as you know, we don't actually guide to that. It's is obviously very, very hard to predict and essentially a function of outside in forces. But just a reminder that you do tend to see significant seasonal decline between the third and the fourth quarter. And also a reminder that in recent years, we've had some slightly unusual seasonal patterns between the third and the fourth quarter. So our base case assumptions right now, all else being equal, are normal seasonal declines between the third and fourth quarter and make sure that you interpret normal with the right amount of historical context and all the usual caveats applied, we've seen a lot of volatility. There's a lot going on and anything can happen.

I think the fourth quarter will have not the same seasonal decline first -- not in the world.

That's all the time we have for questions today.

Thank you very much.

Thank you very much. See you all next quarter.

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

Next up, very pleased to have JPMorgan Chase. From the company, returning for a second straight year, Doug Petno, who is Co-President of JPMorgan and CEO of JPMorgan's Commercial and Investment Bank. Doug, welcome back.

It's great to be here. Thanks for having me.

You guys may recall, when Doug was on stage with us last year, he was Co-CEO of JPMorgan's Commercial & Investment Bank. This year returns, as I said, as Co-President and sole CEO of CIB. So Doug, congrats on the promotion.

Thank you.

Maybe we could start there before delving into CIB. But when we read the release about the promotion, the Board described the promotions as part of the ongoing succession planning process. Just how do you think about balancing your new firm-wide Co-President responsibilities against the operational demands of running CIB?

It's a great question. Well, first of all, thank you again for having me. It's great to be with all of you. It's an exciting time at JPMorgan. I know I speak for Troy when I say he and I are both really thrilled and honored to be in this capacity as Co-Presidents. We had a very high functioning partnership as co-heads of CIB. Mobility is a fantastic thing when you move -- lift somebody up and move them around the company. We're already doing things together, consumer and wholesale that we otherwise, for whatever reason, couldn't get around to doing.

So there's a lot of combustion and value unlock that's happening. It's exciting that that's happening and his learning curve is straight up, and it's going to be fun to work together in this new capacity. The other thing I'd say is there is no big vacuum that Jamie is leaving. Jamie Dimon is not stepping back. And so he's, if anything, I mean, I think it is good news, as active as ever, as client-facing as ever, is out in the markets all the time. But the company is big. We're scaling rapidly. We have big plans, big ambitions. So there's a lot for Troy and I to do to give him leverage to round us out as executives.

But I would say that's the case for not just the 2 of us for a broader base of senior people across JPMorgan as we have a sort of a dynamic talent strategy to develop and make sure we have a stewardship plan for everybody who's a potential leader of the company. I have a fantastic leadership team around me running the CIB. It would be risky to suggest that I don't run the CIB. These teams are fairly autonomous, connected, but very autonomous, strong operating CEOs for every component part of the CIB. And then for the firm overall, we have a high-functioning operating committee which share responsibility and accountability, and we've always had that, and we run the company as a true partnership. So it's not as dramatic of a change for Troy or for me.

Okay. I just have buzz. We started a couple of minutes early. So I'm going to just pause for a minute. So the webcast could kick in. Apologies for that. No, we're good. Sorry about that. Sorry about that.

This is a JPMorgan thing starting on time, end on time. Swiss watch precision.

Yes. I guess as a follow-up to that, what does running the CIB as sole CEO change in terms of how you manage the business day-to-day?

Not much is going to change. If you recall, Troy and I didn't divide roles and responsibilities, some co-heads sort of major and minor, and he's the markets guy. I'm the banking and payments guy. We both made it a point of trying to run the entire franchise front to back across markets, banking, payments, security services, the whole business. So for the teams that reported to us, nothing really changes for them.

For me, I have to make some subtle adjustments because going from 2 to 1, obviously, you have a little less leverage. But that, I think, is just a little bit of turning the dials around time with clients, adjusting for the time I'm spending in my capacity as a President. But it gets back to the point I made earlier, we have a very strong high-functioning operating committee for the CIB, and they're running the business on a day-to-day basis. My job is to harvest the combustion across the composite of teams across the CIB.

I guess when we think about CIB, almost $25 billion in revenues in the second quarter, almost half of JPMorgan, excluding the gains. For those in the room to put that in perspective, CIB's revenues exceeded the revenues of every U.S. bank's consolidated result they presented here other than Bank of America. So clearly, a very substantial franchise.

I guess, that kind of gives you, I think, a broad view in terms of what corporate clients are thinking, investor clients are thinking of all sizes, all geographies. I was hoping you just delve into kind of the current customer sentiment, activity levels against an ever-evolving macro backdrop, which may or may not include a Fed hike tomorrow.

Yes. I mean, just real quickly to extend on the point around scale, it gets to the point of the components of CIB are as big as some of the banks that you've seen here at the conference. And so that's why we have very strong operating CEOs running these businesses. You're right, we have a broad-based client franchise. It's all the best institutional investors around the world, governments, corporates from early-stage, seed-stage start-ups, all the way up to the largest multinationals.

It gives us an amazing lens into the global economy, a tremendous data about the functioning and credit behavior and performance of these companies and institutions. You would honestly not know that we're at war, oil is above 100 for 10 years higher than it's been since 2007. We have a hawkish Fed, hawkish central banks in Europe. Our clients are seeing through the market volatility and the fog of uncertainty, and they've been incredibly resilient. And I'm sort of having a déjà vu, I think I said the same thing on stage last year.

But it really is, I think, a statement of the diversity and strength of the U.S. economy. I think the U.S. is a bright spot, one of the more relatively stable and strong parts of the global economy right now. But I don't -- we don't really see anything flashing red and very little flashing yellow. Anything that's flashing yellow would sort of fall in the category of companies that are in the center of the bull's eye for disruption for AI or anything exposed to the low end of the U.S. consumer demographic. We're already starting to see corporates that have product exposure, revenue exposure to the very low-end income demographics start to see some weakness, but nothing systemic that's concerning us at the moment and conditions are quite benign.

Middle market credit is good. Management and Board confidence is strong. Deal activity is quite robust. So a lot of it ties to the strength, resiliency of the U.S. consumer the diversity of the U.S. economy. And there are some other big secular forces that work. The AI super cycle, tremendous amount of capital spending underway that's driving a lot of economic activity. There's a supply chain repositioning that's associated with a lot of the global trade uncertainty, maybe going back to COVID and then certainly it was following on Liberation Day. You still have trade uncertainty with our nearest neighbor in Canada.

Our clients are moving their supply chains. And a lot of that's coming back to the U.S. It's creating a manufacturing renaissance. You have money in motion in private capital. Finally, there's a lot of transaction activity in private capital and the huge infrastructure spending requirements outside of AI, electrification of the U.S. and you have remilitarization. So lots of money moving into defense tech, defense manufacturing. So these are big powerful drivers that I think are sort of underpinning a lot of the market volatility and uncertainty.

So, so far, so good. There's not much that is really that cautionary at this point. But for those of us who have done this long enough, if you don't feel it, you'll feel it quickly. They sort of feel like something -- it's too good, right? It's sort of at that point where late stage of the economy just feels too good, but it keeps -- I think it might be slightly different given these large secular forces supporting the -- providing a supporting backdrop.

Interesting. I guess against that backdrop, before we kind of delve further in, maybe get the guidance question out of the way. So any update on quarter-to-date trading revenue or Investment Banking fees? And listen, we're also open to hearing about any changes to the firm's overall outlook.

Yes. So I mean, in large part due to the market sentiments, the market fundamentals I just described, we're seeing broad-based strength across CIB. In Investment Banking, strength across all products and all geographies. We started the year with a strong pipeline. We started this quarter with a strong pipeline. That continues. I touched on management and Board confidence. that's driving a tremendous amount of M&A activity. It's as high as we've seen in some time. So absent some sort of major market disruption sitting here in mid-September, we would expect IB fees for the quarter to be up mid- to high teens.

And then for Markets, very similar story, broad-based strength across FICC and equities. There's just significant opportunities across each of our markets businesses. And there, again, we would expect third quarter revenues to be up mid- to high teens, and that would reflect an expected seasonal sequential decline relative to Q2, which was a record quarter for us. But nevertheless, a very strong quarter is expected for Markets as well as banking. I think there's -- on firm-wide insights, we're going to give you much more information at earnings.

The only point I would make is the business is doing quite well at this moment. So I would expect that any kind of revenue-related, volume-related comp-related expense associated with outperformance would reflect -- would show up in our overall expense guidance. But this -- we would catalog as good expenses, and you'll hear more from Jeremy on that soon.

I guess your Investment Banking and Markets guidance for the third quarter seems to be better than 2 of your peers that presented yesterday in terms of Bank of America and Citi. Any thoughts in terms of what's driving that outperformance?

A lot, not much that I want to say in this room. Guys, you can write down everything. We've been investing. Going back to, I forget which year we presented at several Investor Days, a comprehensive multifaceted growth strategy across Investment Banking, product by product, industry by industry, market by market, and those investments are really paying off. We really feel like we have the right to win in most of these parts of the business. We have huge client franchise with the Commercial Bank.

I think the combustion that's happening by putting this Commercial Banking franchise together is more -- even more proximate with the Investment Banking in the Markets business has unlocked a tremendous amount of value for us. And I believe that momentum is only continuing. And then likewise, in Markets, we've got the same level of investment happening, building out our systematic trading capabilities and the teams have done an extremely good job kind of navigating market fundamentals and market conditions.

So we're not so surprised because we've been trying to bring an underdog mentality, not optimizing to #1 rankings and optimizing to maximizing our market share, creating really sustainable step change in our market position. And just given the brand, the client franchise we have, the global footprint, we feel like this is -- you should expect that from us.

So if I take your guidance for the third quarter as possible in our fourth quarter estimate, get to record trading revenues for the year. So on Investment Banking fees, almost as good or maybe plus or minus what we saw in 2021. Just how sustainable is kind of the current market environment, capital market environment? Just how are you thinking about kind of the 2027 revenue levels as you kind of approach the present -- budgeting season? And just kind of maybe what inning or where do you think we are in this kind of Investment Banking cycle?

Being a little bit of a master of the obvious, so much depends on how the economy behaves going forward. And if there is a downturn, how bad would it be and what would it look like? But if you assume that we maintain sort of the direction of travel with the global markets, global economy. There's a lot of forces at work that could drive this kind of performance, not to be repetitive, but the AI super cycle, it's trillions of dollars of spending, estimated to be $5 trillion between now and 2030. And it's not just the frontier models and the hyperscalers.

There's a whole ecosystem around there that's driving a tremendous amount of capital formation. I touched on money in motion and private capital. There's $4 trillion of invested capital seeking liquidity. That's 30,000 companies that need to get sold, and you're starting to see that happen and $2 trillion of dry powder looking for transactions. The infrastructure spending, the supply chain repositioning, all of that points to sustained long-term strategic activity.

I think the other powerful thing as we think about our advisory businesses is there has been a very big movement towards believing that scale is a strategic imperative. And I think if you look at some of the largest transactions that have happened this year, they've been designed to make sure these companies can survive the future, compete. These AI projects are $100 billion projects, $200 billion projects. These are massive projects. You can't -- it's hard to be small. It's hard to be small and make the requisite cyber bets, technology bets, have the global footprint to compete at scale.

And so I think most CEOs we talk to believe they should take every opportunity they can to get the global footprint, the absolute scale of critical mass and operating synergies they can, and that's driving a lot of strategic activity. And in Markets, there's been a structural shift in the overall markets wallet broadly, but specifically in financing, where you're seeing more demand for margin products, more demand for structured financing, more demand for capital across a range of different FICC type products. So we believe that has durability and could survive whatever kind of economic scenario unfolds.

I think specific to JPMorgan, when you think about revenue durability, we've been working very hard across CIB to invest in businesses to build enduring repeatable revenues. So I think our commercial banking lending, payments, the financing businesses within Markets. And then on top of which our market leadership positions sort of pick the part of CIB, we have a leadership or near #1 or #1 position across all of these businesses. It gives you more market durability when things sort of slow down or there's any kind of -- you hit an air pocket or what have you.

So we feel like sustainable is just -- you're going to -- everybody could be affected if there's some sort of major market headwind, but we're going to be more resilient than others just given the strategic design of our revenue streams, our market leadership positions. And I think there's also a flight to quality benefit and a market complexity benefit that favors JPMorgan. We are at our best when markets are most disrupted. We oftentimes see our biggest accelerations in market share.

I want to expand on one thing you touched on in terms of sponsor activity. It's kind of an area we're waiting to see an increase. But just what are private equity clients telling you regarding deal activity, financing availability, exits? And are we moving towards a more normalized sponsor environment?

I think we're definitely back to normal. It's -- the financing markets are open for the right credits, the right sponsors, the right transactions, maybe slightly more selective than they were sort of at the peak. You're starting to see the invested capital get monetized 25% -- around 25% of the U.S. IPOs and the global IPOs were sponsor companies so far this year. Sponsor M&A is up about 6% so far this year. So you have over $1 trillion of sponsor M&A. So I think it's definitely better than it was, where it was very congested. We couldn't sort of get these companies to market.

There will be issues for the sort of '19 -- 2019, 2020, '21 vintages where they were bought under -- there was a lot of leverage applied at much lower rates. Acquisition multiples were quite high. So I think there's going to be a little bit of a reckoning related to those vintage of investments. I also think there'll be a separation, a further separation of winners and losers in private equity. But the asset classes, there's still a lot of value creation. There's still a ton of activity. And we are very focused on it and investing to make sure we can best serve those clients. But absent a big disruption in the markets, I think they're going to seize the moment, put capital to work and also continue to monetize a lot of their investments. And it plays to our favor, just given the breadth of capabilities we have across products and industries.

And then we had Bank of America here yesterday, Morgan Stanley today, and I'm sure others, but peers have announced these initiatives to finance critical industries. JPMorgan was a first mover when you launched your Security and Resiliency Initiative last year. Maybe talk to how much financing is needed, how quickly you've ramped up activity and just your thoughts around that?

So for the record, it's our -- we announced a year ago, October will be a 1-year anniversary of our Security and Resiliency Initiative to refresh everybody. It was a $1.5 trillion of financing over 10 years across 5 broad categories, frontier technology, applied manufacturing, remilitarization, health care and as well as a $10 billion equity capital commitment. And this was all driven by the profound need, and we started to see this in COVID, and we certainly saw it kind of coming out of Liberation Day that the Western economies, U.S. economy, in particular, sort of suddenly have found themselves quite vulnerable to supply chain, single points of failure.

You're seeing what's happening in Ukraine. You're seeing happen with the war in the Middle East in terms of the change in the character of war and the need to kind of completely refit our militaries worldwide. And then you're also seeing the absolute strategic imperative to win the AI arms race, to win, to manage carbon transition, energy transition the right way. So this -- the amount of capital is staggering. So 1 year into it, the impact is -- our impact has exceeded our expectations. We have so far done $200 billion of financing across 1,600 companies, 330 capital markets transactions.

We've deployed over $4 billion of that equity capital. As a reminder, we hired Todd Combs. He was from Berkshire Hathaway, came off our Board, left Berkshire. He's managing that money full time. The singular focus on this type of impact. To answer your question directly, the need is bigger than we thought. I mean just think about rebuilding a shipbuilding capacity that doesn't exist today. Changing the way we think about manufacturing. We've completely offshored and have lost our advanced manufacturing capability essentially in the United States that has to all be rebuilt.

So things like that are taking enormous amount of capital. And it's not simply a financing conversation. We have hired essentially a boutique investment bank within JPMorgan, which is to support this SRI initiative. And it's also focused in addition to the financing on policy and research to make sure that we have the right thought leadership to get to major stakeholders to educate the right policy outcomes. But this isn't going away. This is existential in its -- the size, scale and complexity is really quite challenging, and that was the motive for launching a year ago.

I would otherwise chastise our competitors for mimicking us, but this is a situation where I actually think it is the right thing for the system. We need everybody all hands on deck. The task is enormous. The amount of money that needs to be raised is enormous, and it's really highly complex. So we welcome anybody who wants to wait into this.

Interesting. You talked a bit earlier about just market share gains, and we've seen you take share across many of the CIB product segments, geographies. You talked about scale. Just where are the biggest kind of remaining opportunities to gain share versus competitors? You've obviously invested heavily internationally for years. Maybe which regions or businesses are generating the best returns on those investments?

Once again, he's asking me a question that we often dislike answering these questions. We tend to telegraph too much competitive information, but I'll do my best anyway. We have tremendous organic growth opportunities across the franchise. Many of them, we've been executing a growth initiative across for decades. And so I think if you have to sort of stack rank where do we see the greatest impact, it's generally the businesses that they add more clients, they build deeper relationships, but they also have adjacencies with other parts of the CIB.

So think about being the most important bank to the innovation economy, where we bank the GPs, we bank the start-ups, we bank the founders and we bank the venture capitalists. So we have the Private Bank, our capital markets business, our Commercial Bank, all serving the entire ecosystem at once. You can say the same thing about private equity, huge market opportunities to be the bank, most important financial partner to the private -- say, private capital sector, and there's tremendous opportunity to grow that. We started in the U.S., and we've been building out globally. This is an opportunity with revenue -- incremental revenues are in the multiple billions of dollars over time.

Attached to that are payments investments to support seed-stage and early-stage companies. That's a big payments opportunity to grow an innovation economy business outside of the U.S. and to accelerate client capture in the U.S. And then we have some very simple, highly proven growth initiatives that still have a ton of room to run. So we started with the acquisition of Washington Mutual in 2010, a national footprint expansion in middle market, where we added 4 or 5 cities every year from -- starting from scratch, completely de novo. We've got now several billion dollars of incremental revenue, and we've sort of moved up the food chain city by city.

And it's a very data-driven prospect by prospect, run through our algorithm, pick the best names, hire the best bankers in these cities, and it's a payments-led deposit gathering business for us. We started a version of that with mid-cap companies outside of the U.S. from scratch in 2019. That's now well over $1 billion of revenue. So I can go on and on and on. In Markets, we're making investments across I touched on it earlier, systematic trading capabilities and security services, we're investing in really to best meet our clients where they're going, the more complex solutions, alts and ETFs and digital assets. So we have -- we are on offense. We are growing. And one important point I want to make is there is no like explicit growth target anywhere kind of hell or high water, you've got to grow at this kind of growth rate or hit these kind of revenue targets.

We're being very deliberate capital discipline, client selection discipline when we're hiring bankers, we're maintaining a very high bar on the talent that we're bringing in with this sort of deliberate multifaceted through-the-cycle growth agenda that we've been executing is a big part of our success story. And we're focused on, as I said at the very beginning, those opportunities that have product adjacencies and business adjacencies that put a multiplier effect on the client acquisition. And it's -- we feel we have a lot of conviction in it because just given the track record we have.

Got it. You talked about private credit. It's kind of an on and off theme. But if growth -- maybe, or at least headlines appear to have slowed down recently, maybe competition has eased, you tell me. But just maybe kind of updated thoughts about private credit. And also maybe just talk to -- it's a business you kind of reorged a couple of years ago in terms of what that impact has and your plans there?

Yes. It's -- the private credit market, I touched on it earlier, is sort of open for business. There was a wave of redemptions. There were a few sort of a flurry of sort of idiosyncratic defaults. We still worry about private credit, just like we worry about bank credit. It's been a very benign credit cycle for the past 15 years. So when there is a downturn, the sort of secondary and tertiary players may not fare very well. But put that aside, I think there are a lot of -- the market is open. It's constructive. It's competing sort of head-to-head with the traditional bank market.

And institutional fundraising is fine. I think the outflows, redemptions are sort of under control. So I think that it's an asset class that's, I think, in a decent place now relative to where people thought it was certainly earlier in the year. As we think about serving private capital, it gets back to this sort of ecosystem coverage model that I described earlier. We want to be the most important bank to private capital. So we have dedicated teams across all of our private equity, private capital clients. We can serve the GPs. We can serve the portfolio companies and serve the founders and the owners. And we've -- the businesses that we've added to support that is we have a private capital advisory group, primarily in place to manage private secondaries.

We have a PE M&A team dedicated to sponsor M&A. We have private research. Some of these private-for-longer companies, many, many of our clients are staying private much, much longer. We're building a base of research so that the market can build an understanding around some of these businesses and certainly ones in newer industries. And then we have a Strategic Financing Solutions, which is meant to be -- bring the best broad-based financing solutions to the table between debt capital markets, banking teams and our markets financing capabilities. And so it's a product agnostic, solve the problem, don't sort of come in and bring the traditional solution, and that's been really quite impactful. So the combination of all of that is showing one face to this investor community, I think, has made a big difference for us and has been a big value driver.

Got it. And I guess within CIB, payments now generates more than $5 billion in quarterly revenues. and increasingly a strategic differentiator. Maybe which areas within payments businesses you're most excited about? And just how do you think about that growth trajectory in the coming years?

It's a great business. It's -- as you touched on, it's running at scale. It's the #1 SWIFT U.S. dollar bank. We move on any given day, $12 trillion to $13 trillion in payment volume a day. Sometimes volumes spike higher. I think that's just -- I say that just to give you a sense for the scalability and the absolute size of the business. But even as big and scaled and as mature as it is, we've doubled the revenues over the last 5 years. So that puts you in a sort of mid-teens compounded growth rate. That is a fintech-like growth rate.

And it was a very deliberate outcome from a payments-led strategy where we're investing in being our clients' primary operating bank, having the right payment solutions, the right liquidity solutions to compete and win to become the primary operating bank and then investing in the banking client channels where we saw payments-led opportunities, the biggest payments wallets, the biggest deposit gathering opportunities. That's the expansion of the middle market, the new economy, mid-cap overseas, and that's really driven a lot of the success.

We're -- we think momentum and opportunity will come on being the easiest bank to deal with, with global activities, global -- being global with easy reach. All of our clients are going overseas, and they're going earlier in their life cycle than they otherwise would have. It's just -- it's a force we're seeing happen across the market. So our clients need to have cross-border solutions from small to large. So we're investing in our payments corridors. We're investing in global or real-time payments, digital solutions, sort of -- it's table stakes. So being global, being the best global, investing in the payments corridors across Brazil, China, Middle East, India, that's important for us as well.

And then there's a broad base of innovation coming through our payments business from real-time payments to agentic commerce and payments. We have our Kinexys blockchain solutions, which is our deposit tokens and capabilities there as well as -- I touched on digital. So innovation will be a big part of it. And the last point I'd say on payments, as important as innovation is safety and stability and trust. It matters a lot to clients. So certainly in the world with elevated cyber concerns, having a platform that's at scale and as resilient as ours matters a lot to clients, safety of payments, security of payments. We invest heavily in that, and that's a huge differentiator for us. And those kind of solutions, I think, stand out in the market.

And the digital asset landscape is certainly evolving. The cloture vote on CLARITY Act was today or it is today. I haven't seen the outcome there. But maybe just talk about opportunities, potential risks from stablecoin, blockchain payments. I know you have Kinexys. There's a debate out there the impact of stablecoins can pay yield, how that impacts things?

We've been focused on this for maybe a decade. The ways to apply distributed ledger blockchain to our banking business sort of led us to the formation of our Kinexys franchise. We have an extremely high-quality team. We have one of the most mature institutional blockchains in the market. It's operating effectively, growing daily. I think so far since inception, we've moved over $4 trillion, $5 billion a day. The honest truth is that these are very nascent products with not a tremendous amount of demand.

On the one hand, the world needs 24/7 payments, the ability to move collateral and information on the blockchain, all these -- everything that -- all the utility you could get theoretically out of the technology, there's definitely a need for it. But it's not as simple as I think people can fully appreciate. The cost of these different blockchains are different. The drop rates are different. There's very little interoperability. There's still questions -- regulatory questions around KYC. So it's -- I would describe it as being very, very nascent. As it relates to stablecoin, we just don't see a lot of institutional demand. And any institutional demand that we see is related to crypto.

I mean just to dimension it for you, the total volume of stablecoin transactions in 2025 was less than the transactions we moved on Kinexys or Kinexys blockchain for B2B non-crypto-related transactions. So it's just not something that we're panicked about. We can put a quick -- we can build a stablecoin very quickly. We have the team in place to do that. We have a JPMorgan deposit token. We're at the table everywhere we need to be. We're looking at ways to innovate, but this is a ways to go to play out. And then you put on top of it the outcome of the CLARITY Act. We'll see where that goes. As you said, there's a procedural vote in the Senate today that I think is -- however, that turns out that could be quite profound.

There is the chance for an adverse outcome there where you would have real regulatory arbitrage, which would be, in our strong opinion, bad for the system. I think it much more heavily impacts smaller banks that can't afford to build their own stablecoins. And whether there's money movement from bank deposits to stablecoins, it's too early to know whether it will happen or what quantum of movement will occur, but that's definitely a risk. But I think there's a lot that has to happen before this is sort of at scale and meets the safety and regulatory expectations that the rest of our products do. But we're in the mix, and we have tremendous subject matter expertise.

Got it. About 10 minutes to go, 10 questions, so we'll go lightning round. But deposit growth has kind of been strong. Just maybe in terms of what your expectations are looking out. There was some chatter that competition was increasing, maybe not so. Just maybe talk to what you're seeing in the CIB?

It's the same as it's always been. Competition for high-quality operating deposits is intense. We ended the year last year at $1.2 trillion in deposits. It was up 14% year-over-year. Midyear this year, we're up 10%. We're investing in our deposit gathering businesses, and we're investing in the products and solutions that let us win that primary operating bank status. And I mean that's kind of the rapid fire answer. It's going to -- every one of those wins is heavily competed for. It always has been. But we -- that's why having the capacity to invest in these products and solutions, I think, is a key differentiator.

And then on the loan side of the balance sheet, I'd love to talk about kind of core CIB loans and lending capabilities there. But also we saw an uptick in kind of financing in the market businesses. There's been some headlines around the industry around that. Just maybe talk to both.

Just traditional C&I loan growth is coming from all the places you would expect. There is a big step change in borrowing related to funding the AI super cycle. The message I would leave you with there is we're maintaining our underwriting discipline. We're being very selective on transactions. We're making sure our portfolio remains granular with exposure limits to frontier model companies, the hyperscalers. You could very quickly fill up on this stuff. And so we're being very deliberate on how much we want. And then we understand what the blast radius would be if a range of different adverse scenarios for however AI may play out.

But for the near term, we see opportunities to safely deploy credit. All the other categories I described through the course of our conversation, the manufacturing, there's a buildup there. There's working capital increases across our client franchise, higher capital spending and much more cash M&A. So all the traditional ways in which our clients borrow, you're seeing sort of strong activity across the portfolio. It's incredibly competitive, and we're maintaining our client selection and underwriting discipline. On Markets, I touched on it earlier, there's been a structural shift in the financing wallet.

If you look at -- in equities, we're seeing much more significant demand for prime financing and for structured financing. And in FICC, it's more broad-based. There's some leverage around private credit. That demand is steady. And we're also seeing clients looking for financings around commercial real estate, and so it's -- we think these aren't temperamental wallets. We think these are going to be around for a while. And I think that you can see that across the industry. Everybody's financing revenues are growing at a pretty reasonable level. But those are high-quality loans provided to clients that provide -- generally provide other flow business. And we're being very capital efficient and pricing and credit disciplined as we deploy that capital, both in C&I and across our Markets businesses.

I guess there's been talk of people kind of tightening a bit in some of the financing businesses given the growth we've seen over the last...

I think it's like anything else that people got rattled with the private credit sort of the disruptions you saw in private credit and maybe looked at their margin levels and their collateral rights and sort of make sure they felt good about their market terms.

Talked a bit earlier about credit quality, and you kind of mentioned watching some of the secondary and tertiary players in private credit. Credit metrics are really, really benign, whether it's data centers or leveraged finance, commercial real estate. I guess what kind of areas are on the top of your "watch list"?

It's benign. Our nonperforming loans are less than $5 billion. Our net charge-offs for second quarter around 12 basis points. We're looking at where rising rates could hurt clients. We're looking at clients that could be in harm's way if the Strait of Hormuz stay closed, not just oil clients with oil as an input cost, but there's fertilizer, there's aluminum, there's refined product. There's a range of different commodities that are kind of trapped because of that. There's -- we have all that data, and we're mapped to all those clients. We're watching those.

We're looking at clients that are potentially in harm's way for AI disruption, those exposed to the low end of the consumer demographic. And we're not -- we don't sort of have a set-it-and-forget-it kind of credit portfolio. We dynamically manage our loan book. So anybody who we think is going to face a stress event, we're out proactively working with them. How are you going to -- if oil stays high for this extended period of time, what's your plan? And we're working hard to make sure our clients have multiple ways to deal with whatever kind of scenario they're facing. And that proactive approach, I think, really takes the bottom out of our -- when we -- if you see some of these stress events persist.

And those are the big areas that we're watching at the moment. But right now, it's -- we've been able -- anything that we've been concerned about where we have clients that aren't interested in self-help, it's been easy to get refinanced out. So this editing the business that we proactively use sort of takes the low end of their -- our credit -- the sort of risky end of our credit spectrum. We're not waiting around for bad things to happen.

And then I guess, JPMorgan is one of the largest advisers of M&A globally. I guess when you look at CIB, what role do you think acquisitions could play in kind of future growth for you?

It's an area we've been investing in, talent and capabilities, both in the advisory side and just in terms of boots on the ground across our banking teams globally and...

No, but I guess, in terms of JPMorgan doing acquisitions...

Oh, all right. Look, I never say never, but I would not expect M&A to be a major growth driver for the CIB. And really largely because we have so much organic growth potential in front of us and have a lot of conviction around everything we're doing there. We pick the bankers, we pick the loans, we pick the tech stack. We -- there's no integration distraction. So we have a very high bar for inorganic opportunities. That said, we are in the market constantly. We look at everything that could have any relevance to our business.

And so we have business development teams that are pretty much always -- they're looking across payments, markets, should we acquire client data, and we're in the flow. It makes us smarter. We might partner with these companies, but our bar is very, very high. We are ready to opportunistically acquire. We have sort of a shopping list if it makes sense for the right valuation, if there's a market disruption. And as First Republic showed you we have teams that know how to integrate M&A, which is a skill to do that well. Synergy capture, getting domain over the targeted assets, getting operating risk under control. I mean, nobody sort of even knew it was happening. We bought First Republic and so everyone sort of assumed you announced the deal, it's done. But that's having that innate capability is quite valuable, and we're ready. We're always ready if there's something we can do opportunistically at the right value, but we're going to be very disciplined.

Got it. And maybe one final question. CIB did 18% ROE last year, 22% in the first half. Your capital allocation has gone up. JPMorgan as a whole has seen its G-SIB score go up quite a bit. Just how do you think about kind of managing returns, allocating capital? What do you think is like the right return? And how does kind of an ever-increasing G-SIB score impact what you do?

So ROE is one dial on the dashboard. I mean we look at lots of different variables to sort of measure our performance and manage the business. We also heavily focus on SVA shareholder value creation. So there's a lot of forces at work. When you think about our 16% target, it's just our best estimate of what our through-the-cycle return would be, just given the economic outlook, the regulatory uncertainty, the prospect that we're overearning on credit, just given the comments around how benign it is right now and how robust the markets are overall.

And it gives us some room if you're over-earning or underearning on deposits. So 16% feels like the right through-the-cycle target. If you -- I'd say a few points about that. If you deconsolidate CIB business by business, we have market-leading returns across the entire franchise. So it isn't like there's any shame at 16%. That's a consolidated number. So that's point one. Point two, we are at those return levels while we're making very significant investments in digging deeper moats around our franchise. Expansion growth, platform capabilities, being a market leader in technology and data, cybersecurity and resiliency takes up a lot of capital.

So we're not holding back to manage for greater margins and returns. We're heavily investing in the future, making the requisite investments to protect the value of the business and delivering market-leading returns. I think that's a sign of an incredible franchise when you can do that. And it's not -- I don't want this to be -- a lot gets lost in the averages. If you break the CIB into its components, that's the story in each of these businesses, and we're quite proud of that.

Great. On that note, please join me in thanking Doug for his time today.

Thank you.

Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's Second Quarter 2026 Earnings Call. This call is being recorded. [Operator Instructions]. We will now go live to the presentation. Information concerning forward-looking statements and non-GAAP financial measures Included in this presentation can be found in JPMorgan Chase's earnings press release and investor presentation posted on the Investor Relations website. 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 Burnham. Mr. Barnum, please go ahead.

Thanks, Amanda, and good morning, everyone. Including the significant items noted on the page, the firm delivered net income of $16.9 billion, EPS of $6.14 and an ROTCE of 23%. Excluding the significant items, revenue was up 15% year-on-year, predominantly driven by markets revenue, higher asset management fees in AWM and CCB, higher investment banking revenue and higher deposit and loan balances, partially offset by the impact of lower rates. Expenses of $27.3 billion were up 15% year-on-year, largely driven by volume and revenue-related expense as well as growth in front office hiring and labor inflation.

And credit costs were $2.5 billion with net charge-offs of $2.4 billion and a net reserve build of $149 million. And in terms of the balance sheet, we ended the quarter with a standardized CET1 ratio of 14.1%, down 20 basis points versus the prior quarter as net income was more than offset by higher RWA and capital distributions. This quarter's standardized RWA increase of approximately $103 billion is largely driven by increases in financing across our markets business as well as growth in traditional lending.

As you saw in our CCAR press release in June, the Board intends to increase the quarterly dividend to $1.65 per share effective in the third quarter. Now moving to our businesses. CCB reported net income of $5.3 billion. Revenue of $20.3 million was up 8% year-on-year, predominantly driven by higher card NII largely on higher revolving balances as well as higher operating lease income in auto and asset management fees and wealth management.

A few points to highlight. Consumers and small businesses continue to show resilience despite elevated gas prices and inflation with higher tax refunds and a solid labor market contributing to strong spend growth. In Banking and Wealth Management, average deposits were up 3% year-on-year and 2% quarter-on-quarter, driven by strong net new checking account growth of over 500,000 accounts this quarter. Client investment assets were up 21% year-on-year, driven by market performance along with strong flows. In Card Services, we refreshed the Sapphire Preferred card in June following the successful refresh of several other products over the last 12 months.

Next, the CIB reported net income of $9.7 million. Revenue of $24.9 billion was up 27% year-on-year driven by strong performance across the businesses. IB fees were up 30% year-on-year, reflecting double-digit growth across all products with particularly strong performance in equity underwrite. This quarter's performance was supported by both some large ECM deals and the acceleration of the closure of some M&A transactions, the pipeline remains quite robust, and the current activity levels seem to be encouraging more activity. As a result, while conversion will obviously be dependent on market conditions, we expect activity levels to remain healthy.

In markets, fixed income was up 6% year-on-year with solid performance in credit currencies in emerging markets and rates, partially offset by lower revenue in commodities. The equities business delivered an exceptionally strong quarter with revenue up 86% year-on-year, reflecting the highly dynamic market conditions. We saw strength across products and regions. Flows were strong and trading was favorable in both derivatives and cash and prime benefited from higher client activity and balances.

Turning to Asset & Wealth Management. AWM reported net income of $2 billion with pretax margin of 38%. Revenue of $6.9 billion was up 19% year-on-year driven by growth in management fees on higher average market levels and strong net inflows as well as investment valuation gains, higher loan balances and higher brokerage activity. Long-term net inflows were $50 billion with continued strength across fixed income and equity. AUM of $5.1 trillion was up 18% year-on-year, and client assets of $7.7 trillion were up 19% year-on-year, driven by higher market levels and continued net inflows.

And before turning to the outlook, Corporate reported net income of $4.2 billion on revenue of $6 billion, which includes the significant items noted in the presentation. In terms of the full year 2026 outlook, we now expect NII X markets to be about $96.5 billion and total NII to be approximately $105.5 billion as a function of market's NII increasing to about $9 million. The new adjusted expense outlook is about $107.5 billion, with the increase primarily due to higher volume and revenue-related expenses driven by the activity levels and associated revenue outperformance. Finally, we now expect card net charge-off rate to be approximately 3.2% and reflecting better-than-expected consumer credit performance.

With that, we're now happy to take your questions, so let's open the line for Q&A.

[Operator Instructions] For our first question, we will go to the line of Ken Houston with Autonomous Research.

Jamie, I was just wondering if you could start by just evaluating on the recent management changes and elevation of Doug and Troy to co-Presidents. And -- just anything we should be thinking about in terms of the ongoing development of the leadership team and anything it may mean in terms of your tenure as a CEO from the Board's perspective.

No, it's exactly -- I think we try to be totally clear in the press release, which is what Marian is an exceptional individual is a human being as a leader and is obviously an executive and but the Board made a decision to go ahead with making 2 co-presidents, which we'll be preparing them to do far more at the company to be prepared hasn't changed the timetable or anything, and obviously wish Marianne the best. As a result, she decided he mentioned how about the plan that she'd rather retire than stay here. So that's it. No mystery. .

Okay. Very good. And then just on the Jeremy, on your follow-up to the strength that you're seeing across investment banking and markets. Just I know it depends on conversion opportunities and just the environment, but this is clearly far higher level of activity than anyone would have expected. How do you judge the sustainability and how do you judge just how risk on are we across the various businesses?

Yes. Good question, Ken. So I would actually bifurcate that a little bit between investment banking and markets. And then by historical standards, investment banking fees were fine, but they weren't at super peak levels. So they had some room to come off a little bit. And so one of the things we looked at is like, okay, how much like cannibalization of the future pipeline might have happened for the acceleration this quarter, and/or to what extent would this quarter's results like particularly elevated as a result of some of the large high-profile IPOs and other capital raisings in particular.

And I think clearly, there was some pull forward. And clearly, the large deals contributed meaningfully to this quarter results. But at the same time, the pipeline is actually quite robust. And to some degree, it feels a little bit. I mean we're guessing here, obviously, but it feels a little bit as if the high-profile nature of the activity this quarter and just a generally robust environment is itself be getting more activity. So I obviously don't want to get into like guiding you. And in any case, we're just guessing. But that's maybe just a little bit of context about how we're thinking about the trade-off between the robustness of the pipeline and the fact that there was some pull forward and some kind of exceptional events this quarter.

On the market side, I would probably separate between fixed income and equities. I mean all the normal caveats like we don't know, anything can happen. And clearly, markets revenues in general, have been quite elevated and strong for some time, although as we pointed out, that also is associated with much more financial resource deployment and support of our clients. But I think the particular set of things that happened in equities this quarter, so a little bit hard to imagine that being repeated. But the background environment is quite supportive.

So we'll see what happens. But in the end, we're just trying to serve the clients and manage the risk and get our pressure of the business. And overall, obviously, the environment feels pretty good.

I guess you did say something about risk on, and you said how we're is gone, are we? And not to be pedantic, but I think the question is the we matters, right? So the market is clearly extremely risk on and we're kind of takers of that. And we're trying to strike the right balance between supporting all our clients and being appropriately cautious in an environment that has some complicated dynamics on that.

Our next question comes from Chris McGrathy with KBW.

On deposits, what stuck out was Slide 4 to me, the growth in CCB in the quarter. Interested in kind of the progression towards that 15% retail market share that you've talked about in the past and really how higher for longer may impact the pace of market share gains over time.

Sure. So let me just do near-term deposits for the company quickly. So -- and let me actually start with the wholesale. So wholesale deposit growth was quite strong this quarter actually and has been for the first half of the year. If you recall, last year was particularly strong. I think this year, we were expecting it to be sort of fine but slightly less strong. And so far, the first half of the year has outperformed our expectations. Obviously, a lot of that is the strength of the franchise and winning deals and taking share, but some of it is also the kind of lending environment, particularly the sort of BFI space and a lot of the data center stuff, like however you look at it, you have a little bit of the dynamic of loans creating deposits, and that's going to disproportionately show up in wholesale.

So that's probably a little bit of a tailwind for wholesale. On consumer, we talked about expecting low single-digit growth this year. And I think that expectation is still in effect. It's unchanged, which is good because I think there were some different moving pieces there, and they could have played out differently in some sense. But if you look at what those pieces were, it was fundamentally the balance between ongoing very robust net new checking account growth and the question of yields on flows and the impact that, that was having or not having on average balances per account. And you saw obviously very strong net new checking account this quarter.

And in light of the fact that the rate environment is a little bit more hawkish, yield taking flows are still a factor and probably a little bit of a risk. But on balance, the picture is in line with our expectations for this year, which is good.

And so then the question is, how does that all feed into the 15%? And what I would say about that is we feel great about the franchise, and we feel great about how everything is going. And there's no change to that sort of cope for aspiration. But I would think about that as a kind of natural long-term consequence of executing the strategy that we believe in across all the various components of it, our focus on primary bank relationships, branch expansion, deepening, product value proposition, et cetera. And so the view is that the 15% will be an outcome of that, and we still feel good about that.

That's great. And for my follow-up, a bigger picture question on the expenses. Really, the returns that you're getting from the branch build-out, the investments, the hire the bankers ultimately, I guess the question is, where are we in the investment cycle? And really, how does it play into the operating leverage outlook over the medium term?

I would just say it's a complete continuation we've been doing for years, you shouldn't really expect any change.

Yes. I mean, that's what I was going to say, too. I mean, obviously, there are other expense dynamics this quarter, which maybe I'll save for another question. But in the end, we're investing. We're always going to invest. It's been working and obviously, the returns so far speak for themselves. And I think that we've been saying for a long time is that the power of this franchise is such that we are able to aggressively invest for the future for the sake of generating future returns and to solidify the competitive position of the franchise, while still delivering exceptional current returns. And I think that would be true if we were delivering 15%, 16%, 17% returns. Obviously, when we're delivering these types of returns, it really is fiancylinders. .

Our next question comes from John McDonald with Truist Securities.

Jeremy, I was wondering if you could talk a little bit about the drivers of the upward revision to the ex Markets NII, perhaps the cadence to in third quarter, fourth quarter as we think about the exit rate heading into next year.

Yes. Sure, John. So yes, revising up from 95% to 96.5% for the full year, and you see our first half actual, so you can infer the second half. And as Jamie always likes to say, what matters is the run rates and the exit. And if you sort of do that math, it does suggest a higher exit run rate, which in the central case, assuming the yield curve plays out as the forwards currently forecast and deposit and other drivers are in line with our current expectations. That's what we would expect. Just mechanically, in terms of the drivers of the upward revision, the biggest single factor is deposit balances, I would say, across both wholesale and consumer both sort of the overall quantum of it, but also like mix shift inside of that in favor of slightly higher margin overall. And then rates are like a little bit higher than when we previously guided, both in the short end and in the back end.

And as you know, we've got sensitivity to both and probably our actual sense is a little bit more than the EAR suggests right now because of the outturn of the consumer betas relative to the model, and that difference is probably disproportionately in the front end. So when you assemble all that together, you have a little bit of the increase as a function of higher rates, but most of it is balances overall.

Okay. And then just to finish up on the NII. The market's NII has guided a bit higher. -- even though the outlook for rates is also a little bit higher. So I guess what are some of the drivers there? Is it balance sheet mix and some other factors? .

Yes, it's a great question, John. So yes, you correctly alluded to the fact that we've said previously that the market in number is actually liability sensitive, all else equal, also, obviously, in the context of what we always say, which is that in general, changes in the markets NII, especially when they are driven by rates are almost always fully offset on the bottom line through -- and so yes, you're right. This quarter, all else equal, based on the higher rates, you would have expected markets in II to be down. And instead, the forecast is up. And the difference is changes in balance sheet composition essentially expecting lower amounts of finance noninterest-bearing assets on the balance sheet in the second half of the year and at this level of rates, 1 balance sheet unit of that stuff drives the number, like quite a bit if you think about it and can overwhelm sort of the rate effect. So that's what's going on there.

If you just and [indiscernible] for 30 seconds. There's also another interesting nuance, which as you will have noted that we actually increased the equity allocation to the CIB this quarter for reasons that I think are pretty obvious in light of the amount of growth of supporting clients that we've done and the way that's playing through RWA. And the consequence of that is to move some equity essentially out of corporate into the CIB and a lot of those markets that obviously comes with a little bit of NII. And so that NII is moving out of NII x into market -- and so it's sort of a rare exception to the rule that changes in markets on II are offset in the bottom line. This piece, which betas quite small, it's probably like $150 million. is part of the increase that we would not expect to be offset on the bottom line all those equals. And so obviously, it's left pocket, right pocket at the level of the company.

Our next question comes from Erika Najarian with UBS. .

I just had 1 question. I do want to revisit the succession line of questioning because it is so critical for a lot of your current investor base. And so Jamie, I guess, maybe reasking the question in a different way. What characteristics are you and the Board looking for in terms of the new leader of JPMorgan. What do you think makes an exceptional CEO in the future as you pass the baton on and additionally, I think that some of your investors may have read the announcement, particularly Marian's departure as sort of an extension of your tenure. And I'm wondering if we should think about your remaining tenure is more fixed or if investors are still thinking about a more rolling type of retirement date and a longer stay as executive payer?

And so the question to that is, though, the timing is essentially the same. Obviously, completely up to the board, but it hasn't changed. It's just a natural change that we have to go to about how we go about this. And -- but the -- look, that question is obviously critical, but I've always said it's -- you want to be good at management, you want to be go to people, you want to be analytical. You want to be detailed, -- do you want to you culture care, you want to be curious, you want to have a, you want to have it, you want to have a soul, you might have work at that, you want to be able to travel.

You want to be able to walk in operating centers and fewer CEOs and Prime Ministers. It's all of that. I mean I could give you a long list of stuff, but it's all of that. At the end of the day, we're blessed with a lot of people who are great culture carriers across a broad spectrum -- no 1 has all those things in a perfect way. And some of the things you learn and some of those things you get better at. And -- but you know when you see and we have 2 exceptional co-presidents and we have other people in the company who are great culture carriers, but that's to be 1 -- and we wanted across the whole company, not wedded to investment banking or trading or just big CEOs, but also led to the fact that we've got 300,000 employees around the world. And in our brands, we have 50,000 top-notch people. Our operating centers are cost, 150,000 people. And you have to be a flexible mine to deal with this new growing complex world. And -- and we have teams of people. And as you know, I think it's important we pointed out that we're blessed to have Jen Piepszak, the Chief Operating Officer; and Mary Erdoes continuing to run as an Wealth Management. So -- it's a great team of people, which I am fully confident if I would say by a truck, which is not my preference, we would be fine. .

And just I just wanted to unpack , sorry, I am going to ask a follow-up question. What do you mean by no change in timing? .

Exactly what we said last time. whatever I said last time is that time fails essentially the same. -- several years, you can use a few years, you can use plus or minus or obviously, it's totally up to the Board, not up to me. .

Our next question comes from Jim Mitchell with Seaport Global Securities. .

Okay. Just Jeremy, maybe a follow-up on the expense question and operating leverage question earlier. I understand completely longer term can generate perpetual operating leverage -- but if we look at year-to-date results, it's been a strong revenue environment, but I think operating leverage on an adjusted basis was negative. You alluded to some expense one-offs potentially. No question you're investing heavily and should be. So I get all that. But I just want to think about the benefits of AI and technology generally. Is there a time over the intermediate term where you think expense growth could slow a little and operating leverage kind of becomes more likely in a period of time over the next few years?

I'm just going to answer that by saying when you have great returns and very good margins, which actually went up this quarter, not down, the notion that somehow you can further increase your operating leverage is a crazy notion -- we don't have that. I think it's part of the reason why banks failed if you go back 20 years ago, we're never going to have that point of view. And AI will have its gives and takes. So we can't project. I do think you might actually see a slowdown in growth, maybe a slowdown in '27 or '28, but the teams are looking at all of our opportunities and we pointed out over and over again when we have an opportunity to spend more money in marketing with a positive ROI, we're going to do it. We're not going to have false god, we have to train that we can't do something really smart. I've also pointed out over and continuously some expenses, if you accounted for those investments that they have very good returns, but they're expense in the short run. And so...

And some elements of Basel III. Just curious if there's been any developments there.

There are 4 obvious changes they should make. And I think it's unfair when I hear them say, they should do the numbers the right way. And you guys should demand it, do the numbers the right way and they think they want to be more conservative should add conservatism. They should not do the numbers in a false way to make the number higher. I just think that's intellectual clarity and honesty and stuff like that. They have -- they should get rid of the double accounted operating risk capital. They should get rid of double count in market risk capital.

We have $80 billion or more now of market risk capital and the biggest quarterly loss we ever had was $1.4 billion. Even the CCAR market loss, I think, is like $14 billion or $15 billion. And so they should adjust the G-SIB, the way they're supposed to going back to 2015 and they should change the way to doing short-term onsale funding, it would be fair to everybody. Those are the things they should do the numbers should be the number. If they think we sold more capital, they should ask us it's all 10% more, and I'd be happy to do that. But I'm not happy to have these numbers falsely done.

Yes. And just to briefly add on short-term wholesale funding. I think there's an important point there in terms of the competitive dynamics that we were really quite explicit about in our comment letter, which I would encourage our own to read because it's a nuanced thing, but I think if you go through it, it makes the point very clearly. And what they wound up doing with this change to the short-term wholesale funding is essentially increase the burden on banks like us and Bank of America that have both markets and banking businesses as well as traditional consumer businesses. disproportionately relative to our former investment bank competitors driven business mix.

And I guess, conceivably, someone could want that as a policy outcome. I don't understand why you would want that as a policy outcome because is disproportionately damaging the ability of banks to serve mainstream. But if that's what someone wants, they should say it. And if that's not what they want, then they shouldn't let it happen by accident as a result of like a seemingly very technical thing like removing RWA from the denominator of the short-term wholesale funding contribution to the GSIB score. I mean this is a little bit of what Jamie talks about when he's saying like, do the numbers right and just be clear about your policy objectives.

Our next question comes from Matt O'Connor with Deutsche Bank. .

It seems like everything is firing on most or all cylinders, trading, investment banking, lending, credit, -- is this as good as it gets? Or -- and I know you've kind of flagged some of the risks out there. But is there also an argument you made that were earlier cycle given AI and what seems likely to be a big increase in global defense spending, global supply chain management as we put all that together, what's -- what are your thoughts?

Is getting close to as good as it gets. We just ran lower is going to last.

Okay. And then the rate expectations continue to move all over the place out there and you show that your kind of well positioned for higher rates and you make more money. But is there a tipping point where the deposit behavior changes both from a volume perspective and then betas, which you alluded to earlier, better than expected so far. But if we go up a certain amount, do you think there could be a meaningful change in that.

Yes. That's a good question, [indiscernible]. And I think the short answer is like we don't really know. And if you'd asked me that question a couple of years ago, I would have said that, that you're essentially asking a question about the complexity of the rate paid dynamic, especially for consumer deposits, the negative contract to be specific. .

And if you'd asked me that at the beginning of this rate cycle, I would have said that we would be experiencing that effect right now, and we're not. But just from a common sense perspective, like you have to believe that at some point, that kicks in. So when we do our stress testing and when we think about not just like a slightly more elevated inflation environment and a slightly more aggressive response from the Fed, but something that's like meaningfully different. It's a stress test with an actual change in regime One of the things that we look at and and stress is like, okay, at what point do you have that kind of like acceleration in rate paid as a result of that type of environment. And that's one of the reasons why it's important not to be naive about higher rates because if you simply take our current EAR, even recognizing that locally, the empirical EAR is probably higher than our reported EAR and you ignore the convexity dynamics, you could convince yourself that 7% rate environment is great. And obviously, that wouldn't be true if you had to do a massive reprice deposit franchise in order to protect it essentially.

To assume some of that...

It's something that we think about. It's in the models. It's very much like part of the discipline. But the question is when and -- and obviously, there's the larger question of the competitive dynamics and the full value proposition of the deposit franchise, especially in consumer.

Our next question comes from Mike Mayo with Wells Fargo.

In response to the earlier question, you asked about operating negative is negative, and you gave the reasons for that. But is operating negative the way you look at things? I mean, when you grow revenues 15% core year-over-year, percentage-wise, it's negative, but dollar wise, I think it's positive when I look at Slide 2. And I don't know why -- I'm not going to create the narrative for you, but even if you take out those numbers, if you...

It definitely was positive. Let me -- can I just point out another thing, it was positive, but when revenues go up 10%, like our -- if your general -- if your overhead -- if your margin overall is 25%, when revenues go up 10%, the marginal return on that, so not an now the overhead is going to be a lot more than 25%, people trying to forget -- but obviously, a rapid increase in revenue drives a big increase in operating leverage.

Yes. So I agree with what Jamie just said and maybe just since we've tried a couple of questions about this. And obviously, we did revise up this year's expense guidance by $2.5 billion, which is not a trivial number. So maybe I can piece all this together to add a little clarity here. So first of all, if you remember, the guidance that we gave in the fourth quarter last year are for the full year for the company. And if you made some kind of like reasonable assumptions about what type of market environment and NIR x markets for the rest of the company at the time and you build out your models or whatever.

I don't remember exactly what you had, Mike, but I'm sure that the consensus was for meaningful negative operating leverage in this year's numbers, however, defined. And that's why a company update, I gave the long speech about sort of what Jamie always says about why operating leverage in the long term for the cycle is not a thing. Now for a company like us anyway. -- producing the types of returns that we're producing. Now -- and the root cause of that was essentially that as Jamie just said, like there's a fixed expense base and there's a variable expense base, the variable expense base is disproportionally associated with the kind of capital markets complex, broadly defined. And we were in a moment where coming out of the back of the rate hiking cycle and relatively modest deposit growth, et cetera, the NII, we're still working its way out of out of the other ones.

And so when you -- in the meantime, we had inflation and investments and the usual stuff driving the expense base. So that sort of was the operating leverage picture for the year. To Jamie's point, since then, in the first half of this year, the capital markets complex has outperformed our then expectations by $6.5 billion. And we have booked in the first half of the year, $1.5 billion of additional expenses associated with that. So that says a lot about that kind of like marginal operating leverage point.

And then -- so therefore, of the 2.5% that we increased guidance, 1.5% is essentially already booked and a direct sort of happy consequence of the exceptionally strong performance -- and then yes, we've implicitly added $1 billion for the second half of the year. And there are some nuances. I wouldn't draw too many conclusions from that in terms of our expectations about the revenue environment because there are some other factors and there's some timing or whatever. But at a high level, that gives you the picture of the second half of the year will be whether it will be. And I think when you look at returns, overhead ratio, any metric that your updated model actually for this year, it's obviously exceptional performance principally through the lines of like returns, which is what actually matters. .

It's little bit of National Wealth management, a little bit of that credit card spend, a little bit of that other parts of the business.

Yes. And that's why I say the capital market is complex. It's really the whole competition as well. .

Yes, exactly. .

So your marginal margin based on the number you just gave is on that? And so how is -- why is that as good as it gets? Are you referring to the revenue environment, maybe as good as it gets, Jamie? Or are you just being conservative or what?

I just think we're in a very healthy active exuberant market with very high prices and very high volumes, and we benefit from that. We just don't know how long it will continue. Could it get a lot better than this, it can get better. But how much better, I don't know. .

And then the second question does relate to the management changes and Troy taking over the consumer bank and we don't know Troy as well as we did Marian, and you have a lot more information internally. But to oversimplify and exaggerate, and we have FX trader now selling mortgages, credit cards and deposits. And I'm being simplistic for a reason, but what gives you confidence that Troy is the right person to run the consumer business when he doesn't have that experience in the past?

Yes. Mike, it's a great question. First of all, like I mentioned how you evaluate people, if they're analytics, is the brain power EQ, it's their heart, they're sold, the culture carrier. Can they walk into operating -- so he's exhibited that in markets in investment banking, they remember even the IP is an extensive operations function and our back office function technology function where he's exhibited great expertise. We're completely comfortable with that. I do think it's very important that people have experience across the company. .

And when I've seen investment banks, big banks taken over by soon only from the investment bank who only cares about the investment bank, believe me, the rest of the franchise can suffer. You need to respect for the rest of the franchise. So I think it's great for him. It's great for the company. He's already excited. He's always been to branches and out and about. And he'll take it hopefully upward on and upward. .

And Mike, just a minor correction, Troy, with no offense intended to my old good friends who are foreign exchange spot traders, but Troy was actually an options trader, which is also where I started. So I think you would want me to correct the record on that. .

Our next question comes from Saul Martinez with HSBC.

I have a broader question on AI. And it is -- is there an argument that we're vastly underestimating the potential benefits to efficiency and its impacts on how companies can run their businesses. I know block is a really different animal than you are on a lot of levels, but they argue they cut 40% of their workforce at given the advancement in AI tools, it look at their organizational structure with a blank sheet of paper they can be much leaner and not sacrifice on product velocity and commercial outcomes. And I guess I'm asking if you think there could be a parallel with banks where you can operate with a different structure, be much more agile, be more efficient over time? I know it's a sensitive topic, but curious how you think about these questions and how you're positioning yourself for this world.

So it's not a sensitive topic at all. We are going to use AI to do a better job for our clients. That's our job. We fully expect it will have huge efficiency in certain parts of the company -- and we analyze it all the time. I think we've mentioned in the past, we spent quite a bit of money on it. We have a lot of NPVs that we know we have the whole company is working at this at this point, and there are -- I think there's almost 1,000 use cases today, though, we say that really important ones are 50-50 across risk, fraud, marketing, hedging, prospecting, not taking, idea generation, document reading, and it's kind of just starting.

So we do expect that. I think you have to put in the back of your mind that there are areas where we may just accelerate what we do that we want to get done anyway. Think of a certain applications and customer-facing things and stuff like that. We are preparing to make sure we can retrain our people. And we have had discrete areas where we did reduce jobs by 30% or 40%. And most of those people offer jobs elsewhere.

So we do expect that. I also think that over time, remember, this will be offered to smaller competitors to through Fiserv and FIS and other fintech kid companies. And over time, we've been doing this nonstop for 25 years. We just large computers and mainframes and APIs and various tools and tricks for us have always been trying to create more efficient and stuff like this. This will be faster. This would be dramatic. The whole company is involved in when we have our upside in July, you can imagine this is a big topic everywhere from front office to mid-office to back office to marketing to risk, you name the subject and -- more to come, but we're kind of in the midst of this mini revolution, and we'll report to you.

But I do also want to point out maybe you could be ahead of other people kind of -- but what always happens is the benefit accrues to the customer, not to the JPMorgan in this case. -- because other people are doing the same thing and presuming at least to lower cost and lower error rates and a bunch of things. You can't just say, well, you're always going to go to 50% stay there. if we had a 50% ROE growing at 10% a year, you probably have 50 or 60 years, you'd probably be 100% of the GDP of the United States of America.

Yes. Yes. Okay. A follow-up on equities. And I think, Jeremy, you said, if I recall correctly, that the particular set of things that happened this quarter are difficult to see repeated. Can you just maybe elaborate on what was most exceptional this quarter. I think some of your peers have talked about Asia, prime brokerage there. And I think you mentioned derivatives and cash being strong, but is there any areas or products or geographies that were particularly noteworthy in terms of the strength this quarter that may be difficult to sustain going forward? .

Yes. I mean there's really not a lot like behind my comment. It's essentially what you would get from asking any of the commercial AI models, this question and the 2-year-old -- 2 stages, old version of the model. In other words, it's all the obvious stuff that's been heavily reported, like -- we had some major IPOs. We had some major index rebalancing. We had some very complicated dynamics in Korean equity market. There's been a lot of activity in Asia. The overall environment has been dynamic and interesting across a whole variety of dimensions. The clients have been extremely active.

So it's like -- it's all the headlines basically that have driven the market. And of course, that could obviously repeat, but I just think like statistically, it seems improbable that particular combination of effect to repeat itself .

And you guys -- those who pay attention, you can see most of this on a daily basis from volumes in the New York Stock Exchange, the CME buying through hedge funds, Hikari's not a secret, margin loans, you can see a lot of it taking place during the course of the quarter. .

Our next question comes from Ebrahim Poonawal with Bank of America.

I guess maybe a lot of discussion on the strong Wall Street backdrop. Maybe, Jeremy, just talk about the main street part of the U.S. economy. -- there is a sense that there's a fragility when you look at housing, real estate rates potentially could go higher. Give us a sense around what you're seeing from on the consumer side, the ability to sort of pull forward and resiliency if rates go up? And are you seeing any broadening in CapEx beyond AI? Or is it very AI-centric in terms of what you're seeing on even commercial lending activity. .

Okay. Let me do those in reverse order, actually, because I'll just address your AI CapEx question quickly. We do see some decent kind of CapEx and associated loan growth across the franchise. And at least on the surface, some of that does not appear to be AI related However, I was a little reluctant to draw that conclusion too strongly just because the AI team has started to proliferate in so many different parts of the economy, right? It's like the comments about data centers wind up breeding in limes and electricians, right? So you wind up seeing it in sort of slightly nonobvious places. And so any given bit of loan growth or CapEx that you see that doesn't superficially look like it's AI-related might still be. But on the other hand, it might not.

To give you a big number, I think CapEx is about $4 trillion a year and AI went from $400 billion last year to $700 billion this year, people project, which so do our people, it will be like a little over 1 trillion next year and maybe a little reduction in the non-AI CapEx -- but that's hard to figure out because the same people -- some of the same people doing the same .

Yes. I now starting to draw our comments the other day about like the CapEx impact of chipset and some of that's going to roll off and it's getting replaced by more direct AI stuff. So it's a little bit hard to untangle the whole thing. -- going to the consumer for a second. So a few things, I guess, I've kind of already covered. But so number one, spend is kind of fine robust and across income segments, seems like a bit of a tailwind there from tax refunds. Delinquencies are a little lower than we expected. And again, that's a better performance. You see pretty much across the board by kind of FICO score. There's some of that economic heterogeneity data came out from the Fed recently which also, I think, doesn't give a lot of support to the K-shaped narrative essentially.

So again, we think about this, we worry about this. We look at it. But from our perspective, from all the various dimensions, there's not like that much there in terms to support the narrative. Now to your point about fragility in rates and housing and stuff like that, it is, of course, we are in a slightly higher than normal inflationary environment. I think Marianne had made some comments at some point about a cohort of consumers who are experiencing negative real wage growth and not potentially creating some distress for those folks.

Now some of that statistically is kind of always going to be true at any moment in time in any cohort, but that's probably a watch area. And I think generally, obviously, it's been a long expansion that's gone on for a long time. I think the economy is surprised on the upside on some more strength, a surprise on the upside. And that inevitably everyone worry about fragility and about the thing that could change it -- but as I always say, when it comes to consumer credit performance, it's just about the labor market. And so you're not going to hear anything from me that's new or differentiated about the labor market, like we all see the same numbers and it's been surprisingly resilient. So for now, that's a narrative. .

Got it. And I guess just a follow-up. On the capital front, you have excess capital, strong ROEs. But I guess the question would be why buy back stock here at 3x tangible book when things are so good bad things could happen. Why not just have some even more excess capital for a rainy day if things go south? Just talk to us in terms of how you're thinking about buybacks at these levels? And I know Jamie talked about potential M&A at some point, maybe asset management, fintechs, but would love to leave us with that.

So before I answer that, I want to, I always enjoy reading your weekend notes. They're insightful and sometimes quite funny. So thank you for that Look, you're absolutely correct. I mean we've always said we want to buy back less stock as the price goes up and more stock as the price goes down. We had a lot of excess capital. And so we were struggling with that. If you talk about 2 years ago, we still think the number used just approximately $40 billion. And I think we now think we actually deployed it over time. the world has gotten bigger. It's got more complex.

I just got back mature of Europe. Our security resilience initiative, the hyperscalers, the needs are just big, and it's not just AI, our global infrastructure, the remiliatrization of the world, the reduction of trade is taking place, the enormous need of our governments. You have global deficits are almost 4.5% or 5%, which is a very big number competing for the same capital. So we do think we'll deploy and that has consequences. And we're not going to tell the market we're going to do, but I -- we agree with you, generally.

And if we think we can deploy, it's very different than buying back stock. I've also never thought that by -- I actually want to get rid of that number money returned to shareholders. I just don't even like seeing it because buying back stock is not returning money to shareholders. And you're making an investment decision, you're not making a return money to shareholder decisions. I actually went out of all our reports. And so you can see changes taking place. We're just not going to tell you what they are. And I made a mistake last time mentioning at $20 billion. We could obviously do far more than that or nothing at all.

What I was trying to point out is we have huge opportunities for organic growth in every single business we're in. Organic growth is hard. Its technology is people, it's systems, it's branches, it's bankers, it's hiring, it's training and recruiting -- but I was surprised to find out in parts of Europe that when we doubled our share in certain areas, they think that we could do a lot more there. And country by country, including countries that they aren't doing particularly well. And -- and I think the true here, we have our branches in the United States. We've got a credit card business. We've got the app arsenal, the Apple business at 1 point, which we have pretty high hopes for, if we come up with better products and better services.

And so yes. So the goal is to deploy our capital at a 17% return. That is the goal and which we think we can do over time. We should always be looking at inorganic what we don't want to do is look at inorganic as a sign of weakness of organic in which I think companies do some time the busied about M&A when they should be focusing on why they're not doing particularly well in the area or something like that. And we have a lot of competition, by the way, and we had pointed that out before. Very good competition, not just Goldman Sachs who's doing a great job if you didn't read their numbers this morning because I did. But you got Stripe and PayPal and cash and block and Chime and Sofa and Revolut, and they're good. And we have to make certain investments to keep up with them or to hopefully do a better job so of them. And so we're doing all of that.

But you should always be looking at things that could be good for your company inorganically. And so -- and we've done a bunch of deals this year. Most were goods, a couple weren't particularly good. And we're going to be looking and we're open-minded. It wasn't any particular thing or any particular place. It might be adjacencies. It might be data-related, -- it might be a whole bunch of areas. We have a bunch of skunkworks going on we hope, Chase U.K., we continue to build that in a way that becomes a great European digital bank over time. It could take a lot of time and effort to do that. So you raise a good point.

Our next question comes from Glenn Schorr with Evercore. .

Just 2 quick follow-ups. One, in the last couple of times you talked publicly, you had a couple of comments on the Smart Cash tool that you're working on. I know you said it's nascent and early, but sometimes technology moves fast. So curious status of the tool, when you might roll it out into who and maybe a little more on your comments on you're going to have to pay more for money over time. Just curious.

Yes. So this kind of relates to Jeremy or talking about before about the velocity of money and how it's going to move in a new world. So we are kind of prepared for that. So this is still a test case. Banks -- people are in a different position. And if you actually look at accounts, these tons don't like every account, they relate to a narrow segment accounts and where you're competing for their investment business and their deposit business. So what you're going to see is certain tests coming out and then you'll find out about what we can do, what we can't do. And we're going to learn a lot by doing some of that. And we think it could be good for customers and good for us. We're not just buying way to waste money.

Okay. So of this year thing, I take it?

Yes, you'll see something this year. .

Cool. One follow-up on -- you just touched briefly on it. I'm just curious of how you'd state your European consumer banking aspirations, you mentioned opportunities. You do plenty of business there, but you mentioned opportunities in each country by country, but maybe you could just sum it up in aggregate of -- what are you trying to be as a consumer bank across the major markets in Europe? .

Yes. So we didn't -- when we were talking about just bricks and mortar, we were going to try to compete because we couldn't have with local banks, their brands and capabilities. And unlike the United States, over there, we have to add all the overhead in different languages and different regulatory regimes, et cetera. And we have no real reason to when digital may have changed that. So we started Chase U.K., I've got like 5 years ago it was a complete start-up. And we made a little bit of fits and starts, but we have.

I think, almost 3 million or 2.5 million customers and in the U.K. We have -- we've opened up in Berlin. We've actually done much better in Germany than we thought we're going to do, though it's not quite profitably yet. So what you got to look at there is you have a platform, the platform costs money as you can distribute of course, more and more clients and more and more countries, you can get to the point where you're breakeven and then hopefully profitable. And so we've added the investment products in the U.K. you can assume we're going to try to add them elsewhere and probably credit card. And hopefully, the dream would be there would be a pan-European successful digital bank, building off of JPMorgan Chase's stress.

We are a private bank. We do have an upscale, a huge business here. We've got a lot of clients that go across border. We've got a lot of training capability and underlying capability and research capabilities. So but it's still adjusting over time. We always call this like this is -- it's not income. It's not a brand-new thing, but it's developing over time. I have high hopes for. And we -- the management team is doing great. We tell them constantly come in and tell us what you want to do when you want it differently what we've learned, and we're kind of patient kind of...

Our next question comes from Gerard Cassidy with RBC.

Jamie and Jeremy, you guys have talked about you've seen some excesses in underwriting and credit late last year. I think it was Jamie. Jeremy, you talked about risk on in the capital markets. What are you guys seeing in credit underwriting from your competitors. Is it getting crazier or no, it's still pretty good? And what's the outlook there, please?

I mean crazy is a strong word, but I spent some time looking into this issue like a week ago. And we did hear some examples. I mean I don't know for whatever reason, I think the data center underwriting space is 1 that resonates with me as a kind of bellwether for what people are doing. And we passed on some deals that obviously when you look at the data center stuff, the key question is like what happens with power supply, what happens with tenants, what happens -- it's a well-discussed thing. And we have a pretty precise framework to govern what we're willing to do and what we're not willing to do in that space across those types of risks. And we saw some deals come through where we were just like, yes, we're not doing that.

So it's normal, I guess, it's competitive, and people are eager to be involved. And in some cases, there's ironically some element of like relationship lending that's happening through the data center space, when it's kind of a start-up entity that's building the data center. So that's part of the story a little bit, too. But I don't think we're screaming from the rooftops that underwriting is underwriting loss, but I think you see normal pressures, and we're navigating those in the way that we do, which is we do flag in some moments for particularly important in situations where we feel like it's the right thing to do. But in general, we try to be the 1 that holds the line and make sure that we're guided by our own risk appetite on kind of appropriately skeptical view of the environment.

We didn't talk about a huge deterioration in credit underwriting stars. I think we talked about it as a very mild one, but it's across sales spectrum, which is people assumptions on revenue growth or add back of expenses, more PIK, weaker, some weaker -- and this is not across the board, but it's more of some players than others. We have some weaker covenants some people taking more rollover risk. And by that, I mean, if rates go up, how much interest rate exposure you're taking as opposed to underwriting exposure and it's just things like that. But it is across the spectrum. You've seen a little bit of weakness.

And the only point we're always trying to make is when there's a credit cycle and there will be a credit cycle, how will everybody perform -- and I don't think it's going to be like a bell curve of performance. I think there'd be some pretty -- there'll be some outliers out there just like the , by the way, in the great financial crisis.

I totally agree with you, Jamie, on that. I don't want to sound pollyannish, but on a question regarding the regulatory outlook. Obviously, we've got Basel III in game, hopefully, be codified maybe by the end of the year. I know you guys have put out your remarks on it. And next year, hopefully, we get tailoring. Could you envision a period where and again, I don't want to sound pollyannish, but a period where the regulators are just set where do you go? Because the last 20 years, there's been constant change with the regulators affecting the banking industry. Could we enter a period where we have a stability in the regulatory environment, which could enhance valuations possibly for bank stocks?

Well, I would break the question down into 2 parts, like could we envision stability and impact on valuations. On the [indiscernible] stability, I mean I don't think it's pollyannaish to say that regulatory stability is a desirable thing. And I actually think it's a relatively nonpartisan idea, like I think it's understandable and correct that there would have been a big reaction to the crisis and then maybe a reaction to the reaction and the sort of amplitude of those oscillations might be decreasing, and we get to a place where we've got about right.

And frankly, we get to a point where banks are primarily focused not on complying with regulatory constraints of various types, which should probably in general, operate as backstops or rather thinking about what their own standards are and what their own risk appetite is and have that be kind of the true north of any given type of decisions. And I think we're getting closer to that stage, which will be good. whether achieving that state would be particularly supportive of bank stock valuations. I'll leave that question to you. But at least, I think, for banks like us, I'm not convinced that's a major drag right now, to be honest, that it has been in the recent past.

Yes. And I would just add, there's one legislator at Supreme Court decision that makes it less likely that we wouldn't have flip-flopping, which is a present to remove a lot of people more easily. But I'm hoping -- I mean what really should happen now is when they write legislation, they could be more clear about their intent and what they want because they could have said we want this independent or only replace so many or we don't want to flip flop in regulations.

But I really like the fact that Mickey Bowman and Kevin Warsh are taking a step back and looking at the broad range of changes, which have been extensive over 20 years and never ended. And often with no ultimate intended consequence where they want in an system and outside and system makes it safer. So I actually believe it would make the system much safer, much safer. And that should be their mill goal, not just adding layer on layer bureaucratic reporting -- the -- some of the regulators said that from now on, they're going to focus on safety and soundness, they do that. We would have no MRAs because none of them related to our safety insentive related to other issues.

And I think have you related to safety and soundness, Silicon Valley Bank and First Republic wouldn't have happened simply upon they were taking to much is rate risk, which was disclosed. But one thing -- and so I just think the goal should be to take a step back, look at these things in the open light, be very honest about what worked and what didn't work like resolution did not work. Resolution recovery does not work. People should we should look at the discount window differently. And anyway, if those things are done, I think we have a safer banking system where we don't have to be breathless every time a bank fails.

You guys -- are the guys who know so much about this, they should be making some of these recommendations to regulators. It's in all of our interest is just to be better. not any one of us, all of us. .

For our final question, we'll go to the line of Manan Gosalia from Morgan Stanley. .

Jeremy, as we think about the various expense buckets you called out at the start of the year, the volume-related expenses, bankers, tech, marketing -- the majority of the increase in the expense guide is coming in the revenue-related line. But are you also bringing up some of the other categories, maybe pulling forward any tech or marketing spend given the environment?

Yes. There's some of that stuff going on. So I'm trying to sort of keep it simple and disproportionately focus on the big driver, which is obviously volume and revenue-related expense. But -- as is always the case, there are some ups and downs, which -- some of which relates to things like our marketing strategy, which I probably don't particularly want to disclose. But I think one topic which is not financially meaningful this year, but which I think is interesting and maybe come in the future is the question of token expense, because that is something that we're spending a bunch of time on. I think as probably pretty much everyone in corporate America is.

So just for the avoidance of doubt, it is a trivial number for the first half of the year we are forecasting some meaningful acceleration of that number for the second half of the year. But still nonetheless, the full year contribution of that is still trivial. And obviously, we had budgeted some of that. So it's not in any way a meaningful driver of the current outlook or the revision on the outlook. But obviously, when you listen to the Frontier Labs talk, they talk about the exponential and the acceleration of usage, which is obviously driving their revenues and someone's paying those bills. And we're in a sense, like a representation of the economy as a whole that we're probably lagging a little bit some of the cutting-edge adoption and usage as we should, given who we are as a company.

But it is an important question for us as we go into next year and the subsequent years. And I think the good news is that we've done a lot of really high-quality thinking on this and a lot of the infrastructure that we've built over the last couple of years is going to position us to be quite sophisticated about using the right models for the right purpose. I mean just to use 1 sort of topical example and no events intended to those of you who tend to write slightly long reports. But as you can imagine, sometimes people like to summarize those reports, using AI tools. And as you know, the tools are quite good at doing that. And you really don't need the latest cutting-edge incredibly expensive model to summarize analyst report.

So the idea is use the right model for the right purpose, be smart about open source where appropriate and ensure that you're getting value out of it, ultimately, in the end, either we're going to have a lot more capacity or we're going to have a lot more efficiency or both or we're going to have better revenue outcomes or we're going to compete more effectively, and we just need to be disciplined about how we handle that. So that's a body of work that's happening right now.

Got it. Very helpful. And then maybe on CIB and the increased capital allocation there. I guess, how nimble do you expect to be there? Do you think we're at peak allocation here? Are there any internal limits that you might be ramping up against? Or is there room to keep allocating more balance sheet to the business if the environment remains where it is?

I mean, I'm definitely not going to get into discussions with you about like internal limit management. I guess it was on the press call, so maybe you didn't hear this, but I did get a question about this. And I think the right -- and I think you said this correctly, but I just want to -- on the side of being precise here. Sometimes people think about capital allocation almost as if it's a hedge fund where you're like giving a pot of people, some capital and telling them to go use it, that's not the way it works. It's the opposite of that.

In other words, we have demand from clients to support them in various ways. And to be clear, we also have some, what you might describe as passive effects, like obviously, when volatility is higher, margin risk capital goes up possibly and simply the appreciation of global equity markets increases the RWA associated with things like the prime business. So you've got active and passive FX, but the active effects are us responding to client needs -- and obviously, we've got a ton of access as a company. And as Jamie said, our primary goal is to deploy that organically.

So when our CIB clients want us to serve them, -- and we can do that in ways that make sense for us from a risk appetite and from a returns perspective, we've got plenty of capital to do that, and so we do that. Sometimes there are other financial resource constraints, and that's part of what we do for a living is trying to manage that stuff. And I talked a little bit at the company update, if you recall about the system and the fact that the system is currently quite flush with capital but at the margin, less flush with liquidity, and that's obviously an area of advocacy, especially in light of the stated goal to reduce the society balance sheet, you really need to reduced bank demand for reserves to get that done. And so that in turn probably requires some adjustment to liquidity regulation. So that's the next thing on the agenda.

Great. But our risk standards haven't changed. It's possible some of these things change because people self-select and pick somebody else, and that would be fine with us. .

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

All right. Up next, we have JPMorgan. We're delighted to have with us today Marianne Lake, CEO of JPMorgan's Consumer and Community Bank and also a member of the Operating Committee. Mary Anne, it's a pleasure to have you here.

Yes. Thank you for having me. Nice to see you all.

So Marianne, let's start with the health of the consumer. You have, I guess, one of the broadest views given not just the branch footprint, the deposit base, but also the number of products you have on the lending side. What are you seeing with the consumer here?

Yes. So I mean, I think there's not really a lot of new news, which is a good thing. So we pretty consistently talked about the fact that the consumer remains resilient and all of the metrics that we look at, speaking, continue to show that. So that's true of deposit buffers, while they've normalized even for the lower income cohort, they stabilized, while it's true of debt service, it's true of utilization in card, spend is still solid. So everything still looks pretty good. And I think we talk about that being surprising -- the consumer being surprisingly resilient. I'm not entirely surprised by it. If you look back over the last 5 years, there were 2 things that were true. The first is that there was a lot of excess liquidity on the balance sheet of customers of all income and wealth levels post pandemic.

And the second thing is the labor market was extraordinarily tight and demand for labor was very, very high. And so even in a sort of high inflation environment, wage inflation kept up. I think where we are today is a little different. So notwithstanding that the metrics still look stable, cash buffers have normalized, which does mean that there's less spare capacity, less sort of in-built resiliency for any sort of future shocks. And while the unemployment is low, demand for labor is a little softer. And in April, we saw real wages not keep up with inflation for the first time in a while, yes, largely as a result of the energy shock.

But nevertheless, as we look forward, it's possible that if inflation were to be higher for longer, that this sort of trend of wages keeping up with inflation could be at some risk. I would also say that we've been a little flattered over the last couple of months with higher tax refunds and lower tax bills that coincided at the same time as higher energy prices. So it sort of muted the impact of that. For the lower income customer, about somewhere between 20% and 25% of that incremental money as a result of higher tax refunds has been spent through the first 2 months of higher energy prices. So time is a big vector here. And so as we sit here today, the consumer is resilient. The metrics are good.

Everything looks fine. But there are an increasing small but nevertheless increasing number of people for whom wage inflation is not currently keeping pace with inflation, and that will likely be the thing to watch.

So you're not seeing anything right now, but you are being watchful.

Being very, very watchful. And at the margin, the number of customers for whom wages aren't keeping up with inflation has picked up a little, just a little year-over-year and a little versus the pandemic. So we'll see how that plays out. But for now, we're just watching it.

And what are you seeing on the demand side on certain loan categories like auto, resi, mortgage? Anything different there?

No, demand is good, too. So demand is still pretty solid for consumer finance products. I actually start with card and then move on to mortgage and auto because card is obviously the biggest sort of growth driver for us in terms of loans. And we talked a year ago now at the last full Investor Day that we did that we would expect to see the overall industry loan growth of 4% to 5%, and we expect it to outgrow that more kind of at that trend level of 6-plus percent year-over-year, and that's what we're seeing. We're seeing strong demand for our products, strong acquisitions, strong retention, solid spend. So card still continues to grow in line with our expectations.

Auto also, we've seen good demand into 2026, which I know is a question mark with all of the tax credit expiry last year. FA year-to-date is $15.7 million or close to $16 million, and we're seeing reasonably healthy demand across that space. And then mortgage, purchase demand is fine in quite a small market. We had a little burst of refi activity, which was exciting and less so now. So for us, of course, as you look at loan balances rather than demand, we're going to see mortgage runoff because of the First Republic acquisition. But demand is still fine.

Got it.

And underwriting standards are still generally unchanged right now.

Got it. All right. Perfect. So let's talk about the consumer banking targets you've laid out. I think you've exceeded your 25% through-the-cycle ROE targets for about 5 years in a row now.

You're asking what we stand by.

Well, do you think you're over-earning, I guess? And if you are, where do you think you are?

The trouble with through-the-cycle measures is that you contemplate a range of macro scenarios in that. And over the last 5 years, I think you would probably agree with me that we've had the benefit of more macro tailwinds and headwinds across the business. And so in any through the cycle, you have to get to a credit cycle to really see the other side of it. But if I just quickly talk, the 2 big drivers would be deposits, both balances and margin and then credit. So on deposits, over the last 5 years, starting at the beginning, we had, as I said, a lot of excess cash on our balance sheet.

But margins were actually low coming off of a decade of low rates. As rates rose and balances started to normalize, margins expanded. And those 2 things at this moment in time, we just picked a moment where I would happen to say they both feel about normal, right? So deposit balances have normalized. We're expecting modest growth from here, plus or minus whatever happens, of course. And margins are at the top end of what I would call our through-the-cycle expectations. Now if rates stay higher, which they look set to stay higher for a period of time, higher anyway than a 3% sort of Fed funds normal rate, then margins will continue to expand above our target, but there will be more pressure on balance growth.

And so those 2 things will maybe not completely offset, but we'll have competing forces. So I'd say kind of normal-ish right now with a deposit margin expansion outlook on higher rates, but more pressure on balance growth, more competition, et cetera. Credit is the area where I say it's -- and I hate the word over-earning because we're going to have a credit cycle. And when we do, we're going to see the other side of the story. But on credit in card, balances also have normalized. And charge-offs have normalized back to where they were pre-pandemic. But pre-pandemic, we were in a benign credit environment, and we still are. And so our charge-offs this year are at the low end of the range we gave you.

We gave you a range of 3.3% to 3.6%. We're at the low end of that range. So I would say normalized to good, but the through-the-cycle expectations contemplate stress and so would be higher than that. So in that context, I guess we're over-earning for now until that changes. And then the only other thing I would mention because people tend to forget it is that those are not the only things. Of course, the mortgage market reflects the rate environment. And so a very small mortgage market has been a feature of the last several years and continues, relatively speaking, to be a feature looking forward with very little refi activity and funding our balance sheet is more expensive, particularly card transactors. So there are other offsets, plus or minus normal, except for over-earning on credit right now, and that will turn when it turns.

Okay. Let's maybe talk about market share here. So you have leading market share across most of if not all of your products. Where do you see the opportunities for growth here? Where do you see, I guess, the most opportunity to pick up share in the near term versus the more medium-term opportunities?

So I will start by sort of not correcting you because you're not wrong, but of course, we get very granular. And so as excited as we are about our sort of industry-leading positions, we can find plenty of places where we are not #1 or #2 and in some cases, not #3 or other areas where we're sort of investing in sort of growth or new businesses. So we see opportunity sort of everywhere. And I don't think of market share as a near-term thing. I'm not that I wouldn't take near-term market share gains, but it's a long-term goal because sustainable share is the objective. And so it's not new. It's the themes that we've talked about. It's marching towards a 15% share in deposits.

It won't be linear and the last 100 basis points will definitionally be harder, but we are doing that through expansion markets, new builds, our existing footprint through investing in our brand, in marketing, in products, in services, in branch refreshes. And so we expect to continue to gain share there. Card is an area where -- I should talk about customer segmentation, by the way, like even in the consumer bank where it's not as easy to pick different products and say, we're not #1 in everything that we do, and we expect to outgrow in use and starters. And we're seeing in terms of account growth, 22% CAGRs in use and starters. We're seeing 6% CAGR in CPC, and we're investing in our affluent strategies. We're seeing 8% account CAGRs in small business as we're investing very heavily there.

So we're outgrowing in the places where we can. And the same is true in card, right? So we're gaining share. We're not #1 in small business, but we're gaining share. We have reclaimed the #1 spot in terms of application share for affluent and Premium last year. We're not #1 in starters. So we're not #1 in non-rewards, and we're investing in all of those things and growing them, too. So growing our premium card business at 12%, small business at 12%, continuing to invest in the premium segment. Wealth management, I could go on and on. So all the things that you've talked about, we're adding advisers, we're making them more productive. We're adding AI tools. We're leveraging our data. Our self-directed platform is growing. So we're going to get growth in Wealth Management that continues the trend that we've seen.

And then our newer areas like commerce, we're in the earlier days. We're growing from a smaller base. But there, we're also seeing really strong momentum, in particular, in travel.

All right. So there's a lot to dig into. But maybe let's talk about disruption and competition. In your CEO letter, I think you mentioned that you face disruption everywhere, whether it's because of AI, it's because of regulatory change, it's because of nonbank competitors. Can you expand on that a little bit? Where do you see the biggest threats for the consumer business? And then on the flip side, I guess, what opportunities do some of these changes provide for you?

Okay. Great. If I miss anything, pick me up at the end. So let me start with maybe with regulation and legislation and that we have a lot of -- there's a lot going on. particularly around card and payments and open banking and clarity and things like that. And we just have a very, very clear point of view about what we advocate for on regulation and legislation. And that is, first and foremost, the things that we think are important to our customers, so for customer protections and for customer choice. And then second is for a level playing field that like activities are regulated in the same way regardless of the nature of the company that's doing them.

And so we'll see how those things all play out. Things don't always break our way. Things don't have to be 100% fair all of the time, but that's kind of our North Star for advocacy. If you think then about competition, what does the competition do, which is completely natural. They look for chinks in our armor, right? They look for the things that we aren't doing very well. They look for the customer segments that we're not supporting as well as we should or the products or the experiences that aren't working the way they should. They then build a beautiful thing to fill that gap and then they earn the right to deepen from there. And they do that well. And the best offense is a good defense, right? So we have an extraordinary amount of customer data, and it is our job to interrogate that data to find out what our customers are telling us through their behaviors that we aren't doing well for them and to fix those things.

So to make sure that our experiences are beautiful, that they work first time every time. And in moments of truth, we have their back and to continue to build out products and services that resonate with them. So that's kind of -- and that competitive landscape has been true for the last 10 years, which is people looking to disintermediate us from our relationships faster than we can fix the problems that exist and so far, so good for us. And then on AI, so AI is going to change everything, and it's going to reduce barriers to entry, which you could argue could create more competitive threats and risk. And for sure, that's at least partly true. But it also favors us, too, because one of the things if you look at new entrants or fintechs or companies with less legacy than we have or less complexity than we have is that they were able to move really fast.

Well, so are we. AI is leveling that playing field, too. So we're able to modernize more quickly, catch up more quickly, develop more quickly. We have a lot of capacity to invest. We also, I think, have the best hand because a lot of our strategic competitive differentiators are AI resistant. So our brand, we've invested in over many, many decades. It's synonymous with trust and security. And I would argue that trust and security will matter even more and customer protections will matter even more in an AI-enabled world. it is the breadth of products and services. It is the quality of the service. It's the fact that we answer the phone. It's the risk management results that we have. It's the 5,300 physical branches. It's the quality of our digital channels. It's a data advantage we have that allows us to personalize experiences.

And that's not to say that we have a God given right to those things protecting the business, but I think we have a really good hand. And so there are risks and there are opportunities. And I think as long as we continue to make sure that we're taking advantage of all of the opportunities that AI bring to make our teams more productive, to improve the customer experience, to leverage our data advantage to modernize our infrastructure, then I actually think that this may level the playing field in our favor on speed.

And the data advantage is for a broad set of consumers for a really long period of time, right? So that helps you from the AI perspective as well.

100%, 100%. And obviously, models are just getting better and better. And you've seen all of the excitement now about transformer and Frontier models and the ability to use the sort of scalable impact of data, and we're working on that, too. So look, I'm excited. I'm also just excited about the fact that anything that improves customer experience is generally good for our business, right? That's always been true. We're here to serve customers, and we're here to do a great job of that. And if we're able to do that, sometimes even if it costs us to do that, it generally ends up paying dividends in the fullness of time.

Right. The other thing that you spoke about in your shareholder letter was how AI-related changes are transforming consumer behavior. So I guess as investors have been increasingly focused on AI and how that impacts deposit behavior, can you talk about what you're seeing there and how you expect that to evolve?

Yes. Look, I will start with just a sort of very big picture overall sort of sentiment, which is a little bit where I ended the last question, which is I do think that AI is going to at the margin or more than at the margin, improve the ability for people to monitor and manage their cash flow and therefore, optimize their financial position. That's definitely true. But it also speaks to the benefit, at least for many people of consolidating their financial situation with a single service provider where that could be even simpler and even easier. So like stepping right back, we compete on a lot more than price. And that has been true for a really long time. I actually remember being at this conference, Betsy, back in 2015 and saying, we just need a real rate cycle to prove that the value that we bring to customers resonates with them and that they're willing to reward us with their relationship.

And so it is the brand, the convenience, the people, the products, the services, the branches and all those things that make people want to bank with us. So we compete on more than just price. We compete on value and value that it resonates with customers, number one. Number two, on price, right? Because I do think there's a lot of conversation about yield as there should be. But on price, nearly 90% of our banking customers bank with us without a service fee, right? So we're already rewarding them and their relationship. And many of them don't have very large deposit bases. We're already rewarding their relationship with us by allowing them to have full access to the full suite of products that we have without paying a service fee, and that is valuable.

That's kind of number two. Number three is that as much as I do think that things will become easier and friction will be eliminated, I think we can all agree that in the rate environment that we have today and have had for the last several years, there have been a lot of options for people to find yield, right? A lot of time and a lot of options. And yes, some friction, but not a lot. And that's not only true of us. It's true on us. So we have a competitive CD suite of products. We have premium deposit and a very, very broad fixed income solutions in our Wealth Management context. And we have consistently retained more than 90% of all yield-seeking behavior from our customers within our Banking and Wealth Management context because we offer them a lot of options.

So that doesn't mean that things won't become a little easier, but it does mean that this isn't new, right? And the options have existed and value beyond price matters, and we do give people a lot of value. And we think that this is an opportunity to provide value by rewarding people who bring their relationships to us, which is the Smart Cash thing that I know has gotten a lot of attention, which is very nascent and very early. But it's looking at customers who bank with us, who have wealth management with us, who have their wealth spread across a number of different products and services that we have and making those experiences on us just easier and more rewarding and rewarding them for bringing their relationship to us. And we think that, that is just a great customer experience.

So is this something that, I guess, will be available to customers to bring more of their relationship to JPMorgan?

Correct.

All right. Perfect. And then as we think about the funding advantage that JPMorgan has, I guess, what preserves that funding advantage going forward? Is it the depth of products? Is it the branch footprint? I guess, what will keep the funding advantage going forward?

Well, I mean, it's all of those things, right? It is all of the same things that has preserved the funding advantage through the last rate cycle. And so again, we're not suggesting that there is going to be 0 impact. And again, things that are great customer experiences are things that we generally like to lean into. We like to give our customers choice and all of the best experiences. but it's all of those things. It's not one thing, which is why it's so hard to replicate. It's decades of investment in building out wealth plan and credit journey and plan and track and making sure that we have the full range of products and making sure that if you do more business with us, we do recognize that relationship. All of the things that were true before will be true going forward. Things may be different at the margin, but on the whole, not.

All right. Perfect. And then as we -- you mentioned the Smart Cash product. Anything else to talk about in terms of the impact of agenda cash optimization on the deposit franchise?

I don't think so. I don't think so. I think everything I said, which is there will be some People will pay for value one way or another. Right now, they're being rewarded in having service fees waived. If at some point, the yield dynamics were to change materially, then there would be other ways to get paid. That's just the way it works.

All right. Perfect. And the other side of this is Agentic commerce. So how is the bank permissioning for the rise of agentic commerce? And how are you tackling some of the issues like trust and control, purchase protection, fraud?

Yes. So look, we talked a bit in the earlier question about changing customer behavior. And I think what has been obviously most notable is the pretty widespread and rapid adoption of AI platforms and AI summaries for search and discovery, right? Why? Because actually, search and discovery was not super easy or like particularly fun before. right, when you had to sit through lots of different links and sponsored versus not sponsored and figure out what all the details were and curate all of that information yourself. And what have the AI platforms and experiences enabled is like a really beautiful from click to conversation way of discovering brands and doing the discovery part of shopping.

So I think that the reason why that has been so rapidly adopted and has been and is so successful is because it really has taken an extraordinary amount of friction out of a process that was necessary. What we're not seeing is that moving into the transaction part of this. And I would put -- you could say for now, I think maybe for a long period of time. Why? Because when people are moving money, things change, right? Trust and security matter even more. I think that we should not allow ourselves any of us when we're innovating to underestimate the importance of customer protections and making sure that those are preserved and the insistence that customers have about making sure that the payment methods that they like, that they get the chance to use them and the rewards that they like, that they get the chance to have them.

And so what we are seeing is that even the sort of AI platforms are recognizing that the investments that have been made in the consumer payments ecosystem are important and complex. And so we're working to ensure that cards work everywhere, that customer protections are front and center of everything that's getting done, that clear customer positioning and humans in the loop for things that matter are still present, that there's transparency on what is being done by agents and that there's a liability framework that works, right? If an agent makes a mistake, the liabilities with the agent. how do disputes work, who answers the phone when there's a problem and that digital wallet should continue to work.

So Agentic-enabled commerce should support digital wallets that are trusted by customers that have good clear authentication and customer permissioning. And so all of those things, I think, are going to be a feature of what I think will be extraordinary abilities to shop, but I don't think people are going to delegate their purchasing to agents just yet. And let's not forget that sort of the ability to automate everyday purchases isn't a new -- like we were talking behind the doors there about everything that's old is new. Remember the smart refrigerator that's going to do all your shopping for you and subscribe and save where you now open the closet in the corridor and you have 200 years' worth of toilet paper.

These are not necessarily new. And it's not to say that they won't gain traction. I'm not being dismissive I'm just saying that the customer choice is important. Customer protections are important. commissioning, liability, those things have to be fit for purpose, and that's what we're working on. And I think we're going to get there. What we are excited about, however, is what you need to look for are the things where -- like search, the things where actually there is a lot of complexity and tax on the person and stress. And so a good example of that, where we're really excited to like participate is in travel, right, where actually, it's still very complicated to do the discovery and figure out how to bring together the flight and the hotels and the itinerary and do the itinerary and when something changes, how do you manage it?

And how do you deal with disputes. And with our assets and our platform and our data and our partnerships, we're pretty excited about helping using Agentic AI to help customers do that more easily and start with us and have a -- we're looking to have a consumer-facing travel agent in pilot before the end of the year, trying to help with that because it's an example of where things are still hard, right? There -- you've got to look for the problem to solve. And where there is no problem, I'm not saying you can't improve experiences, but it's not going to be the thing that scales rapidly.

All right. All right. Perfect. So stay tuned. All right. Maybe going to the branch footprint. You've been highlighting the importance of branches for several years now, over a decade. You made a big push to enter into new markets, and that's been going on for several years as well. So as we think about the bridge between the 11% deposit market share and the 15% that you want to get to, how much of that is coming from new branch expansion versus existing branches and existing penetration amongst your customer set?

Okay. So -- so just to like really answer the question and then give a bit more context. So about 40% of our share gains are coming from new builds. But I should point out that when we say that, not only have we built 1,000 branches since 2018, which is when we sort of stated our ambition to sort of plant a flag in all lower 48 states, including high-growth markets that we weren't previously in and start to sort of build out density in those markets. So we built 1,000 branches since 2018. I should remind you, and I'm sure you do remember, we built 1,000 branches in the decade before that, too, post Hamu.

So there is a large percentage of our branch network that is still not yet mature, which is to say that we have a tailwind of growth behind us. And furthermore, we continue to build about 160 plus or minus branches each year, allowing us to continue to densify in those high-growth markets where our share is low. because there is a direct correlation between branch share and deposit share, and there are many markets where our branch share is very low. So we will continue to build those out over the years to come. So we expect future share gains to also be about 40% driven by new builds, and we're not going to stop, and there is no real point of arrival, but we're just going to keep doing that. What that does, however, mean though is 60% of the growth is coming from our existing footprint.

And so in our existing footprint, it's about investing in the brand in refreshing the branches so that they look fresh and good and the experience is great, putting new tools and capabilities into the branches, hiring the best people, having the best products, servicing them, customer satisfaction is key. And so -- and also about having the best branches on the best corner of the street, so the best real estate. And we continue to turn over certain of the real estate in our legacy network. And so as we look back, 40% of growth was from new builds as we look forward, the same, but it does mean that the majority of growth has been and will continue to come from our network.

And is it getting more.

To do it better.

I hear you. Is it getting more competitive? I know deposit growth is always competitive, but I guess more of your peers have been advocating growing branches in different regions. Is it getting more competitive there? And then what is your go-to-market strategy where you can compete with, say, more established players in a particular market?

Okay. So look, imitation is the sincerest form of flattery. It's not surprising to me that people are looking to expand the network because it is working, it does work. We can tell you all the facts about omnichannel is the winning answer here in the U.S. It lifts digital production when we have branches. Our credit card business lifts new branches when we build them in new markets, it's symbiotic and all of those things are true. But again, we don't expect not to compete. So I would never underestimate the competition. They will build branches, they will be successful. We just have to do it better.

And [indiscernible], it's going to be hard to catch up with us. Like I recall -- I recall at Investor Day way back in the day. I can't even remember the year now where there was like a big, big debate, branches are dead, you guys are building 1,000 branches, you've lost the plot, nobody else is doing the thing. And I don't think that we will prove wrong, right? So we have, as I say, more than a decade of history to catch up on all of that tailwind of growth, a younger network, a proven capability of doing this 160 a year, and it's not easy, right? It's like fitness. You have to do the exercises. You have to like have the technique, you have to be able to do it. And then investing in all of the other products and services. And I will tell you, I don't mean to be arrogant. I genuinely don't discount the competition.

But if you look at our new builds and compare them in year 5 to the new builds of our large competitors, our deposit production outperforms 1.5x. If you look at a new market that we entered at the same time as another competitor entered the same market, our deposit production in new build outperforms. So you can just do it better, too. And that's not to say that we will get everything right, and we don't get everything right. But on the whole, our network is really, really producing, and it will be hard to catch up.

So another area where you have a really strong hand is on the card side. There's more competition from other banks and fintech providers, but you recently noted that JPM is 60% top-of-wallet behavior from your clients. How do you stay top of wallet and protect your moat there?

Yes. So I mean, it's -- for us, it's a couple of things. The first is that we want to have products that are designed for every customer segment. So no matter who you are, there is a product designed for you. And then you get to choose what products you would like, right? Just if I designed a product for a starter, but a lot of Gen Zs and millennials are favoring Sapphire. So that's great. So we have products designed for every cohort. You get to choose what products you have. We make sure that there's always exciting new news. We refresh the product. The value proposition has to be compelling. It has to be -- it has to resonate with the customer, be compelling relative to the price, whatever the price is and allow customers to want to engage heavily.

And so we're seeing that. We're seeing strong customer acquisition. We're seeing very, very low attrition. We're seeing a lot of excitement about the products. We're seeing strong engagement, good spend. And then there are other assets that list the whole portfolio. So if you look at our commerce assets, travel, lounges, the Edit hotels, they kind of list the whole portfolio. So yes, the value proposition is very rational. It is about points and how you redeem them, which we do think we're best at class in, but it's also about the whole ecosystem. And so our products are resonating with customers, and they're engaging with them strongly.

I'm going to come to the audience in just a second to see if there's a quick question in the room. But maybe continuing on the card side, part of the strategy, part of your goal is to grow card outstanding share from 18% to 20%. Is there anything more you need to do on either the premium card side or the non -- outside of the premium card segment to get there?

Yes. So I -- look, we've been -- so we sort of regained or reentered a growth trajectory in outstandings about 3 years ago. We've been reasonably flat before then. And we've grown 110 basis points over 2 years, 40 basis points year-over-year. And here, too, like when you're at 18%, like there's no single thing. It is about the right products. It's about having new news. It's about refreshing them. We talk a lot about Sapphire. We also refreshed Southwest and United last year. All of them are performing really strongly. We have plans to do more of the same. So our products will always be fresh. They will always be best-in-class as far as we're concerned.

Apple is an incredibly important partnership, which we're extremely excited about. Partnering with an innovator like Apple, I think, will not only be a great partnership, but we're excited but all the other things that we might be able to do over time. But as excited as we are at 10% of our overall portfolio. So it's true it's going to actually close most of the gap from 18% to 20% when we onboard those loans. But the 20% was just -- it was just a flag, right? We're not going to stop. And it's about marketing, risk management, value propositions, refreshing cards, customer experiences, customer satisfaction, all of those things, it's 1,000 things, and we're just getting after them.

Got it. Is there a question in the room? There's one there.

Just in the context of what you were saying about service fees and finding a way to price. As the velocity of money accelerates and what I mean is, say, instant settlement or the tokenized deposits you guys are pursuing. it's very easy. And then you have AI that can sort of automate for you, just moving from, say, your current account to a money market fund automatically instantly. What's the role of noninterest-bearing deposits in that world? A bit of a big picture question, then I guess.

Yes. I mean, look, I don't think the role of noninterest-bearing deposits change. I think that the time frame over which you measure them might change, right? So for example, and I'm not your target audience to that question, I understand, but I have money in my checking account for things I want to do purchase. And so you will be able to move money more instantaneously over time. That's definitely true. But by the way, I would say that for people for whom that is important, they do achieve substantially all of that today. right? And so in the future, as that progresses, and I think it will progress over time, and we will be making those things capable for our customers. It is also true that we provide more value than our competitors.

And so if you're going to move money around, would you rather move it within the JPMorgan Chase complex or across various different accounts? If you want to consolidate your financial situation, where would you consolidate it to? I just think we're going to end up being a net winner in that. And so do I have a crystal ball as to how fast these things will happen or exactly how they will play out? No, I don't. These themes are not new, right? The tools and the capabilities are new, but the themes are not new. And if I look at deposit tokens as an example, like we are definitely looking to become capable to sort of use deposit tokens and stablecoins on chain for things that we think are not yet the optimal experience like international remittances where speed and efficiency could be improved.

But you have to look at the existing situation for consumers here in the U.S. and say, what is the problem that a deposit token really solves, right? Really. So for the vast majority of people, you have access to credit, liquidity and real-time money movement between accounts and peer-to-peer today. So we need to continue to make sure that those things are true and then become capable because I would bet that deposit tokens and stablecoins have some role in the future, and we want to be capable of doing that. I just don't think that there is a material set of problems for U.S. consumers today in that space. So we definitely want to be capable. We definitely want to meet our customers where they are, but we are seeing 0 demand because there's no need right now. We'll keep watching it. And when we see the demand, we'll meet the customer in the service that they're looking for.

All right. I know there's a lot more to discuss, but we are out of time. Marianne, thanks so much for joining us.

Thank you so much.

Okay. Good morning, everybody, and welcome to the 42nd Annual Strategic Decisions Conference. I'm Ken Usdin. I'm the large-cap bank analyst here at Autonomous. Really happy to be back and also joining us today for our first session, Jamie Dimon, Chairman and CEO of JPMorgan Chase. Jamie has led the company for over 20 years since becoming the CEO in 2006. And JPMorgan Chase has grown to now being the largest bank in the U.S. with over nearly $5 trillion in assets. So Jamie, thank you very much for being here today with us. Just as a reminder, before we go, there's the pigeon hole app you can submit questions through.

And we're going to start big picture, Jamie, so you've described the environment as cautiously optimistic, but recent company update and earnings. You talked also about several existing risks out there. So walk us through your base case of how you see the economy progressing from here across the different areas of the bank? And what are your top concerns as we look forward?

Okay. So welcome, everybody. I think I was cautiously pessimistic because I am quite cautious. And also just as a matter -- a base case is a mistake in this kind of environment because it's kind of a false sense of security that somehow you think this is a forecast and It'll be a little bit better, a little bit worse than that. I think it's more dramatic than that today. And so if you look at like the short run, the One Big Beautiful Bill is $300 billion of stimulus, deregulations of former stimulus. The AI expenses a former was $300 billion year-over-year, another $300 billion for next year. So all those things, money supply is going up, that's a stimulus, banks lending more money. That's a stimulant. So that's what we have today. And you see that. You see that markets, you have liquidity, it's pricing.

But there's a long list of issues, which I think should concern people. And it's not concerning for banks per se. We're just canaries in the coal mine when it comes to that. But it is concerning for the free and democratic world. You have a real war taking place in Ukraine, unresolved. You have terrors in the Middle East, other than I ran and then you have -- obviously, Iran, you have huge global deficits. You have very high asset prices, very low credit spreads, so I just put that -- there's a lot of uncertainty there. There's Trade 2.0, people negotiating what that means for them, people looking at how they want to protect their nations. And then you have things like rare earth, our relations with China. So I just think it's a lot of uncertainty. Is it kind of a base case and you should really be looking at what are the potential range of outcomes. And when might these things happen or not happen.

They may not affect the environment at all. They all may disappear over time. Then again, they may have consequences which are bigger than people think. So base case, so far, so good this year. Hold on, you really don't know.

And JPMorgan, you have top market shares across all of your businesses and your annual letter for the last couple of years, you've acknowledged that there's a lot of competition out there, some stronger than ever across all subsectors, traditional banks, nonbanks, fintechs, new digital entrants. So as you think about building the business for the next decade, what are the most important moats you have to defend? And what are the areas that you need to really focus on to ensure you maintain those leadership positions.

And things have changed. So if you go back like 15 years ago, -- it was almost like set pieces. Wells Fargo and Bank of America and JPMorgan and Goldman and Morgan and specialty banks and credit card companies and all that today, you do have this extraordinary amount of competition. And I think the view -- my view is they're very smart, and they're coming. Some have been quite successful, and we've taken pieces of our business that we could or would have showed it. I think it's very important that management acknowledges what it also missed, not just what it did well. And there's more money, there's more capability. AI and things like that will create opportunities, and they also create additional risk.

So we look at -- you go by any area of payments, credit card, consumer banking, investments, every 1 of those areas has got all these different types of competitors and banks by their nature, didn't have very big moats before. So more Buffett talks about the moats, there are real moats out there for companies when your virtual monopolies or people can't catch up. So one of the biggest moats is having a bank that is hungry and not complacent and not arrogant and constantly investing in its future like technology. That does create a little bit of a moat temporarily. And so -- and I think in certain businesses, it's more than others. In payments, we're so big globally corporate bank. But if we don't build a new set of things like even with stable coins or JPMorgan deposit coin, that could be challenged too. So we are hyper focused on all these forms of competition and constantly investing to compete in that world.

And you mentioned AI. It's touching every part of the banking business already as it continues to evolve coding, ops risk marketing advice. From your seat, what are you -- what are the most tangible benefits that JPMorgan is already seeing as you embed it within the technology ecosystem? And how do you think AI is going to change the overall economics of banking as we look longer term?

Yes. So when we do -- we look at AI like any other technology, we're talking about all the time, it's an even business review, what are you deploying I've got -- I think there are 1,000 use cases today, but maybe there are 50 or 60, which I would put in the significant category. Some of them we do MPVs on. We know exactly what it is. We did this, we're going to save this money, overhead, error rates, better prospecting, better marketing. And the NPVs are real. We're saving real money and we see real changes taking place. But think of it as every job, every app, every application, everything and certain things won't change. I tell you, you're going to have to move money, raise money, send money, manage money, raise capital for people, but everything else can change. How that gets done. The blockchain gets used and how these other things.

So AI is an enormously dramatic thing. It also creates a risk. You all know by my those mall that some AI, we do not do MPVs on. So we talk about our LLM, so if you're a JPMorgan, all these products and internal products with LLMs or something like that. And everyone in the room, we have 150,000 people using it a week every week. That's pretty powerful. And they would tell you if you surveyed them we're saving 4 hours a day. We don't MPV that because we don't see the productivity. That's -- it's just you telling us that it makes you more productive so far. But I do think it will drive huge amounts of change in productivity. And in my view, it will create -- it will create things we are better at we can win at. It will also probably create things that we're going to lose that because competitors will find ways to bite off something or do something like that.

So we just have to be really, really good at it. I also don't agree with this notion that people say that, well, if JPMorgan does it first, and we're going to create higher margins than that last forever. It lasts temporarily. What happens in a competitive world is if I do something better, well, so is everyone else eventually and that gets competed away or it's being given to the client. So I think you can create temporary margin, but not permanent margin. I think it's a mistake to think that somehow it'll all accrue to you. That might be true in certain tech worlds. You and I can argue and debate all day long, how many wins are going to be in LLMs, but for banks, I think it will be competed away. And then, of course, what's also going to happen is that Fiserv and FIS will offer these same services to smaller banks, and they should.

So it isn't like they're going to have -- we're going to have it, and they won't. Everyone is going to have it over time and find ways to use to do a better job for their clients.

Yes. And speaking of margins and returns, JPMorgan's had a long-standing 17% ROTCE target. And you've been above it for the last 8 years. Can you talk about the balance and the decision tree as you think about growth versus return given the fact that you've been above it at 20% or so and how you balance though, what type of growth and what type of return is the right?

So this is an important thing about -- first of all, 17% is pretty good. And if any you can do the calculation, if you can compound at 17% for 40 years, you're probably going to be worth 100% of the stock exchange, okay? So the notion that somehow we should do better than an excessive return in the marketplace. I think it's a little bit and also, we did a chart this year as Jeremy Barnum showed you all that said, how many banks have achieved over 17% of our 12 competitors over the last 10 years. I think it happened 8x versus 9, and we were 6 or 7 of them. that Cap did a couple of times, Goldman did a couple of times. So the notion is somehow I personally think that right now, we're over earning and I know that it's a hard concept, but I think credit losses are they kind of normalize, but they still may be a little low. Volumes are very high.

So remember, when you have high volumes and low credit losses and certain markets that we have today, let's they've probably over-earning. But our competition is also very good. And everyone is good now. I mean it isn't like anyone who's really lagging behind on competition. That wasn't true years ago. So eventually, this will sort out. So after a dividend, our preference is always to reinvest the money if we think we get a good return. I think we can. So we're going to end up with $40 billion to $50 billion of excess capital, depending on all sorts out, which is more than everybody, by the way, they'll tell the higher CET1 ratio but I think we can. And I think the reason for that, because I wasn't so sure a couple of years ago is because the world is so big, it is so complex. The need -- you see these needs, the hyperscalers of countries of global capital markets of deficits around the world, you're going to need some very large financial institutions to handle it.

And I think we have capital could be deployed in very good ways over time. I also pointed out, which is important that sometimes our capital is deployed by expenses. It's not deployed by capital -- and -- but to me, it's almost exactly the same thing. If I can put money in the ground and branches or bank or something like that, and I know I'm going to get a return on the ultimate return of 17% of the capital deployed, including the expense. I'm going to do more of that. and I really don't care that the expense ends up in year 1. And so we've always constantly invested in looking ahead that these are good investments. But this year, it might -- the expense might outweigh the everything else. So -- and think of a branch. That's what it branches. It loses money in the first couple of years.

Yes. So you mentioned CET1 capital, and we recently got the reproposal of the Basel III and the GSIB rules. And you've been vocal about the continuing overlaps and complications that still exist in the framework. Where and how do you see this impacting JPM in the industry from both a competitor's perspective and the economy from a gross perspective if the rules go through as proposed?

Yes. So the big picture, you can't really look at some of the stuff that we've done and think it's semi rational at JPMorgan, CCAR, resolution recovery, it will never happen. Unbelievable amount of work in is 1 scenario. And I actually think it's a mistake to say, "Oh, I can handle that 1 snares, JPMorgan's going to handle hundreds of scenarios. And so -- and we really do that. So to me, the CCAR is the test, and it's not a perfect test. And fact, it's completely flawed. And resolution recovery might be will never be used that way. And you saw a Silicon Valley Bank and First Republic and I mean let's just -- let's see things where they are, call them what they are and banks were not -- didn't have too little capital. And like even operational risk, it's in CCAR and it's in G-SIFI and it's in some other measurement.

Now market risk is in this 1 that -- so our market risk capital today is like $80 billion. You make -- we make $150 million to $200 million a day. We've -- in the last 10 years, we've lost money on 30 days okay? So the business -- the worst -- and I've told us the regulators, the worst quarter we ever had ever, we lost $1.7 billion in trading, and we have $80 billion and it bounces around, of course, because there's risk you take there. But is that -- have we lost a plot in this state at 1 point. So I believe in being totally property capitalized, I think liquidity is much more in true for banks. How you have liquidity, how use the discount window, do you have concentrated deposits, all that kind of stuff. And so I think the regulators have a chance to really look at this and fix it all.

And so -- and the last thing I'll say about G-SIFI, G-SIFI is definitely anti-JPMorgan. And quite -- in my view, quite deliberately so I really don't like it, how they look at short-term wholesale funding, which is flowed on the start of it. So look, whatever it is, we'll make our points to regulators, they'll decide. Are you going to see the capital come. You guys have done the studies, the capital is going to come down for most of our competitors. Maybe a little bit for us, net-net, will still do very well. I'm not even sure it's really good for our competitors for us to be up here and then to be here in capital. I think that creates a distortion in your view and help people look at the safety and soundness of my bank, it will be a positive particularly in a crisis.

And so I just -- I think people should be really thoughtful why to do it. And the G-SIFI by that calculation is probably the dumbest calculates you've ever seen, like bar none, like look at the calculation, tell me that makes any sense. I understand the point that a bigger bank may create more risk for the system. In operational risk capital, they create assets. They make up assets as opposed to saying you're saying aside $20 billion for operational risk, they make up assets. They're artificial under face it, and it's 1 in 1,000 year loss. -- well came up with that. And even if you close down the business, they have the loss, you still have the capital. I can go on and on about these things were action. But whatever it is, we'll compete, both deal with that after I complain, we'll suck it up and move on.

Go end up further on liquidity. So to that point, you mentioned about changing liquidity rules. How would you address that while both protecting the regulatory environment and protecting the ability for banks.

So I think we can make banks safer. I want to get rid of this concept. When Silicon Valley bank failed that everyone goes into caff, the markets are moving, eras looking for the next a dead on. I think we can fix that. And I think it's much more on the liquidity side. And I actually recommended in my Chairman's letter like you could have -- if you can use the discount window. So JPMorgan has got the exact numbers, $1.5 billion of marketable cash and markable securities and something like $1.4 billion of uninsured deposits. It can be fully backed up and then leave the FDIC with other stuff, the insured deposits, a lot of other assets we have things like that. So I just -- I think if you set it up right, you can almost make banks fail safe, so you don't have to worry about it anymore. And if a bank fails, it just goes to a regular way. .

Remember, when a bank fails, the other flow is that people say, taxpayer. The taxpayers never paid a penny for bank failures. We pay this huge moral hazard. They screw it up how they do a Silicon Value Bank, and we paid. I'd literally like to run the FDIC. I think it's a mutual insurance company and the people who we do a better job being responsible to that because I would be much tougher in other banks on the interest rate exposure and the liquidity exposure.

Jamie, you mentioned earlier that you prefer after the dividend to put money into organic growth and always build the balance sheet. And then there's buybacks and then there's acquisitions. On the last one, how do you think about inorganic growth opportunities? And where might acquisitions be a better use of capital rather than building or growing it internally?

So the good news is, I believe we can grow every business internally, organically. I think that's good that we have those opportunities. We can do in payments. We can do banking, we can do in an innovative economy. We can do it in global investment banking around the world. We can do asset management. We can do ETFs. We can do in consumer credit card, travel, connected commerce, every one of them. I think we can deploy capital and grow. Organic growth is hard. So if you sit around a lot of management meetings, the first thing they do when they're not doing well in organic growth is the start to about M&A. So like my measurement is, I don't want to hear about M&A. That's a separate conversation. What are you doing to grow your business, sales, branches, tech, profits, product, services, all that competition I mentioned a lot of those things we can be building ourselves and we don't or we can partner with somebody else.

But yes, looking at acquisitions is important. It keeps you quite smart. And I do think there might be opportunities. And so we are on the lookout, but it's got to make sense. It can't be just a sky and pie in the sky type of things go make sense organically that we can integrate it, that we can -- the cultural to get it the right way it adds enhances our business. And it's not like some separate stand-alone thing they have to pay. We don't screw up. So because we have great businesses and we want to continue to build them. But I do think there might be in the next couple of years, a chance to put $10 or $20 million to work buying something. And when we do that, we'll explain to you why we think it's a great purchase. And but also, I think, just if you hear me, I think asset prices are high. including JPMorgan stock. So I'm not that fond of buying stock at these prices or companies. And we're quite patient with capital. I mean it's not like -- we just not bringing a hole in our pocket at all. It sits there for a while, no problem.

Speaking about high stock prices, and you mentioned earlier, good volumes. Maybe a couple of questions on the environment. Capital Markets backdrop has been really strong through the first quarter and still been active across both the markets business and investment banking. Can you give us an update on how the second quarter is projecting? I get this done with right away.

Markets, you guys -- I think your analyst estimates are up 11%, you're approximately right, might be a little better. Investment banking, you have it up 10%, you're approximately right. could be a little better, depending on how the rest of the quarter turns out because a lot of big deals that we've spoken about there. NII is the same we gave you last time $95 billion, expenses, we gave you $105 billion. We think it will be closer to 106, mostly driven by better performance. So it's a good extra $1 billion. .

Fees driving the incentives of payment. .

Trading. It's more than we expected, yes. And we budget that up conservatively by the way, that we don't budget pie in the sky stuff. So Yes. .

And on the environment, just the uncertainty that we've been moving through, what do you sense when you talk to clients in both the markets business, investment banking, commercial banking, about willingness to transact, sponsors, corporates, et cetera? Is it -- this is the new normal we go forward. Is there any hesitation? Any change in the environment? .

It's -- I mean it's gun co folks. I mean there are exceptions to that. But people are doing M&A is like the best year we've had. I've gotten how many years. ECM is going to be huge this year. But remember, ECM is like an accordion. It opens and closes. It can close tomorrow. But ECM, DCM, a lot of DCMs repeat. You know it's going to be there, but then the M&A related, obviously, that's different. And so -- but I think sponsors are busy. Companies are busy. There's a lot of exuberance out there. So yes, right now, it's good. But it wasn't '72, '86, 2000, 2007. That doesn't give me comfort I just -- I look at -- yes, it's exuberance. I mean -- and of course, it feels good. It feels good for all of us. But -- there's a huge amount of time -- I should have mentioned our deficits are so big. I don't know when that's going to come to bite. But I say I remind people of the deficit. It also fuels all the other stories you spoke about.

The government borrows money and gives it to people, and that money gets spent. It also fuels corporate profits. So when we all look back over the $10 tillion or $12 trillion, we borrowed and spent in the last 6 or 7 years, we're all going to realize that drove corporate profits, too. Corporation it's just not all automatically. They're all genius all of a sudden. And the other thing I remember, corporate profits is at the margin, $1 trillion will drive $300 billion of profit or whatever the number is because every is making money at the margin, not the average. And that's why you have huge corporate profit results this year. And -- so we'll see.

So in terms of the other side of the environment, when you think about JPMorgan and the balance sheet, you've got strong reserves, a strong capital level you mentioned before. We talk through the potential risks to the economy, to the environment. What are you looking at in terms of the most substantial credit risk as you think about the portfolio and the overall environment? .

Yes, the -- first the way we look at credit risk is always through the cycle. So we don't look at it like what's you're going to do today or tomorrow or something like that. It's through the cycle on every -- at a very detailed level, -- so credit cards, subprime is different than credit card in the business card different than auto and auto leasing is different than all these things. We're going to have a credit cycle 1 day. And I don't know when that's going to happen. I think when it happens, it would be worse than people expect. So if unemployment goes to 6%, people will expect credit laws to be here, I think they be higher. I think they'll be higher in some banks and some private credit and stub stuff that may surprise you, some that other people are doing just because when I look at standards, and it's been so long since we had a real credit cycle because COVID lasted 3 months -- when you look at standards, there's been a stretch.

There's a stretch on EBITDAs, add-backs. I mean how many people are doing stress test assumptions on credit. I think there's been a stretch on diversification, like too little sometimes, and you saw a little bit in software because you're always surprised a little bit where the industry gets hurt. I think covenants have gotten a little bit weaker. I think there's a stretch on risk. So we have a lot of people that got refi risk. And if things stay where they are, that's fine. But if rates go up, where credit spreads go up, that creates a lot more risk for leveraged companies. And I'm not sure all the marks -- you're going to see Mark's change.

So you're soon going to hear about the marks on private credit and private equity relating to March 31. So obviously, software coming down 25%. What are they going to mark those down. And what does that mean? And of course, I'm not saying they're bad. And of course, some people do a very good job at this. And the problem with credit is some people aren't going to do a good job -- and as the ones who don't do a good job because all the problems, to go back to the mortgage crisis, the banks in subprime and near prime mortgages massively out -- they tillabadly, but their credit losses, remember correctly, we're 25% of the credit loss of the mortgage brokers. 25%, still 3x worse than they should have been. And so you're going to see some kind of cycle and they'll work its way through. I think it would be fine.

We have, obviously, CECL, I remind people during COVID, I think we added $15 billion of reserves in 2 quarters, and then we reduced $15 billion over the next 3 quarters. So you will have -- because the CECL, which is also upfront or loss for lifetime, you have some dramatic swings in certain institutions that takes place. So I think it will be okay. I don't think it's systemic. If you look at like the big picture, corporations in general, their leverage is not that different than in the past. The total debt bars, I think if you look at consumers debt service ratios, they gain a little bit worse. They will be stretched if rates go up. So you'll see that in the subprime areas more than most, and you haven't seen that. And again, when I see people doing their reports, I don't see anyone looking at maybe interest rates be 300 basis points higher. And maybe credit spreads will be 300 basis points worse.

And so you can have real stress in environment. And I just think what that happens will be kind of worse than we expect, but not systemic.

On the topic of private markets and private capital, a lot of banks, including JPMorgan, talked in the April earnings about the relative confidence in the portfolios and the quality of the books and the underlying characteristics. And made the market feel directionally better for JPMorgan, how do you see that as a potential opportunity going forward? How do you look at private credit, whether it's direct lending, or lending to the funds? And how do you see that interplay with private markets evolving over time?

Lending to the funds is 2 things, okay? It's arbitrage and we do arbitrage, too. I'm not generally in favorite, but that's what we do, that's what the rules are, the regulators, a lot of capital crafted. So we have no problem doing that. And their clients. So we get other business. When we look at those loans, we look at the client in total and -- we think they're rational. We think it adds leverage. If those assets fall 20%, the net asset values fell 40%. And so it does create something. I think if you have a downturn, people get a little concerned with some of that stuff. But we think that's generally okay. And then we look -- for us, loans are an outcome. They're not an objective. And listen, really closely, there are an outcome we do not make loans to make loans. And I -- and this is very important to me, if I can go in the marketplace and buy a loan at par, I haven't created value by making a loan at par. My grandmother could do that. That's not value to us.

So we look at the relationship in total, and we know that people need credit and we provide credit in multiple different ways globally to clients, but it's also the whole relation that makes sense to us. And so I do think if you have a downturn, it will create a little bit of a competitive advantage to the healthy banks and by the healthy private credit funds, too, because some of them have a lot of -- have a lot of cash to do stuff with at that time because they've raised money. And so -- but that's always been true in downturns, healthy companies have opportunities. We also look at direct lending, and there are benefits to doing a direct loan. It's faster, smaller covenants, 1 person negotiated with generally it's more expensive. So we want to do it. If you're a client, we want to offer you the full range of products and you get to decide.

We'll tell you the pros and cons of banks syndicate lending of direct loan. I think we have -- we've done -- I've got the number, $20 billion of direct loans ourselves. Maybe we still have $14 billion in the books because they obviously recirculate a little bit. And remember, middle market lending was always direct lending. And there's always a leverage component of that. So it's not new to us at all. It's just these folks built very successful businesses generating leveraged loans and excess returns. And that may -- we don't know what's going ball the spreads over time. And I do think -- and you've heard this from not just me, you've heard from a lot of people in private credit and other investment banks, they're going to converge at 1 point. As these loans get bigger and bigger and some are investment grade, you're going to have more people making markets and things like that.

So you mentioned stability of net interest income growing even with rates starting to decline. -- very resilient revenue base for JPMorgan. But with all these new digital capabilities that are coming about, whether it's tokenization, stable coins, agent, we talk about the deposit business in general? And how do you think all these new tools will or will not change the nature of deposit taking and how you approach it and costs, et cetera.

Yes. My bottom line assumption is it will make it more competitive, you have to pay more for money over time. But you got to really divide these component pieces. People who keep money in checking accounts for transactions I saw a Schwab reason you said, only 4% of the money in all their accounts is transaction money and that gets moved a lot. And -- and that -- and the same with corporate money. They're already being paid good rates. So if you take all these things, the whole spectrum, there are portions which I think are attackable by disruptors. And it will be around some of that. And we're going to -- we already talked about having a smart cash account. It's kind of -- it's nascent, I wouldn't call it like an earth shattering thing about how we can do a better job for you. .

So if I ask you all, if you have a brokerage account with us and a checking account with us, we help you manage between the 2 and give you closer money market rates and some of the stuff, you might find it very attractive. And that's what we want to do. We're going to serve the client, that may cost us some money. But at the end of the day, if banks have to compete the money, they'll compete. -- stable coins, I'm not sure they're going to change -- I mean, I don't know why if you're in the wholesale business, you're going to want a stable coin. okay? Because I send you a stable other than there are benefits to say real-time, 24/7, and you can eliminate some FX risk on a salary that may make sense. We can do that today.

So -- and JPMorgan deposit point pays you interest while you wait to do with it. But remember, a stable coin, you got to buy the stable coin, you got to own the stable coin and you got to sell the stable coin and their transaction costs on both sides -- and then you got to say to me, if you're a wholesale, I don't want you to albacore. -- just send me my money your money. And then you can earn interest or you can put it whatever you want or keep it Jore deposit point you're investing in JPMorgan money market fund or something like that. So I do think on the consumer side, internationally, there will be some use for stable coins, more for payments than as a transaction vehicle, but we'll compete with that.

We already have the J.B. Borne coin. We already have intraday repo. We already have a blockchain. We already have Canexus. We already have we may do a stable coin or some group may do a stable coin we'll participate in over time. So I'm not afraid of that. I don't think it's going to fundamentally change the nature of money to tell you the truth. But I do think when they criticize today's infrastructure, not to get the banks just do it, but we have 24/7. Fed payments is not 24/7. SWIFT is not 24/7. We have 24/7 real-time payments. So it's just have the system over time adjust to that. And so I do look at it when you hear some of the stable coin, people could, they're right, but not right because we're dumb, right? Because the whole eco built up isn't yet ready to assimilate some of that. And we want them to I would love to have the Fed wire go 23/6 or something like that because I think it will be good for the system.

So on the other side of the revenue ledger, fee income is a big driver of JPM. We talked about a couple of the businesses already. whether it's investment banking markets, asset management, the payments business, as you look further out, what do you think are going to be the drivers of growth for JPMorgan among the fee side businesses?

Well, I mean, the way I look at it, look at the big picture. So I think all stocks and bonds in the world are worth $350 trillion or something like that. Okay? In 10 years, it'll probably be $70 trillion. And that's the public stuff. There's a lot of private stuff, which is worth hundreds of trillions. And so the actual underlying business, the fuel is going up. Now it goes -- the values go like this, but we're paid to custody that. We're paid to move it. We're paid to buy and sell it and very competitive prices. I mean when you do some of us, it's very cheap to move this and do things and you do it securely with all built-in fraud protections and -- so I think all that will grow. It just doesn't grow in a straight line. It doesn't make it a bad business.

So I think markets can grow. There'll be more products and markets. I think they're private and public come together, that would probably create some opportunity. Wealth Management, we still have about 1% share in this huge segment from $100,000 to $10 million, 1%. You got to imagine why not 10%. We have 10% in most of the businesses. So we've opened up branches in rural areas. I think that could be a successful strategy and help reason America. I think the strategic resiliency initiative is going to be bigger than we thought. -- helping a lot of these companies that are -- for security and resiliency purposes, grow and expand. And so I think it's -- we'll have a little bit of growth everywhere and some would be fee-based. -- some are not. They're NII-based, but even that is a little bit of a subscription business.

I remind people in the banking -- in the consumer banking business, when I used to get to the banks, you have cheap deposits. You do not have cheap deposits. People have to stop saying that. To have a checking account cost us $250 a year, mostly fixed. For that, you get a wide range of services. The revenues come from NII. So the cost of the $250, having ATMs, wealth management planning, fraud protection, all these things you've built in and products and services and special segments. And so yes, we will compete in that. And I think in that, but there are also opportunities that we have -- always have a bunch of skunkworks going on. So I think there's puts some buy stuff in my mind. We actually could be good new opportunities for us. opportunity I talk about maybe could be worth $100 billion in 10 years, not $1 billion. Maybe I don't know if that's true, but you can imagine we think about that.

And Chase U.K. We're not doing that. They have a checking account in the U.K. Right. Okay. there's Revolut. I mean I'm jealous. It -- but why not chase U.K. being as good as Revolut, and we have some competitive advantages. And they're very smart. I mean you watch these people, they move. We learned a lot by watching some of these folks. And we got to get faster and better sometimes. And if you look at my letter, I criticize is a little bit for being a little too slow and some of the stuff like that. So we have opportunities that you don't know about yet. You just recently opened also in Germany, the direct bank to as part of -- and that gives us a pan-European license and a platform you can use across Europe and more simple regulations, 1 regulator. This doesn't really in.

We doing I'm doing -- you mentioned some of the capital you use is actually going through the income statement and the expenses that you use to build the bank over time. And over the course of time, that expense growth has been higher than peers, and you've been very consistent and it helps the flywheel generate revenue. So walk through the benefits of -- well, first of all, how do you continue to find all those new things to continue to spend incrementally on. But the benefits also within that of self-funding and how you kind of balance between revenue growth -- expense growth for revenues, but also expense growth that actually creates efficiencies.

Well, we do well. I mean, I always feel about margin improvement, continuous more, you don't -- that's not -- we're a capitalist world folks but just it's an irrational concept that somehow we can create more and more margin. And somehow people -- I believe what Jeff Bezos says, "Your margin is my opportunity." And so -- but we look at them separately. And we disclosed some of this, not all -- there is no expense that we make that we think is an investment that we don't do the same announcement that you would expect us to do. okay? And sometimes analysis may be wrong, but it's pretty thorough about we think we can get a return on that. If we didn't think we get a return, we simply wouldn't do it. On technology and some of these other things, it's the same thing for the most part. -- because there are certain things I say, that's just -- you got to keep your operations good. You got to keep your -- like we didn't do an NPV on creating digital account opening 10 years ago. It's a waste of time. It's table stakes.

So when you're the client and you have to get that service for me to try to NPV it and then not have it is a bad idea. And then when you look at the NPV, what people do -- and this is what happens in big bureaucracies, and of course, finance and risk and everyone is going to look at it. And they have to estimate how many will use it? Are they better accounts and worse accounts -- do they use a branch at all. If they use a branch, we charge them for the branch? Is it marginal here? Are you going to use a debit card and you build this big model, and it's totally filler ship you want digital account opening. And I just -- people will wait to tremendous amount of time. So -- but on a lot of tech, yes, we do it. But I can't do an all tech, o we don't try. We need to have the best operating systems and -- but other things, yes, we know when we build an AI system for fraud, we kind of know what the return is. And we can back test it. There are a bunch of things we do.

So -- and we try to be pretty rigorous in that. As you know, when the tech budget is always the hardest because some of it is just qualitative. And if you leave a company where it's securities operations and back office stuff isn't very good. that is a bad idea. And so you're constantly upgrading that kind of stuff and it's just in your expense base. It's not -- you can call it an investment, but I just look at the normal regular operating behavior.

And as you...

View at the company, here's what I say to people when you have a business review with us, I want you to lay on the table everything you think you should be doing. I don't want you to say to me, it wasn't in my budget. I want to keep the number to 5%. I want you to say to me, this is what I would do if I own the company today, all of it back office, front office, tech, AI. So we have a real conversation about how we're investing in the business and then make a deliberate decisions, we're going to exert why. But for the most part, the good investments we're going to do them. Take marketing. We spend a lot of money in marketing. If you walk into my office today, which could happen and Marion Lake or House Beer can walk in my office and say, we found a way we could deploy another $500 million in marketing today, can we do it? .

And we will go through the numbers, and my answer is if it has a very good ROI, of course. And then I have to tell you that our expense budget might be higher by $500 million this year. But I would do it in a second, I wouldn't hesitate. I would do it if it's $4 billion because we know it's going to have a return. And that part of why you see our -- we continue to grow the franchise because we're making investments that drive the future and not protecting the past.

And to that point, you consistent -- are very consistent about just pushing that agenda and moving forward. But even in softer environments, how do you make that decision tree of what should stick on the page, what could be deferred? Or is it always we are building for the future.

It's almost always we're building for the future. we priced up through the cycle. We make mistakes. So we trim our sales. It's not like we don't say -- sometimes it didn't work. We have failures out there. We're pretty blunt about that internal. So every now and then, we waste some money. And sometimes, we have -- I call hobbies like every year, I think you showed look at all your hobbies. I start a lot of them. If you ask the medicine they say, "Well, those are your hobbies. you started those ideas, and they're not working. And sometimes, you got to try it in the second time and the third time in a fourth time. Other times, you just kill them. It was a good idea. It didn't work, move on, close it down.

So we do a little bit about -- we try to be very disciplined on that. So -- but some of the things that we have today started as hobby is that it took the third or fourth time before we got it right, like self-directed investing, for example. And One of the questions is wealth management in general.

One of the questions that's come in is related to tech and investments. But how do you -- can you talk a little bit about JPMorgan and broader system readiness for Cyber tax -- cyber attacks in the world of LLM and the developments we've seen there.

I wrote in my Chairman's letter, Cyber is our biggest risk. And it's not just ours. I think it's for the system at large, for banks, but it's also true, you could say when you go industry-rated telecom, water utilities, you can go on in our government services and I said it will be made worse by AI. And I think I wrote that a couple of weeks before, Mythos came out. And those it just amplifies it dramatically. And I think they did the right -- I think Anthropic did the right thing to tell the government and then start this glass wing effort, the glass wing effort is not meant to disadvantage anybody. It's meant to give people a chance to figure out what we need to do to fix this on your own applications, open source code, how patch you need to take place -- we're probably going to build some utilities. We could do open source. So it's for everybody. If we fix the open source thing, it's fixed -- as long as you have the up-to-date version, it's fixed for any company you do business with.

I do think we got to get it to other banks. And this be very capably roll it out because you don't want to give it to people who don't know what to do with it. It is dangerous. It's a nuclear weapon in the hand of someone. And so even if you go out to a company, you want to make sure they know how to handle it, and they're going to have restricted access and they know how to test it and a lot of kind of stuff. So this has to be done properly. I think the government is doing the right thing to slow it down. I think you saw that President Trump spoke to President Xi about it because we have a common interest in this one. This is not our cyber or their cyber. Deep Seek eventually have it deep seen but this can be used by inside of threats. It can be used by various things. And you have a lot of government -- a lot of hardware may be compromised. -- because it's got embedded software, that cannot be patched. And so we have to figure it out, and we're doing it.

All the big banks are working together now. We're trying to inform other banks where we are. The governments can have to decide with Anthropic when it's given to other people. But we're doing it for the system. This is not done to benefit large banks or small banks or anything like that.

Another question that's come in is can you talk about incoming Fed chair and the outlook for both the ability to lower mortgage rates, but also the debate on the Fed balance sheet size and if you think that there's a right path forward for that.

First all, I know Kevin Marsh, I have a numerous respect for him. And I think he's generally right about the Fed went off and did a lot of stuff. It started with Janet Yellen basically, and I recall DI and climate and regulations became I mean, literally, like so screens for punishing banks and things were overdone and supervision. I won't even go through -- and that's kind of a regulatory policy. Remember, they're not independent regulatory policy. This also opens them up to a lot of criticism, about thinking they're independent on regulatory policy when that regulatory policy follows the same rules as all other things, cost benefit studies, public notice and a lot of that just didn't take place at all. I mean 0.

And in some case, no for thought about the consequences of some of the things they did, like private credit, like stuff going to insurance companies, which is what they should have done because we've seen all of our benefit, the systems stay safe. And so -- so I think they're right to look at that. I think they will. Remember, Kevin is going to walk in a room with 12 governors. And he knows them all, and he probably knows them all. And they're smart people are going to be convinced. So it's not going to be like immediate -- that's number one. I think he's right about the size of the Fed balance sheet. I think that we had too much government stimulus and too much monetary stimulus over the years. And I think it was required during the great financial crisis, I think it got overdone in COVID -- and I think the reasons to reduce it. But -- and this is a big but to reduce the Fed balance sheet, you must change liquidity rules and regulations.

It cannot be done without changing them, and that's going to take time. I think they all know that, and they're going to take study. They're smart people. They want to, okay, good point, Mr. Wash, that's -- let's take the time to study the impact of how we use the discount window and how many buffers banks have and how they do stress test and liquidity, and we don't want to make them less safe, we want to keep them safe. So it will take time. But I think if they do that, they can reduce the Fed balance sheet. -- and then go back to kind of old-fashioned monetary, focus on monetary policy and then focus on also across the system. And so we'll see what it takes. But it's just going to take time. It can't happen overnight. And the other thing is they don't control the 10-year rate, you do. The notion that they can do operation twist. They can do all that kind of stuff, but they do not control it. They influence it.

And even the short rate, I remind people, because we all said they control the short rate, they do, but not really because when inflation goes up, they have to follow. -- they're always trying to look forward to all the data labor weaknesses and anticipate things. But at the end of the day, if inflation goes up, which it might, I'm on the side that I think you might have a little more inflation than people expect. They can't do what they want -- and so it isn't complete independence like they're independent of facts. They're not. And so now they -- and you can mediate mortgage rates more. Fannie and Freddie are buying mortgages that will have a little effect. But at the margin, these things aren't going to change mortgage rates a lot. I think what would change it, by the way, is changing some of the rules and regulations. And we estimated, and I've told them this that securitization requirements, excessive requirements, excessive servicing requirements and excessive origination quiet at 50 basis points the average mortgage.

They could be fixed with no additional risk. And we -- and I've been talking about that for 10 years. That's what they should be doing. All the other stuff won't matter.

Another question from the crowd. Can you talk just a little bit about the leadership bench and the leadership squad that you could see as you look forward to leading JPMorgan someday?

Look, you know -- you guys know a lot of the leadership people. I won't go with I think the high quality, very smart. I think there are potential successors inside the company that's, of course, up to the board. There are people you don't know where you may have meant a little bit who are potential successors down the road from here. So we feel good about it. But it succession is always going to be hard. And so we're quite contest about it. It is the most important thing like next. That is -- we understand that, and my Board understands that, and I understand that -- and I do think -- I do think I wrote about this year about culture, too. I think culture gets misused. I always didn't want to use it. But I think culture is critical, not being arrogant, knowing your facts divide into segments get detailed understanding it open like literally speak up, everyone's got to speak up. Everyone's got to have a point of view.

All information like my management team sees everything. My operating committee is nothing we don't talk about. And we tell the board the same stuff, by the way, so it's completely open. And you said this should also give you comfort. And I think this is a great -- this is like you talk about all these governance rules that regular has put in place. A lot of it just waste time. There's 1 that matters, which they didn't do, by the way. Only 1 that really, really matters about Chairman, CEO and proper Board governance, my board meets every time without me, every time, and they've been doing that since the bank wants, you're talking about 26 years. And it's good for me because I leave to when I think I leave the room, and then lead director, calls me back, give me some time to give you a coaching -- sometimes they tell me, we think you're wrong about that or can you give us more detail.

But I'm only trying to do the best job I can but it allows them to have a complete open conversation without feeling the consulting me. You're in a room or even asking a question because sale get installed sometimes. So that is really important. And it's important for succession, too. And they know all the senior people. And there's no guide like gains they can play golf with them, they take them to lunch, they have their own opinions about that. And I believe that's a very good way for them to participate in that decision.

So last one, 1 of the most interesting things I've seen out of the company over the last year, these new business initiatives, security resiliency, the special advisory services, American Dream initiative. Tell us about how that's different of a different thought process at JPM and now that's also going to encourage growth while also helping customers.

So they're a little different security resiliency I was just asking -- are we right about policy and sometime complained about. But I'd like to ask -- I always ask management, if you're in the room and me, okay, you're king for a day, what would you do? And so I asked -- we asked the question, okay, we know this is a big issue -- and you know what focuses active pharmacy ingredients, production capability ships, it's everything, missile production like and we say, what can we do to help? We're just going to help. And we've been asked to help by certain military officers and to get involved. And that's all we did when we did the analysis. We've broken into 29 subsegments, Jones space, intelligence, API, Pharmaceuticals LNG to Europe is security. LNG in America is not security.

So we're trying to be Boeing military security. Boeing aircraft is not security. And so we try to figure it and then we simply said, we're going to add 50% to we're already doing. That's the $1.5 trillion. Todd Combs has been a great add to the company because it's just a brilliant think about industries, and he helps us, of course, a broad spectrum of stuff is on my floor and I'd love talking to them. is doing the $10 billion, which might be more in investing in some of these companies, where we think it would help security resiliency in a variety of different ways, including AI, by the way, -- so that's what we're doing. And we think it's commercial. There may be a philanthropic component. -- think of welders. We are going to be short, 2 million welders and nutritions in the next 5 years.

We need welder and nutrition schools in the right place, okay? And that might require some philanthropy, which we're fine with. So it was a very thoughtful process Doug and Troy running it. There's a whole group of people. Jay Ryan is -- I mean, he's in Australia today. He's been around the world for us and -- and we're beefing up research. So if you look at it -- and this -- I love research, you know how much I think research adds to the world, entice but industries and countries. But like we've done research on the ship ecosystem, the API ecosystem, the earth ecosystem, so that we're getting smart about the whole ecosystem so we can decide and then we're going to advise them policy because we do think policy makes a big difference.

The American Dream, we already did, we just named it, and you're going to double down on it. Small business, mortgages, affordable housing, -- we're going to do it local, so we're going to Alabama this summer. We're doing a whole bunch of stuff that is just more, and we think we do that again, commercial. There may be some flowthropathy related to it. Special advisory services is different this is taking me at doing a hobby. CEOs call me up and they say, Jamie, we get advice and government affairs or crisis management or Board management or lessons on CEO or cyber, AI or -- and we did it ad hoc. And so I simply ask to people, it shouldn't be at hoc. These are real service provided people, directors and that would just formalize it. is Myers is running it. And how can we provide it at cost money. So we have to beef up some of these areas because we get a lot of requests.

And this is kind of meant for clients, not meant is a free service to anyone who wants it. you're a client of this company, we want to provide you things that can make your company better. It's good for us because the country is good for you. And so far, it's been quite successful. So SRI has been -- we're doing it in the U.K. We just -- I'm going to the U.K. next week, and we're rolling out a whole thing there in the U.K. with the Chancellor and we're doing in Japan, Korea, Australia, where Jay is today, -- so -- and it's been fun. People -- a lot of patriotism come out of that, about how we can help secure the free and safe world, which I do think is the most important thing facing us, by the way. Not the economy.

Great. What better way to end than a plug for research in there. So we're out of time. Thank you -- please join me in thanking -- thank you for joining -- thank you so much.

Thank you.

Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's First Quarter 2026 Earnings Call. This call is being recorded. [Operator Instructions] 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, James Dimon; and Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead.

Thank you very much, and good morning, everyone. This quarter, the firm reported net income of $16.5 billion and EPS of $5.94 with an ROTC of 23%. Revenue of $15.5 billion was up 10% year-on-year, primarily driven by higher markets revenue, higher asset management and investment banking fees and higher NII, driven by the impact of balance sheet growth, predominantly offset by the impact of lower rates.

Expenses of $26.9 billion were up 14% year-on-year, largely driven by higher compensation, including higher revenue-related compensation and growth [indiscernible] employees as well as higher brokerage expense and distribution fees. The increase also reflects the absence of an FDIC special accrual release in the prior year and credit costs of $2.5 billion with net charge-offs of $2.3 billion and a net reserve build of $191 million.

And in terms of the balance sheet, we ended the quarter with a standardized CET1 ratio of 14.3%, down 30 basis points versus the prior quarter as net income was more than offset by capital distributions and higher RWA. This quarter's [indiscernible] RWA is up $60 billion, primarily driven by the markets business, reflecting higher client activity, seasonal effects and higher energy prices which resulted in higher RWA across market risk and credit risk ex lending.

Now let me spend a few minutes on the recently released Basel III game and G-SIB reproposal. I'll start by acknowledging that this has been a long journey and getting it done across multiple regulators and applied to the full set of U.S. banks is unquestionably a difficult top. With that said, we do have some concerns with elements of what's been put forward primarily with the [indiscernible] proposal.

On the left-hand side, we show you our preliminary estimate of the impact on JPMorgan Chase next to what the Fed has disclosed but the category 1 and 2 banks in aggregate. Our results are worse in each category, estimated RWA is higher, G-SIB is worse. And because our CCAR losses are below the floor, the Fed's reduction is not going to apply to us. The result is that under the proposed rules, our CET1 capital would increase around 4%, while the Fed's estimate for large banks is about a 5% reduction.

Our long-standing position has been that the agency should calculate each component of the capital requirements correctly without regard to what that may mean for any specific firm or for the broader industry. And to the extent regulators want to add conservatism, they should make that explicit rather than embedding it in methodological choices.

Turning to G-SIB on the right. the surcharge on the reproposed rule looks quite high when placed in the historical contacts as the chart clearly illustrates. As many of you know, we have been on the record for the better part of this last decade, advocating for averaging smaller buckets, GDP scaling and reweighting short-term wholesale funding to 20%, and we were glad to see many of those concepts in the NPR. However, while we have every reason to believe that the Fed's published estimate of a 3.8% reduction in capital associated with G-SIB NPR is accurate when defined [indiscernible] it's important to understand that under the current role, the surcharges for almost all of the G-SIB banks are scheduled to increase meaningfully over the next 2 years, simply as a result of recent growth in the system despite, in our view, no change in real world systemic risk.

In addition to that background increase, the proposed change in the short-term wholesale hunting methodology adds about $22 billion of G-SIB specific capital, principally to the money center banks, of which we represent about $13 billion. while in the process, making the methodology less risk-sensitive and less consistent with the Fed's original rationale for including it. This could have been addressed by better adjusting for growth in the system, but it wasn't enough.

The net result is that we need to plan for 5.2% in 2028, a 70 basis point increase from the current 4.5% requirement, which, when combined with the RWA increase from the Basel III game NPR results in a total increase of about $20 billion of G-SIB capital based on our current balance sheet. This persistent miscalibration of the U.S. surcharge is obviously bad for international competitiveness. But more importantly, domestically, this means that the cost of credit from JPMorgan Chase to U.S. households and businesses is likely higher than it is from other domestic non-G-SIB banks.

We recognize that we are larger and more systemically important than even large domestic peers. But in the end, the question is, how much more should the cost be. It is very hard to reconcile the principles articulated in the 2015 Fed G-SIB white paper with an outcome where JPMorgan Chase has $109 billion of G-SIB surcharge. Obviously, the rules aren't final yet, and this is what the common process is for.

As Jamie wrote in his Chairman's letter, everyone wants to move on. So our comments will be very focused. But we feel strongly that the framework should be coherent and the system would, therefore, be better off with these outstanding points addressed. Now moving to our businesses. CCB reported net income of $5 billion. Revenue of $19.6 billion was up 7% year-on-year, predominantly driven by higher card NII largely on higher revolving balances and higher operating lease income in auto.

A few points to highlight. Notwithstanding the recent volatility in market and gas prices based on our data, Consumers and small businesses remain resilient with consumer spend growth continuing above last year's pace. Average deposits were up 2% year-on-year and quarter-on-quarter, driven by account growth and moderating yield-seeking drugs. Client investment assets were up 18% year-on-year, driven by market performance and healthy net inflows and Home Lending originations of $13.7 billion increased 46% year-on-year predominantly driven by refi performance.

Next, the CIB reported net income of $9 billion. revenue of $23.4 billion was up 19% year-on-year, driven by higher revenues across the businesses. To give a bit more color IB fees were up 28% year-on-year, driven by strong performance across M&A and equity underwriting, partially offset by lower debt underwriting. Looking ahead, in engagement and pipelines remain healthy, but of course, developments in the Middle East could have an impact on deal execution and timing. In markets, fixed income was up 21% year-on-year with strong performance across the businesses, partially offset by lower revenue and rates. Equities was up 17% from increased client activity.

Turning to Asset & Wealth Management. AWM reported net income of $1.8 billion with pretax margin of 35%. Revenue of $6.4 billion was up 11% year-on-year, predominantly driven by growth in management fees on strong net inflows and higher average market levels as well as higher book [indiscernible]. Long-term net inflows were $54 billion with continued strength across fixed income, equity and multi-asset. AUM of $4.8 trillion was up 16% year-on-year client assets of $7.1 trillion were up 18% year-on-year, driven by higher market levels and continued net inflows.

And before turning to the outlook Corporate reported net income of $699 million on revenue of $1.2 billion. In terms of the full year 2026 outlook, we continue to expect NII ex markets to be about $95 billion. We now expect total NII to be approximately $103 billion as a function of market decreasing to about $8 billion, predominantly due to rates, which we expect will be primarily offset in NIR. The adjusted expense outlook continues to be about $105 billion and the card net charge-off rate continues to be approximately 3.4%. With that, we're now happy to take your questions.

So let's open the line for Q&A.

[Operator Instructions] Our first question comes from Steven Chubak with Wolfe Research.

So maybe to start on the AI cash tool, which, Jamie, you commented on in your letter. There's been lots of focus on this particular at least launch given that this is a tool which could potentially result in some consumer deposit pressure as well as drive some impact on increased competition as well as higher deposit betas. I was hoping you could just speak to how you see deposit competition unfolding as similar smart tools become more widespread?

Yes. So it's a great question. And obviously, there's early stages for this particular product. So you have to look at it literally segment by segment, how people manage their money, how they want to manage their money, people are pretty dead, particularly the higher net worth. They have tons of choices. They [indiscernible] many different places. And so the question for us is, how can we make it easier for them to manage their money in a way they're comfortable. Most of you on this call, you have in your mind, how much days is the checking account and then you write a ticket to a money market fund or a deposit account, something like that. And that's all we're trying to do. And we provide great values to people. If you're comfortable with JPMorgan. I remind people, if you have this product, you have ATMs, you've got branches, you've got a device, you have instant payment systems like Zelle. So we look at the whole basket, how we can do a better job for the client. And yes, basically is some margin somewhere and create more competition somewhere. [ That's life. ] Jeff Bezos has always says, your margin is my opportunity. And I kind of agree with that. We're trying to look at the world and the point of view of the customer, what more can we do with them. And this is really early stages. And as you know, there's tons of competition out there for the money.

Yes, exactly. And the only thing I was going to add to that, it's sort of understandable just got an intention because it has sort of AI in it, and it's kind of interesting. But I assume he says like -- and as you highlighted in your question, competition for deposits has always been very intense. It continues to be intense and we have both external and internal competition from higher-yielding alternatives and people sort of optimize that and the start of running the business. And as also Jamie just alluded to, this thing is like kind of not even live yet and it's sort of targeted at a very small subset of the client base, particularly clients with investments where we think there's an opportunity to take a larger share of the investment wallet as part of this. So I would -- it's understandable the amount of interest that it's gotten, but I think the right way to think of it as sort of as an experiment right now.

No, that's helpful context. And maybe switching gears just to the Basel III capital proposal certainly helpful in terms of how you frame some of the shortcomings, some potential areas for improvement. But maybe just focusing in on the RWA inflationary impacts. Does the guidance that you've laid out contemplate any mitigating actions you might pursue? Is there any potential mitigation that you envisage? And do you have any preliminary views just on the magnitude of SCB relief that you could see from the removal of some of the double accounting of markets or operational risk. I recognize that piece is a little bit more opaque.

Yes. I mean those are interesting questions. I think, obviously, we are kind of well practiced over the course of the last 1.5 decades on understanding the rules in detail. And ensuring that we're using our financial resources efficiently to support the client franchise. So -- and I think the hope is that the rules land in the stage where there is nothing in them, which sort of takes an otherwise good and healthy business and makes it completely noneconomic. I think we've alluded to a couple of areas where if you look at the presentation slide on the bottom right-hand side, we talked about targeted RWA clarifications needed. There's this issue with like high-yield repo collateral and some stuff about advice lines where the proposal is [indiscernible] what the actual impact would be in and some versions of the world, we think it creates rational results. But broadly, I don't think this is a story about optimization at this point. I think this is a story about a rule set that is converging to a place and then we need to just grow the business and deploy the resources to serve our clients. Obviously, we have said a lot about G-SIB on this page. And I guess I don't really have more to say unless you have the big question on G-SIB, but that is the one area where we think it's kind of a significant disincentive to a particular type of business, in particular some markets business. And I guess I would just make the point that we've often made publicly that the depth and breadth of U.S. capital markets is a key competitive national advantage. And regulatory capital rules that at the margin discourage a dynamic secondary market in the United States with active participation by banks is, in our view, sort of not great. So that's part of the reason that we're so focused on G-SIB because it disproportionately affects that business.

Anything you could speak to just in terms of the removal of the double accounting.

Yes. Sorry, I forgot about that part of your question. Yes. So as you know, like we're currently below the floor, right? So obviously, if that is like the new normal, then if the double count is addressed by moving further things from stress testing, it wouldn't have an impact. If the double count is addressed by modifying the operational risk calculation in RWA, then it might have some impact. And obviously, it's far from guaranteed that we will be a bank that is permanently below the floor. But I suspect that issue is more relevant for institutions who business mix is such that they're going to tend to structurally be above the floor. It's a little bit unclear for us as things settle down, whether we're going to bounce around above and below the floor or tend to be structurally above the floor. We'll see. But I think removal of the double count is definitely something we support. It's probably not our #1 priority at this point because some progress has been made on that.

Can I just also just mention on the market -- global market shock, it's never been in the real world, all these years, including during the COVID and then before the [indiscernible] is nothing like what they have. we already have $80 billion or $90 billion of capital for the trading books. So those numbers are just -- they're completely out of whack with reality. And operational this capital, I can't avoid saying it is another crazy of 2 -- 1 in 1,000 year thing, and then worse than that might be they create risk-weighted assets. Every company in the world has operational risk and they artificially create risk-weighted assets, which do not exist, and this locks up a lot of capital liquidity [indiscernible] for no good reason. And I understand there's operational risk. I think there are real ways to measure it, by the way, which I'd point out, which is not this artificial academic exercise, but there's operational [indiscernible] margin loans that are late and using subprime [indiscernible] or as opposed to prime collateral and how you process things, and that's where they should really be focusing, reducing actual operational risk as opposed to these calculations but you can't change. Like if you -- if they all come to the mortgage business and you got out of the mortgage business, it still stays there. Like who would do something like that. And so it's time to really look at the stuff and do it right.

Our next question comes from Erika Najarian with UBS.

Jeremy, my first question is for you. You modified the market's NII outlook given the change in rates between end of February and today. I'm wondering, as we think about the ex markets NII number of $95 billion, you retain that. What are sort of the offsets to higher rates in the asset sensitivity if we don't have cuts for the rest of the year?

Yes, sure. So it's a good question because I think we have said that we're also sensitive and rates are a little bit higher as a removal of the cuts in the back half of the year. And so you might have otherwise expected us to revise the NIX markets up a little bit. But just to do a little mental math, EAR that we've just disclosed $1.8 billion as a result of the fact that were pretty backdated. The impact on the full year average is only about 20 basis points. So the amount of upward provision that you might have otherwise expected is really quite small when you do that math. And there were some other bits of up and done noise, some rounding next. So that is essentially the reason the number is not changed. I don't think there's too much to read into it.

Got it. Perfectly clear. And my second question is for Jamie. Of course, we were all unpacking your Chairman's letter from a few weeks ago. And one of the topics that you wrote about and you've spoken about at length in the past, is on private credit. And I think we fully appreciate what JPMorgan's view here is. But given all of the headlines that this topic is garnered I guess, good question here for you and your team is, if we do have a recession and higher defaults and higher severity and cumulative losses and leverage lending, what is the ultimate loss back to the banks? Because as we understand, the banks are fairly well protected in terms of structure. And while you address this in your letter for those that maybe hadn't had time to read it and that are listening to this call, you think that if we do have a default cycle in private credit, it will be systemic?

No, I mean I was quite clear, I don't think so, and I gave the big numbers. Private credit leverage lending is like $1.7 trillion. [indiscernible] bonds like something like $1.7 trillion, [indiscernible] syndicated leverage loans like $1.7 trillion, investment-grade debt, $13 trillion; mortgage debt, like $13 trillion; and there's a lot of other stuff out there. And I pointed out that I think there's been some weakening in underwriting, not just by private credit elsewhere. And there will be a credit cycle 1 day. And I think when there's a credit cycle, losses will be worse than people expect relative to the scenario. I don't think it's systemic. It almost can't be systemic at that size relative to anything else. But when recessions happen and values go down and people [indiscernible] higher rates, build the address the stranded system. And are people prepared for that? I can't speak for other banks, but these -- most of these things are they on top of -- you have very large losses in private credit before at least it looks like banks are you get there or something like that. So it doesn't mean you won't feel some stress and strain and you might have to do something about it, but I'm not particularly worried about it. I'd be more worried about what is the credit cycle, how is that going to filter through the whole system. That to me is a bigger issue. I also pointed out, corporations in general, the debt's not too high, consumers, in general, does not do -- most of excess debt is in government debt at this point. And so there are positives and negatives you look at what's going to happen if there's a cycle. And of course, we always worry about what happened in their cycle. And like I said, I think it will be worse than people expect and you go look at what happens in other cycles to various credit and industries, et cetera. The other thing which almost always happens is that there's an industry with surprising people. So if you go back to the year 2000, people are surprised there was utilities and telecom, [indiscernible] stocks that got hit. Things changed. And going to '08, it was media companies and newspapers, [indiscernible] things change. This time, you have all the 2 year for about software, which we'll see might be soft or might not. But something always happens that people don't expect in credit.

Our next question comes from John McDonald with Truist Securities.

I wanted to ask a question about reserves. Can you talk about scenario weighting and how you're evolving views on the macro risks out there factor into your reserve setting process and how that played out this quarter?

Yes, John, good question because I think at a high level, if you look at the allowance, it's like quite small, and you might wonder like what's going on there given everything that's happening in the Middle East, especially given our historical stands about wanting to be conservative and concerned about the geopolitical dynamics. So a couple of things in there. One, as you know, we start the reserve, the allowance calculation process with sort of model-based approach that's based on economic forecast. And so -- and actually, just to make it easier to track, let me start the punchline, which is we actually did not change the wage this quarter. And so with that said, on sort of unchanged was flowing through the economic outlook actually lowered the weighted average unemployment rate and the allowance build up from 5.8% to 5.6%. So that created some tailwinds across the numbers primarily in consumer, but also a little bit in wholesale. And we also had a little bit of a lease consumer in home lending, I think it was about $150 million which was an HP or maybe 110 or something. But anyway, which was an HPI upward revision, so kind of unrelated to everything else. Under the covers, there are some builds in wholesale as a function of loan growth and also some minor syncratic downgrades here and there, nothing dramatic. But in the place that you would expect to see allowance build, you are seeing some. But at a high level, we did sort of have a very conscious debate about this as a company like should we add downside skew the wage this quarter given [indiscernible] that's going on. And our conclusion was that the existing kind of conservative bias in the land was sufficient, and we would just wait and see to see how things develop. And to the extent that things hopefully, they don't. But if we get some of the downside case outcomes with higher energy prices that wind up having an impact on the core global economic outlook, and that would actually flow naturally through the process. And so we'll we can see kind of how [indiscernible]

Okay. And then separately, I was wondering about any changes to your outlook for loan and deposit growth, your balance sheet growth was very strong this quarter, a lot of it seeming to be in the markets business. So I'd just like to give some more color on the drivers of growth this quarter and how it affects your outlook for loan and deposit growth this year?

Sure. So I would say that this quarter's growth, as you said, early markets, primarily low dentistry stuff lot to RWA, secured financing and various stores and a lot of that is seasonal. So there is a sort of background trend of growth in the size of the markets business and in the size of the market's balance sheet, but I don't think that anything happened this quarter that was sort of particularly off trend in that respect. In terms of the firm-wide overall outlook, I think, arguably the single most significant number is the what we said about card loan growth expectations, a company update, which is that we said we expected 6% or maybe a little bit more. and that hasn't really changed. That's still kind of our core expectation. And the rest of the franchise, it's really pretty modest growth overall. We actually have some headwinds in home lending as a result of some preselect portfolio roll off and stuff like that. But to a significant degree, some of that's going to get driven by acquisition financing, that we hold on balance sheet for a while that some of that's a little bit of a driver in this quarter as well. And of course, if things deteriorate, which we very much hope they don't, that tends to produce lower loan demand. So we'll see what happens there, but we're going to be there for our clients for whatever they need. And then the final building block of this is markets, which, as you know, has been actually, interestingly enough, the primary driver of wholesale loan growth recently. But there, it's going to be very opportunistic. A lot of it is kind of the data center lending type stuff and related things where we're going to participate with the terms make sense. So we're going to be very willing to walk away if we don't like it. And so that's going to be more a matter of just seeing what the opportunity set looks like and how we feel about the risks.

Our next question comes from Manan Gosalia from Morgan Stanley.

You have one of the best views in -- on the U.S. consumer. You mentioned that the economy is resilient, the consumer is healthy. Could you give us some more color on what you're seeing there? How resilient is consumer spend and credit if energy prices remain high? And are there any signs of cracks that you're seeing at all?

Yes. So it's a good question. It's the right question. It's a question we get a lot, and I sort of struggle to say something new and interesting every quarter. There really is not anything or interesting to say this quarter. We looked at it through every angle early roll rates, delinquency rates, cash buffer, spend, discretionary spend, nondiscretionary spend, it all looks consistent with prior trends and fundamentally, healthy. So let me add maybe just a little bit of nuance in the context of energy prices and what's going on this quarter. So I think the cost is something like 3% of the typical consumers spend expenditure, at least in our portfolio. So it's not nothing, but it's not overwhelming. We look to see if there's kind of evidence in there of people trading decreasing other discretionary spending to adjust for higher gas prices, but it's just kind of not enough yet to be visible. I would caution, though, I think it remains fundamentally the case. The biggest single reason that the consumer credit performance is healthy is that the labor market is strong. And if you get bad outcomes in the Middle East, much higher energy prices or other problems that sort of do eventually frac what has been, I think, many people's perspective, I think surprisingly resilient American economy and a very resilient U.S. consumer, and that winds up having [indiscernible] labor market, and you will see that come through clearly. But right now, in the end, the story remains the same, which is Brazilian consumer that's doing despite higher gas prices.

Yes. And I would just add, we're really getting too fine-tuned here, but it's being helped right now by higher tax refunds too.

That's really helpful. And then a separate follow-up just on the trading business. One is, are you seeing any signs of that volatility here? Or are things -- things in March still pretty good? And then if we look at trading assets that were up pretty significantly quarter-on-quarter. Was there anything specific in the environment that drove that? Was that business as usual? Or is this some of the deployment -- the ongoing deployment of excess capital, Jeremy, that you've been talking about?

Okay. So sorry, I think there are several embedded questions in your follow-up questions. Let me try to do this efficiently. So in short, no, we haven't really seen any so-called bad volatility. I'm sure there are pockets of that in some markets. But broadly at a high level. I think what we mean by that is the types of extremely gappy discontinuous markets with low liquidity they keep clients on the sidelines. And as I say, I'm sure there have been pockets of that in certain subsegments of certain asset classes. But in general, that is not -- has not been a characteristic of this quarter, which is, I think, part of the reason that the performance has been very good. On trading assets, as I said a second ago, I think that was mostly BAU growth, mostly seasonal low-risk density and not particularly a function of capital deployments one way or the other. I think to the extent that, that plays out, that will be a longer-term phenomenon and just to refer you back to my comments and company update, I think, to really get that right, you need both to free up capital, but also to free up to allow banks to deploy against the broadest possible set of opportunities as for the real economy, not just kind of high-risk density opportunities that require less liquidity per unit.

Our next question comes from Mike Mayo with Wells Fargo Securities.

Jamie, in your CEO letter, as was mentioned, you talked about private credit, and you mentioned the $1.7 trillion private credit market, which didn't really exist 2 decades ago, as you know, how much of that $1.7 trillion would you say is a substitution effect from banks to private credit? And how much of that might be types of credit you never would have originated in the first place. And with the regulatory changes and what's happening in the market, do you think you can recapture some of that share? And more generally, what are you doing with regard to the collateral there are new headlines in the past quarter that you're becoming more conservative with that. And lastly, what kind of Fred are you getting? Are the treads improving on this or staying the same?

Yes. So those are all really good questions. So the trains actually was there before. There was always this and the banks did it in some ways it was arbitrage because banks were really discouraged from doing leverage lending over a certain overseen leverage. And then of course, the competitive will find new ways to do things, which we're not against how they do it. There's a little bit of [indiscernible] arbitrage and all these various things. But I do think -- I mean it's really hard to say that half that probably was arbitrage that banks could pick up some of that. Banks also look at relates differently. When a bank does alone in middle market leverage lending, that's what this is. We've been doing this for a long period of time. When we look at the relationship through extensively, not just the loan but the rest of the relationship payments custody asset management type of services, et cetera. So maybe some will come back. I'm not particularly concerned about it. And the spreads, you can just track how spreads move around every bank does it differently. And every bank charges differently and stuff like that. But depending on how concerned they are they going to raise the reason with the charging for private credit. -- private credit spreads themselves but they charge their clients have gone up and down. And you've actually seen loans go back and forth every now and then from the private credit market, the bank syndicated loan market. So we'll see. And we always had what we call marketing rights. So if you look at the underlying collateral, and that's just the right that protects you and gives you sort of [indiscernible] like that. Obviously, if you ever see credit getting worse, and it's gotten not terribly worth the actual credit which a lot of these private equity -- private credit guys pointed out, the actual credit hasn't gotten that much worse. There are pockets where it has. And and credit spreads themselves haven't gotten much worse in general, but there are pockets where it has. So we'll be watching it closely. We think we're okay on all that. base be seen. I think the big point to me, Mike, I don't think it's systemic, but I do think it was a credit cycle, and I'm not referring to private credit here, because of underwriting leverage and picks and competition, and we've got a cycle for a long time, a lot of people late to this game, I just don't expect every player is going to be the same. I think some will be -- it won't be a bell curve there'll be something different than that. And people can be surprised that some of the players aren't particularly good at it, and that business will probably come back to banks.

And then separately, Jeremy, you mentioned no change in the core NII despite being asset sensitive. And in terms of the deposit growth, you had some really amazing deposit growth and then kind of hit air pocket for a little while in this quarter, conservative deposits were up 2%. I guess taxes probably helped that out. Is this the start to getting back on that higher deposit growth path or not yet?

Well, I think air pocket is a little strong word but fair enough, I recognize the dynamic that you're describing. And I think it's a little bit too early to sort of say, like, day like we're back with like super robust consumer deposit growth, partially because of your point actually about tax. I think you're right, that probably is contributing a little bit right now. But at a high level, we talked about a company update, consumer deposit growth expectations being low to mid-single digits. And I think that is still the belief, and I think we'll be a little bit more confident in that, as you say, once we get through tax season, so maybe we'll know a little bit more next quarter. But I will say that through the lens of like net new checking accounts, where I think we said in the EPR that we did over 450,000 this quarter. So that driver of sort of long-term consumer deposit franchise growth is in place. And it just becomes a question of at the margin, how are you seeing flows develop and what that does to kind of balances per account as we talked about a company update. So -- it's the right question, something we're watching a little bit early, but unchanged expectations and some signs, as you point out, that the trends might be improving slightly. And then just to complete the picture, -- on the wholesale side, as you recall, last year was an exceptionally strong year for wholesale deposit growth. So our expectations for this year were a little bit more modest Actually, you're starting out pretty well, some of the typical year-end seasonal increases that we tend to see roofs have not quite rolled off to the extent that we would have expected. So I still think the core view is for significantly less robust growth than last year. But from a core franchise perspective, things feel pretty good there.

Next, we will go to the line of Gerard Cassidy with RBC Capital Markets.

Obviously, the first quarter, the expense levels were a little elevated relative to the full year guide, if you annualize that out, of course. Can you give us some color that how you're going to bring down the following 3 quarters to be able to hit the year-end guide that you gave us at about $105 billion.

Yes. So I would somewhat discourage you from like annualizing quarterly expense run rate because there's a lot of seasonality in the volume and revenue-related component of that as a function of the seasonality of the market revenue in particular. But I think -- and I think in reality, as you well know, Gerard, that's kind of like not how we manage the company, meaning I don't think you meant this obviously, but the implication of your question is that like all the numbers were a bit high in the first quarter, let's like run around and find some expenses to cut in order to meet our guidance, and that's kind of like not how we do things like we just manage the expenses holistically every day of the week. But at a high level, I think you're actually getting on something important, which is that when you consider the exceptionally strong performance of the Markets & Banking business this quarter, you actually might have otherwise expected us to revise up the full year expense guidance because realistically, I think no one could have -- it's impossible to imagine that we would have budgeted the level of performance that we saw.

This quarter in markets and banking and that...

I'd say some is expected to be quite good. I hope every quarter is good, and then our expense target would be to spend more money could be did so well.

Okay. But I still want to make my point, which is that, Gerard, I would discourage you from drawing the conclusion that for the purposes of the full year we are going to see the amount of implied internal offset between volume and revenue-related and other expenses that and the failure to revise the guidance this quarter. It's just a little early in the year. So let's see how things play out in the next quarter or so.

If volumes -- and if every quarter was good this quarter, we will spend more than $105 million for a very good reason.

Yes. No question.

Five is not a promise. It's an outcome of business results.

Which you've said in the past, Jamie, good expense growth, we all completely understand. As a follow-up question on digital assets, stable coin, on the continuum that we're on for adopting these types of new technologies. Can you guys give us an update where you see this moving in terms of deposit impact possibly. But more importantly, payments, obviously, you're a very large payments company. And how are you guys assessing it?

Sure. I mean there's like so much to say on the stable coin front. Obviously, there's a lot of like legislative and regulatory stuff going on. I think, Gerard, your question is a little bit more about sort of long-term impact on the payments ecosystem. So I guess, through that lens, I would actually start with the wholesale business and talk about all of the innovation that we've done in sort of modernizing payments through [indiscernible] and the way that some of that is starting to play out and giving a lot of our customers kind of exciting new features like programmable money and different hours and the associated Tokens deposits, all that type of stuff. So we're super excited to embrace the [indiscernible] of innovation and be part of it. And the question a little bit is how does that relate to our existing franchise and in the context of wholesale payments, I think it's just part of an overall product offering. I think sometimes people think that you're going to have some stable coin thing that's going to like radically disrupt the existing wholesale payments paradigm. And I think that's not quite the right way to look at it, only because wholesale payments is already ratably efficient, extremely low-margin business with very sophisticated clients. And so it's not as -- a little bit to Jamie's earlier comment, it's not like there's 1 of these like your margin is my opportunity type situation and wholesale payments. It's already a very modern, very technology sophisticated, pretty low-margin business where we're constantly doing that, including with some of these sort of new technologies. On the consumer side, people talk about like what is the consumer use case for stable coin and one version of it, it's like digital cash and there's the obvious like KYC implications of that. And I think maybe that's where you get a little bit into the legislative and regulatory tranche where there are some new developments on that whole thing associated with this [indiscernible] to what extent is the payment of rewards or proxy for interest and that sort of turns it into its stable going being an interesting form of innovation. It's just regulatory arbitrage and that you can run a bank without being subject to the important regulatory protections, both prudentially and for consumers in terms of KYC and stuff like that. So we're eager to compete. We're eager to innovate. We're innovating all over the place. We definitely support certainty that comes from this legislation. But as we get close to some form of finalization there, it's very important with the same product be regulated. Same risk be regulated in the same way, and it doesn't become the case that you just create a giant arbitrage back door or the provision on the payment of interest for stable funds. So we'll see how that plays out.

Our next question comes from David Chiaverini with RBC Capital Markets.

Actually with Jefferies. So wanted to follow up...

Welcome to [indiscernible].

I wanted to follow up on the consumer deposits. So interest-bearing deposit costs were down nicely in the quarter. Could you talk about the opportunity going forward in light of the changes in the forward curve?

Okay. That's an interesting formulation. I sort of don't actually know the number you're quoting, but I suspect it's just a function of the rate curve [indiscernible] came through last year. Go ahead.

I would just keep it simple. The margin would be about what it is today, give or take, a couple of basis points up or down. There are a lot of factors in there, like what kind of accounts you're opening tax refunds and all that kind of stuff. So -- but roughly the same for now.

Yes. I mean I was going to pivot to the broader question, I guess, what you talked about in terms of opportunity. And I think that there's -- as Jamie says, there's just the yield curve flowing through the high beta portion of other franchise. And then there's the load portion of the franchise, where I wouldn't say lot of opportunity to price down because I think as is well known, the price there is already quite low, but it's in the context of an overall service bundle where a lot of clients have relatively low balances are getting a lot of value in the package. So I guess I would be there.

And then shifting over to a follow-up on private credit. So there's still a lot of attention on this in the banks. I think the banks are well protected. But can you remind us of the structure of these loans in terms of typical advance rates and embedded credit enhancement that protects your position?

Asked you for too much of the information. They are seeing their loans on top of leveraged loans, so you're senior to the actual loans themselves and the -- each one is different. The loan to value, the trigger the loan to value and all the things like that. So -- but you can probably figure those out or if you look at the disclosures on the PTCs, et cetera.

Yes. I do think it's reasonable to to remind, I guess, the market of some things that we've said before about this space, right? So yes, the each client, each relationship is a slightly different structure. But at a high level, as Jamie pointed out, it's a senior position the portfolios are well diversified. There are a number of protections that we have, conservative advance rates, good underwriting, sector concentration caps, cash flow traffic mechanisms, et cetera, et cetera. So as we often say, nothing that we do is riskless, but this is a space that we're quite comfortable with as a function of very close scrutiny on the way that we do the business and ensuring that the underwriting is high quality and then we've got a bunch of structural protection [indiscernible]

And the BDCs have statutory rules that they can't exceed in terms of loan to loans at the part, which is sometimes and sometimes a little bit more than that.

Our next question comes from Ebrahim Poonawala with Bank of America.

I guess just one question on AI, one on the risk side, one on the opportunity side. On the risks, maybe Jamie or Jeremy, if you can just give us a sense of it's very hard for investors and for us from the outside to handicap cyber risk. We saw the headlines last week around L&M enabled cyber risks being discussed in D.C. Like is this a different level of risk? And how would you characterize the preparedness of the banking system to handle this if something were to happen and we see headlines. I'm just wondering what would be the implications of that as we think about just systemic risks, et cetera.

Cyber -- we've been talking about cyber risk for a long time. In fact, I think I said in the Chairman's letter is our largest risk. So I think every industry is different. So in context, I think JPM is very well protected. We spent a lot of money. We've got top experts. We're in constant contact with the government. We're constantly updating things but AI has made it worse. It's made it harder. Of course, we read about my dose, which we're testing now and looking at it, it does create additional vulnerabilities. And maybe down the road, better ways to strengthen itself too but the side risk isn't isolated to banks. It's like you can look at almost any industry. And also banks, of course, are attached to exchanges and all these other things that create other layers of risk, which we work with a lot of people to protect themselves. So it is a complex one. It's a full-time job, and we're doing it all the time. And while we're trying to get the benefits AI, we also are very cognizant of the risk of cyber. I think the government is aware of it, too. And remember, you have cyber criminals, you have cyber states, you have cyber everywhere, and that's why you have to be quite careful. So I'd say the banks in total are rather well protected. That doesn't mean everything that banks lion is that well protected.

Yes. And I think there's 1 just minor extension of what Jamie said that it's worth pointing out, which is, obviously, we've -- he's specifically been talking about the importance of being prepared for cyber risk for many, many, many years. But I think even more recently, even before this sort of latest set of headlines around the latest on topic models, there's been a clear understanding that AI and generative in particular, brings both risks and opportunities from the cyber risk management perspective. So it's not like this is the first time that anyone's thought about the way in which these more recent generative AI tools can both make it easier to find vulnerabilities, but then also potentially be deployed by bad actors in attack mode. Obviously, now you've got an even higher level of attention as a result of the apparently much greater capabilities of the latest models, but that is still happening on a continuum we've been engaged with for really quite a long time.

And [indiscernible] the bone, I think it's also important to look at -- a lot of it is hygiene is your new software being tested before it goes in place, if you ask them to do certain things to protect the company, how do you protect your data, how you protect your networks, your routers, your hardware, changing your past codes. I mean, a lot of is just doing all those things right, [indiscernible] the risk. And you're seeing a lot of banks they haven't had some of those rise like ransomware and things like that, at least nothing I know.

No, that is helpful because I think it's something that investors struggle with. On the opportunity side, I think what -- it feels like the productivity boost, which for us translates into what the long-term efficiency ratio could be meaningful from AI deployment just given the speed at which the technology is evolving maybe talk to that? And also, does it create new business opportunities where maybe it's extending the perimeter of JPMorgan's business into new things that were harder to do and are now easier to sort of put together and grow as a business, given AI-driven technologies?

So on the first question, I think it's a bad idea to think that you're going to deploy AI and improve your efficiency ratio because in the competitive world, I'm going to do it. Everyone else is going to do it. The benefits will be passed on to the marketplace. It's not like you're entitled to have your ROE go to 15%, and that will stay there because you do it better than everybody else. You make it a head start, you want to head start, but I just don't -- I think that's just not a rational thing to somehow that will be the ultimate outcome. But the second question absolutely creates opportunities because if you look at -- if you just take our consumer business, it's true that all businesses, but just take the consumer business with the data you have and now we call it connected commerce, we do travel and offers and all of these various things that people want. So you can use your relates to the client, the data you have to make the client happier. We do a lot to reduce risk and fraud and scan by using AI. We do a lot better job of prospecting. We offer AI services to clients, et cetera. So it will enhance a lot of things you can do directly, and it will create more adjacencies in my opinion, if you could use it quickly and wisely.

Our next question comes from Matt O'Connor with Deutsche Bank.

I want to start with a big picture question on trading. It's been amazingly strong this quarter over the last few years really no matter whether markets were good to bad. We've had shocks in commodities this quarter, rates, credit, equities, and it's not just you and others kind of managing well, but it does seem like the client base is also managing it very well. And just wondering if you have any thoughts on that on why it's been so on strong across variety of environments.

Yes. So just to put it in a big picture, which our folks do an excellent job. And if you meet with them, you'd be very impressed their knowledge, their brainpower and we buy and sell almost $4 trillion a day. And you make a little bit each time you buy and sell, then you have to manage the exposure and the risk. So they do a great job in that. Every now and then you're on the road side is something a credit or a commodity or rate side or something like that. And you see that. But to me, that's that's kind of the question doing business. That's like a retailer having inventory that they can sell. The real question is, do you serve your clients every day with great products and great service and great execution and the answer is yes, and that's where the real business is. And what you see today is much more volume and the volatility, which generally helps because it makes spreads a little bit wider, all things being equal. There will be times where you're going to be sitting here in to say that volatility killed us on the wrong side of something. But in general, you're serving huge investors around the world who have $350 trillion there was so much products and services. That's the business of trading. And I remind people, it's not that different when you go to Home Depot, they have inventory. They put it in, they put it out, they mark it up. They mark it down. They don't call it trading, but there's that element of risk management there. So our fabulous people doing a great job for clients, very conscious of the risk they take. Sometimes they we take a risk that we were on. We're okay with that. We never panic over that. We don't -- you've never seen us say, my God, we were on the wrong side of this trade. No, because we're there serving clients. And very often they're also arbitrate the client wants to sell, and you're not really dying to buy if you do it any way to serve a client. And so it's a business. It's a very good business.

And just one minor extension of that that I think supports the larger point is the thing we've said a couple of times now, which is, yes, the revenues have been great and the performance is very good. We're deploying a ton of capital in this business actually and a lot more over the last few years. And I think the returns that we're getting are good there, they're actually below the 17% for the company as a whole, that's fine, and we're serving clients and it's much better than alternative uses of capital. But I think the important thing to understand is that it's not as if you're getting giant amounts of revenue growth with the same capital base in ways that you might think are unsustainable. Part of what's going on here is that we're deploying more capital and getting healthier turns.

That's helpful. And then I guess a good segue into kind of a broader capital management question. Obviously, a lot of comments on the reproposal and -- but as we think about kind of capital management going forward, any updated thoughts onand you still have a big buffer obviously, on sales acquired levels 3 years from now or 2 years from now. maybe generate a ton of capital, obviously, very solid buybacks this quarter. You grew organically, as you mentioned. But just any updated thoughts on how to think about capital allocation going forward?

Yes. So obviously, we have a lot of excess capital. Today, we measure around $40 billion. Obviously, that could change depending on ultimate rules and regulations. And we prefer to deploy the capital serving clients. And the way you see us serving clients, we have more bankers, innovation economy, more global banking, doing commercial banking overseas, opening countries, opening payment systems, opening branches, that is ultimately what deploys capital over time. building the client base. It doesn't happen overnight. The outcome isn't deployed capital. I mean the goal isn't deploy capital build wonderful businesses that use capital intelligent over time, developing with their clients, mainly with the client focus on it. And I think when I look at the world today, if you look at the world that is so big and so complex and the capital needs, when you look at the small we're one of the biggest small business bankers out there. But look at the capital needs of countries today. the remiliturization of the world, the infrastructure that people need. I think they're going to be huge capital needs of companies but huge mergers. I mean some of these companies, when I look at the , we're not big enough to serve them anymore. And so we think there will be more opportunity to serve large clients in a way that they need it, over time, and that could be M&A, it could be countries, it could be helping them building infrastructure they need. So -- and that will happen over time. We're not in a rush -- our preferred way of using capital is not buying back stock today. we're doing it, fair market value and all that, but I'd rather buy back stock where you think it's a real discount and the ongoing shareholder gets the benefit is buying it cheap. In fact, I want to remove that little thing that says cash returns to investors, which is a dividend and stock buyback. I don't particularly like that because I think it puts you in an artificial position thinking that's always a good thing when it's not.

Our next question comes from Glenn Schorr with Evercore ISI.

That last comment leads into my question. I'll just merge my question and follow-up together because it's easier. So those things that you just mentioned, Jamie, on the big capital needs, some of those are very long duration. I'm curious on how much you think of that plays into a long-duration private markets balance sheet or can big public banks finance that. And so you mentioned in your letter, the market might be a little too relaxed about higher for longer rates. And I'm curious how you see that playing into all these direct lending BB and B credits that need to get refinanced. And while we're at it, the follow-up is, can you size your private credit exposure. So sorry to smush that altogether, but I'll end it on that.

So Jamie, sorry, if you don't mind, let me just answer Glenn's second question first because I think it would be useful for the market to have the size number out there. So I'll do that quickly and then if you want to take the first part of the question. So Glenn, let me just bring this in context because I think the question of private market exposure and the definition of that. It means, as you know, a lot of different things, love different people. So let me just quickly run through. Remember, last quarter, we did a walk in the context of NBFI from the 330 in the call report to the 160 that we consider core NBFI exposure, which we defined in that context, I won't go through that again. So inside of that $160 million, there's about 50 that we would call private credit, and it's essentially the portion of that 160 of NBFI, which involves leveraged loan investors. So that's some of the stuff that we've been talking about almost all in terms of leverage in BC lending that has all these characteristics in terms of underwriting, diversification, cash flow trapping, et cetera, which is why we're broadly comfortable with it. So I just thought it would be worth sizing that in that context. There are obviously other pieces of that, like direct lending, subscription lines that are variously in or out of very different measures and then you could consider like in a broader definition, but our sense is that thing that people are interested in is this kind of like leverage loan, back leverage type stuff and that's about $50 billion for us. So with that, I'll hand it back to Jamie for the first...

Yes. So the way I look at it, so banks aren't going to warehouse very long data stuff in their balance sheet. But when you have investment grade even large noninvestment-grade, private markets and public markets are going to come together. The people have to make markets in those things, do research and those things. I think it's going to be harder for private credit to do, not all of them, but to do large investment based stuff, though, they've done it. But like I said, they have to compete with us on that, and we're willing to do it too. We only take the customers do. They want to do a large direct lending, investment-grade deal, we will present that side by side with a banks syndicate alone or something different. But I do think you're going to see a lot of creative capital, a lot of greater financing. A lot of the institutions out there need long-dated assets, think of pension plans and social security plans, all these various things like that. So our job is to intermediate a couple of ideas to turn it over, sometimes put in the balance sheet, the stuff of the balance will be shorter dated, but it's all opportunity. And I think the requirements of the world are going up fairly dramatically in the infrastructure at large, almost everything is infrastructure today, utilities are roads and bridges and data centers and GPUs and so it's all there, but we're going to do a great job serving clients. And so we're not worried about that. But I do think you'll see in certain categories, private markets and public markets come a lot closer how they look at value and trading and secondary markets, et cetera.

That concludes your question, Glenn?

Yes. just just to [indiscernible], the higher for longer part and if that has an impact on some of that B, BB paper that's coming due for refinancing.

Yes. No. Glenn, that's like a basic risk management where when you look at the world, you got to look at what's going to happen a recession forecasting enough to be saying for JPMorgan, we have to be prepared for a recession and that you have station. You see people mentioned that we have to be prepared for [indiscernible]. Obviously, if you have stagflation, and higher rates for longer credit spreads gap out, that will put a lot of stress on strain on leveraged companies as they refinance. And those get fixed. Sometimes people put more capital credit, sometimes reduce their CapEx plans. It's not an immediate example overnight, but it would put a lot more stresses training people. And I'd pointed out that if there's a credit cycle, I do expect it will be worse than people think relative to the scenario. It's not a disaster. We use the credit cycles. We'll be big boys about it. But asset prices will go down, credit spreads are going down. People make it a little nervous about some of those things. We don't think it's systemic, that's more I would put category of traditional recessionary behavior.

Our next question comes from Jim Mitchell with Seaport Global Securities.

Just maybe a quick question on investment banking. It seems like activity held up pretty well in March. But just wanted to get your thoughts on that. Has there been any pushing out of any pause on activity levels and pushing out of the pipeline? Just any thoughts on the pipeline and how you're looking in the near to intermediate term?

Sure. Yes. I mean I think it's true that activity held up well. The other thing that I think is worth noting is that some of the robust result this quarter is the result of actually accelerated timing on M&A deal closure and some of that was as a result of faster-than-expected regulatory approval. So that's obviously all to the good. But I think it's sort of unrelated one way or the other to like overall sentiment. On the question of overall sentiment on the pipeline, I would describe it as resilient, maybe surprisingly resilient, given everything that's going on. But I also think the time lines in the Middle East are quite short. There are deadlines or negotiations. I think it's reasonable for people to kind of proceed with their plans in the hope or maybe expectation that we've got relatively quick resolutions. But if things start getting derailed, I would be surprised that you do see some impact on sentiment and on deal decision-making. But right now, it seems quite resilient.

Okay. And just a follow-up on the balance sheet growth in markets. It has been strong, I think up over 20% year-over-year. Were you saying when you think about the impact of the G-SIB surcharge on JPMorgan specifically, does that start to impinge your ability to grow that as much as you want? How is that factoring into your capital decision in the markets business?

I think the answer is yes. And that's a big part of the reason that we time that we spent today talking about the problem for the surcharge. It disproportionately improves the markets business and disproportionately accrues to the relatively low risk density type of stuff that the client base really needed to these days. And that's why we think it's important to regulators think very carefully about what they're actually trying to achieve here.

I'll add one other thing. We will obviously use our brainpower to do something I don't like doing, which trying to find a lot of ways to serve our clients properly and reduce the G-SIB charge, which is usually gold [indiscernible]. So I'm not sure the outcome is great for the system, but we will find ways to do it.

Our last question comes from [indiscernible] with China Securities.

I have a quick follow-up on private credit. I totally agree with Jamie that there is no systematic risk come as long as we assume the every type of capital expenditures continue with good yield outlook. So it comes down to the company-specific questions. Mike, how does JPMorgan ensure its capability of selecting the top-tier projects. How do you ensure you stay with the good guys and stay away from the stock.

Yes. So we are quite disciplined on credit. Certain things we turn down, we don't like the covenants, the underwriting or the ability to move assets out of the secured company or something like that. And we're perfectly willing to have our balance sheet go down. In in fact, we think credit is getting stretched, you will see us not make loans. Actually, we don't want to -- we're just not willing to meet those terms. And so that's how we do it. We underwrite when it comes to most clients, including driving credit, we intertie the company, the loans, the covenants, all those various things. And credits are discipline. Like I said, loans or all of them are an outcome of doing good business. Sometimes if the loan book drops 10% next year, we will be completely fine if we thought the loans that we're walking away from where irresponsible.

Thanks very much.

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

This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation.

Good afternoon. Welcome to JPMorgan Chase's 2026 Company Update. Welcome to the stage Mikael Grubb.

All right. Good afternoon. It's my pleasure to welcome you to this event and the new and improved 270 Park. I want to send a special thanks to the extremely dedicated folks who brave the elements and joined us in person. I guess, even in the world's dominant ice hokey nation, there is such a thing as too much winter. Please remember to review the disclaimer about forward-looking statements. And before getting started, let me just quickly walk through the agenda and some logistical points for the afternoon.

Jeremy is going to kick us off with a discussion of firm wide topics, and he will also take a few questions at the conclusion of his presentation. After that, we will invite our LOB heads to the stage for the business line-focused Q&A. We will then take a quick break before wrapping the public event with James Q&A. At that point, at least I will need a stiff cocktail which will also be served on this floor. No reservation required.

And now let's welcome our first speaker, Chief Financial Officer, Jeremy Barnum.

Welcome to the stage, Jeremy Barnum.

All right. Thank you, Michael, and welcome, everyone. And let me add also thanks for everyone who show up in person. So before we get started, a health warning. Some of the slides you're about to see are shall we say a little bit on the dense side. The reason for that is that we want them to serve not only as a guide to today's conversation but also as an artifact to support all of conversations with you over the next few months. So if you don't have time to consume every number on every page, that's okay, I'll tell you the parts that we think are most important.

So with that, let's get started. We have branded this event company update, but there is no real update on these pages, and that's intentional. Consistency is a hallmark of our operating model. Our strategic framework is not just words on the page, is deeply woven into our culture and guides our actions every day. We've highlighted the key elements here. Together, these strengths enable us to serve our clients, customers and communities through any environment and support a relentless focus on generating long-term shareholder value.

Our completeness, global presence, diversification and scale are not just attributes. There are competitive advantages that allow us to serve our clients and customers in unique ways. The composition and connectivity of our business lines creates durability and allows us to generate robust results across a wide range of environments. And our operating model enables us to support our clients and customers for their entire life cycle and through multiple generations. The metrics on the right-hand side of the page brings us to life, calling out a few of them. We have $4.8 trillion in AUM. We serve over 86 million U.S. customers. We operate in over 100 markets globally, and we process about $12 trillion of payments a day.

Sorry, I simply force quit my notes. Okay. We are also proud of the leadership positions our business as a whole. The market share gains we've achieved are the result of a decade of continued investment and effort. As we look to the future, our focus remains on growing our share and expanding our lead in order to secure the position of the company through many cycles to come even as competition intensifies. And despite the intensifying competition, our 3 lines of business delivered exceptional performance and had a number of notable accomplishments in 2025.

Before diving into the specifics, I want to take a step back and frame this page through the lens of scale and investment, which we define here not only as the increase in allocated capital, but also as the cumulative investment spend across technology, people, marketing and more that each business has deployed over the past 5 years, as shown on the top of the page. And in many cases, the results that you see here are the product of investments made even longer ago. With that context, let's review some of the results in 2025.

In CCB, we delivered 32% ROE, added 10.4 million new card accounts and reached nearly $1.3 trillion in client investment assets which is more than double the level we saw in 2019. The CIB posted an 18% ROE and 12% revenue growth with record revenue in markets, payments and security services and we expanded global corporate banking coverage to over 40 countries. And in AWM, we delivered a 40% ROE and a 36% pretax margin with record total client asset flows of $553 billion, positive across all channels and regions. We also had the largest active ETF launch on record.

With this backdrop of strong LOB results, let's take a step back and discuss recent performance for the company as a whole. 2025 was another year of outstanding results, both in absolute terms and relative to our peers. We delivered 12% growth in EPS, 11% growth in tangible book value per share and an ROTCE of 20%. And as we show you on the bottom left, this year's performance represents a continuation of our long-term outperformance over the last decade. As I just highlighted, our focus remains firmly on long-term growth and performance with the goal of maximizing long-term shareholder value. These ambitions are underpinned by our ongoing investment in bankers, advisers and new markets here in the U.S. and internationally as well as in our technology platform, which continues to drive innovation and efficiency across the firm.

We are also deeply connected to the communities in which we operate, and we are committed to being a responsible corporate citizen. Whether it's our community centers or our recently announced security and resiliency initiative, these efforts are both integral to our mission and deliver significant commercial benefits.

Before we turn to the 2026 outlook, I'd like to briefly touch on the macro environment. We remain cautiously optimistic. The page shows a stack ranking of the factors we feel better or worse about none of which will be new to you. Currently, the macro backdrop remains supportive and the consumer remains resilient, but the labor market is the key driver there. Business volumes, activity and pipelines all remain very strong. At the same time, our traditional competitors are also benefiting from the supportive backdrop and new challengers continue to emerge, making competition more intense than ever. This environment reinforces the need for vigilance. And just to manage our expectations, might make us a little bit less eager to share certain valuable competitive information.

As we move through the next few slides, you'll see that we have dedicated pages for each of our major revenue categories, starting with NII ex markets. Our outlook for 2026 NII ex Markets is unchanged from what we shared at earnings last month. We continue to expect about $95 billion. Breaking down the drivers of the year-on-year growth. We expect a headwind of about $2 billion from rates. The outlook follows the forward curve, which currently implies 83 basis points lower average IORB year-on-year, resulting in deposit margin compression. This is more than offset by balance sheet growth and mix.

On the loan side, we expect card to revert closer to long-term trends, but still expect strong growth of more than 6%. In both CIB and AWM, we expect modest loan growth as a result of a continuation of last year's trends, healthy acquisition finance activity, strong infrastructure and AI-related spending as well as ongoing strength in securities-based lending and subscription finance.

For deposits, we anticipate low to mid-single-digit growth in banking and wealth management, which I'll discuss in more detail on the next page. We expect payments and security services in CIB to deliver continued deposit growth, albeit at a less robust pace than last year's exceptionally strong performance. In AWM, as clients continue to optimize their cash and redeploy into investments, we expect deposit balances to remain essentially flat. And we now expect markets NII to be about $9.5 billion. I'll cover this in more detail when I discuss the markets business in a couple of pages.

Now let's take a closer look at the trends we're observing in retail deposits within CCB. As the headline says, we expect retail deposit growth to resume in 2026. But let's take a moment to review how we got here and expand on some of the drivers and dynamics. As a starting point, we saw significant balance growth during the pandemic as government stimulus drove cash balances higher and rates were low. As we emerge on the pandemic and the Fed's hiking cycle began, yield-seeking flows grew and that, combined with higher spending, drove balances down.

In 2025, our total balances were about flat. We did see an inflection point and although total balances were about flat, we did see an inflection point in our checking balances per account, which grew 1% year-on-year. Our checking account acquisition has remained strong and yield-seeking behavior continues to slow. At the same time, yield-seeking flows captured by CCB and in particular, by JPMorgan Wealth Management have actually increased during this period. So while this is a small drag on deposit growth, it is an important long-term tailwind and proof point for our affluent wealth strategy.

As you'll recall, last year, we shared what we expected for 2026 deposit growth based on a range of economic scenarios. The central case at the time was about 6% deposit growth. And relative to then rates are higher, yield-seeking flows are higher and the consumer savings rate is lower. And when you put all those effects together, we expect something more like low to mid-single-digit growth this year based on the current central economic scenario. But moving beyond the narrow question of our best guess for this year's deposit growth. The more important point is the consistent track record of account growth, which provides the foundation for long-term deposit growth. And in 2025, we originated 1.7 million net new checking accounts.

Now turning to NIR ex Markets. We gather that many of you have questions about the NIR outlook, particularly in the context of our expense guidance. While we are not providing a formal outlook we are expecting higher NIR across the board, except in home lending, where the continued market headwinds are well known. I'll leave you to review the details of this page on your own time, but you can see that we're giving you some directional insights on NIR across the major sub lines of business. Of course, all of this remains highly market-dependent and it's important to acknowledge that our outlook assumes a constructive macro backdrop.

In other scenarios, particularly in the event of a sustained equity market sell-off revenue in a number of our capital market-sensitive businesses would be challenged. In such a scenario, we would, of course, also have some offsets on the expense side. And to round out the revenue story, let's talk about markets. The performance of our markets business over the past 6 years has been truly exceptional. At times during this period, we have asked ourselves whether their performance was sustainable, and if not, whether there was a risk of reverting to 2019 levels. By averaging the 2020 to 2024 period, as we've done on this page, it becomes clear that it is probably time to retire that conversation. Of course, markets revenue is volatile and the repeat of the 2025 performance is not guaranteed. But the themes that have supported the recent growth higher levels of volatility, a healthy corporate wallet and strong primary activity remain in place.

Now let me take a second to make a few points about business dynamics and revenue streams. As a reminder, we continue to encourage you to look at the markets business on a total revenue basis. The core of our long-term value proposition to clients is meeting their evolving needs as a reliable counterparty across the full product suite, supporting them through cycles and different market conditions. We believe this client-centric approach will grow the franchise sustainably and the composition of the revenue inside that growth is less of a focus.

Nonetheless, let me take a second to discuss financing revenue and a related point, which is Markets NII. We continue to find that competitive financing capabilities are a key enabling product to grow with our most complex clients. Last year, we told you that it represents a growing portion of our revenue and that remains true in 2025. In terms of the markets NII outlook, we expect it to be around $9.5 billion this year up from $3.3 billion last year and slightly higher than the $8 billion we indicated at fourth quarter earnings. It's important to continue reminding you that we expect the majority of this increase to be offset by lower NIR. This is because much of the increase comes from the impact of lower rates on the funding expense for portions of the business that typically involve a derivative offset, which, as you know, is accounted for as NIR.

The gray bar on the right reflects the expected growth in loans and cash financing driven by client demand. To the extent that demand materializes the associate NII would likely contribute to the bottom line. But as you can see, that effect is quite a modest portion of the overall increase. Looking ahead, despite the many leading positions of our various markets businesses, we feel optimistic about our ability to grow as we execute the priorities you can see listed on the right.

With that, let's pivot to the expense outlook. Consistent with what we shared at earnings, we expect 2026 adjusted expense to be about $105 billion, which is up about $9 billion year-on-year. Starting with the first bar, you can see the contribution from bankers, advisers and branches, which represents our client-facing employees and spaces that are critical to driving growth for years to come. The details on the top right highlight the continued growth in JPMorgan Wealth Management and Private Bank client advisers as well as senior bankers in the CIB. You may have seen the announcement we just put out on our branch expansion plans. This year, we're planning to open more than 160 branches in over 30 states and renovate nearly 600 locations. The brand strategy remains core to our growth as it brings us into new markets, including low to moderate income and rural communities.

The second largest category is volume and revenue-related expenses. About 30% of this increase is revenue gross ups. In other words, activities where each dollar of expense is directly linked to at least $1 of revenue with auto leases being the most prominent example. The remainder of this category includes what we also consider good expense as it is directly linked with higher revenues, increased activity and greater client engagement with our products. Technology is also a significant driver, and I'll cover that in more detail in a moment.

The next bar is marketing spend, which is generally highly targeted with predictable payback periods as it drives both demand for card products and results in strong customer engagement across the rest of our consumer franchise. There is a small other bucket that is grouped with real estate. On real estate, there is some catch-up on expense as we've needed to add space to accommodate the headcount growth over the past few years while also bringing employees back to the office. So we're modernizing our older spaces and adjusting seating densities to improve the employee experience.

Finally, while inflation doesn't have its own bar it's present across all categories, whether it's technology, hardware, labor or real estate. And even as inflation moderates, these effects add up.

On the next page, we address the question of efficiency. You will recall that last year, we talked about living within our means. This was not a cap on expense growth or accrued hiring groups. Instead, we were setting a cultural tone to discourage automatically hiring people as the default response to any given problem or opportunity while still making it clear that the priority was revenue growth. The left-hand side of the page shows the result of that. We grew in classing roles and very modestly in some technology roles while shrinking in operations and support functions. We've also seen productivity gains. Given our size, no single initiative is likely to be material to the firm. But our ability to identify and implement a broad range of efficiency opportunities has been critical to our ability to simultaneously show industry-leading growth and profitability.

Just to highlight one example from the page. In CCB, just in the last year, accounts per operations employees are up 6%. As we think about 2026, we're taking a more flexible approach to living within our means. The discipline remains and will continue to be laser-focused on productivity. At the same time, the businesses do see compelling opportunities to develop additional products, features and capabilities for clients and customers. So we've budgeted some additional headcount in technology to deliver that. And while efficiency and productivity are always priorities, we are not managing the firm for short-term operating leverage. We feel instead that long-term PPNR growth is a much better lens to assess our investments.

As we show you on the right-hand side of the page, our PPNR CAGR continues to outpace both revenue and expense growth, demonstrating the power of sustained investment in the scale of franchise. As I just mentioned, technology remains a major driver of our expense growth as we expect to spend about $19.8 billion this year, up 10% year-on-year, reflecting business growth and demand for new products and capabilities. On the bottom left, you'll see the breakdown across the lines of business.

On the right, we've broken out the main drivers. In the first bucket, the contributors of growth are regular way inflation and perhaps not surprisingly, higher hardware expense as AI-related shortages are pushing up memory prices. The second bucket is volume and feature demand, which is driving growth in technology infrastructure costs, including the public cloud as well as higher software costs associated with higher volumes. While the absolute spend growth rate has been in the low single digits, we have continued to see unit cost reductions across a wide range of modern infrastructure products. We continue to invest and are spending about $1.2 billion more this year on major projects, and we've identified about $600 million in efficiencies some of which are AI-related, enabling us to invest more than we otherwise could. Other areas of ongoing investment include AI initiatives, projects to enhance the customer experience, and platform build-outs like Apple Card.

As we mentioned before, we are probably past the point of peak modernization. That said, we will always continue to modernize our technology and have shifted focus from infrastructure modernization to modernizing the underlying application code and data. An important reason we need to continue modernizing is to ensure we are positioned to benefit from AI and other cutting-edge innovation. On surprisingly, AI is one of the most frequently discussed topics both internally and externally. So I want to highlight a few points about our approach.

We continue to invest in AI, and we're seeing tangible benefits in multiple areas. Machine learning and analytical AI have been driving improvements in revenue and expense for many years particularly in marketing and fraud detection. The share of generative AI continues to grow as a percentage of our total AI activity. And overall, we've doubled the number of use cases in production this year. We're focusing our efforts on the highest impact areas such as customer service, including call center efficiency and personalized client insights as well as in technology, particularly for our software engineers. We're also pleased with the widespread adoption of LLM suite, our internal generative AI platform and more importantly, with the evolution of how employees are using it. As they move beyond brainstorming and summarization, to using our internal APIs to safely integrate GenAI capabilities into business-aligned applications and daily workflows.

Looking forward, we will continue to challenge ourselves to drive transformation and while carefully managing the associated risks. We believe these efforts will help us scale and continue to improve products, services and client experiences in this increasingly competitive environment.

Now turning to credit. There's not much new to say since earnings. We continue to expect this year's card net charge-off rate to be about 3.4%. The consumer remains resilient. And as always, the labor market is the critical factor to watch. I want to take this opportunity to provide a bit more color on a few credit-related topics of interest. Starting with Apple card, we've received some questions about the relatively higher subprime percentage in that portfolio. This segment already makes up about 15% of our current portfolio, and given the relative size of Apple Card, we don't expect that number to increase meaningfully.

The more important point is that we are not strangers to subprime. So we feel confident that we have the data, experience and capabilities necessary to successfully integrate the portfolio.

Another topic of frequent discussion is the so-called K-shaped economy or to be more precise, economic heterogeneity. Different commentators define this differently and come to different conclusions, waiting into that debate is beyond the scope of this presentation. But from the narrow lens of the impact of this heterogeneity on credit performance, the problematic version for us would be a significant divergence in spend growth between the highest and lowest income segments. What we're seeing in the data is that while there is a difference, the difference is not outside the pre-pandemic range and lower income consumers remain resilient. And with respect to the AI ecosystem, nothing has really changed since we talked about it in the fourth quarter. There's a lot of demand for financing, and we expect to continue participating in it, but we are not going to compromise on perms to chase share.

Another recent topic of market interest is the potential risk in the software industry from the advances in AI. Our exposure to that industry is small relative to the size of the wholesale portfolio and is concentrated in the enterprise software space. And the exposure to the more vulnerable players in the broader software industry is quite small. Beyond that, the potential impact of AI disruption is obviously not limited to the software industry. So we continue to look across the whole portfolio to identify emerging risks.

And of course, one of the reasons for our large excess capital position is to protect us from these types of potential disruptions. So now let's turn to the question of the excess capital. We kept our access relatively flat by taking what you might call in all of the above approach while deploying in line with our capital hierarchy. We put more capital to work for organic growth in RWA expansion, invested in unique assets with attractive return profiles like the Apple Card and increased the dividend and bought back shares. All the while, we maintained a significant buffer given our cautious macro outlook and the belief that even more compelling opportunities could emerge.

On the right-hand side of the page, we've attempted to account for our aggregate deployment of capital over the last few years. Notice that in this view, we have characterized investments that are expensed through the income statement as a use of capital. On this basis, you can see that our deployment has been in line with our hierarchy, and we would expect this to continue going forward. Looking ahead, it appears that Basel III endgame probably won't change capital requirements significantly in either direction relative to the current rules. That said, we're still awaiting the reproposal so there's some uncertainty. And importantly, GSIB remains a significant pending item.

Now let's spend a few minutes on liquidity. Over the last few years, we've talked a lot about capital regulation but less about liquidity. We think now is a good time to shift our focus to bank liquidity regulation and what we believe needs to change. Before starting, though, I want to briefly direct your attention to the left-hand side of the page, where we summarize some of the key attributes of our [ FORTIS ] balance sheet. $1.5 trillion of cash and marketable securities as well as nearly $0.5 trillion of additional available borrowing capacity and a number of other metrics we show you every quarter.

Now turning to regulation. It's important to say that all of the post-2008 changes did, in fact, make the system safer, but it was at the cost of an incredibly complicated framework that was -- that has not always succeeded in its stated goals. Specifically, in the case of liquidity, you can see from the graph on the left, the increase in the percentage of highly liquid assets on bank balance sheets. Narrowly, that increase means that the typical balance sheet is less risky but it also means that less credit is being extended into the real economy. More importantly, despite this apparent reduction in risk, over the last decade, we've seen a number of instances of regulators taking ad hoc actions in response to liquidity challenges in the system, most prominently in the spring of 2023.

On the top of the page, you can see how our levels of CET1 access, the shaded area and bank LCR access the line have evolved since 2018, and you can see how we've moved from a period where we were closer to our capital requirements to a period now where we are closer to our liquidity requirements, and to a significant extent, this is true about the banking system as a whole as well. And as we say on the bottom right, the current strength of both the banking system and the macro environment makes it a good time to consider changes so the system is more resilient the next time it is challenged.

Unfortunately, I don't have time now to take you through all the dimensions of our analysis as well as our proposed solutions. But some of the key principles are on the page. And yes, the alphabet soup of regulatory liquidity acronyms was generated by AI and by our treasurer no less. In any case, the overarching theme is we believe the link between real-world liquidity management and regulatory requirements, including recovery and resolution planning should be stronger, in order to enable banks to manage through various stresses without the need for ad hoc interventions by the government.

A second ago, I talked about our nearly $2 trillion in liquidity resources but in LCR, only about $1 trillion of the cash and marketable securities were accounted and none of the available borrowing capacity is accounted. Aligning the definition of liquidity resources more closely with the collateral value of the assets on the balance sheet as defined by Central Bank facility haircuts would help to shrink the gap. In the end, the goal is to finish delivering on the promise of the post-2008 changes, a resilient system where bank failures are rare, but when they happen, they are orderly, do not require extraordinary government actions, and at the same time, the banking system as a whole is actively contributing to robust economic growth.

All right. Starting to wrap this up now. Each year, we update the stylized returns view to reflect relevant economic scenarios for the current environment. Using our internal outlook and estimated sensitivities to key variables we show the range of ROTCE outcomes across these scenarios over a medium-term period. The scenarios cover a broad range of economic conditions from benign to recessionary but importantly, we do not include a full-blown GFC style crisis.

Over the years, we've come to colocally refer to this page as the scarves page. So running with that, the scarves you see here illustrate a few important points. First, it's generally consistent with what our realized performance has looked like over the last 10 years. A range of returns above 17% when the economy is generally healthy and stable and lower but still solid returns above our cost of equity when the economy is less robust, but not in a severe recession.

Second, it demonstrates why we continue to feel that 17% is a reasonable expectation of our through-the-cycle returns. The dotted line represents the target. Some scenarios end up below it and some above it. In that context, we do periodically get asked whether we should raise the target, given the launch point is 20% and many scenarios produced returns above 17%. In short, the answer is no, and let me explain why.

This page will look somewhat familiar to you as I presented a similar one last year. But this year, we want to emphasize some different points. Over the years, you've heard us say that ROTCE is an output, not an input. What we mean by that is that we do not make decisions in order to achieve a particular outcome on ROTCE. Our focus is on growing long-term shareholder value, which we believe is best approximated by our ability to deploy capital at returns in excess of our cost of equity which is correlated to but not the same thing as achieving high ROTCE in isolation. Last year, I showed you that in practice, this means that much of our capital deployment will be in businesses that generate returns below 17% as we respond to the opportunity set and optimize across resource constraints. This year, we wanted to illustrate what that looks like firm-wide level, which we've done on the right.

Let me take a moment to explain this chart. The width of each bar is the capital of the firm, represented here by tangible book value, which has grown over time. So the bars have become wider. The Y-axis is ROTCE, and the height of each bar is the ROTCE in that year. The amount of SBA we deliver is a function of both the width of the bar and the portion of it that is above the indicative cost of equity line shown as the dark brown rectangles. In other words, the area in each quadrilateral above the line. As you can see at the bottom, our ability to generate returns in excess of our cost of equity is unrivaled by peers. Some of these concepts may seem self explanatory, but it's worth illustrating in the context of thinking about our target. For us, the 17% through the cycle target is not aspirational, rather, it serves as a helpful backstop measure to think about the trade-offs between investing in every single SBA positive business and focusing on maximizing returns.

For now, we believe this is the right number and we remain committed to generating long-term shareholder value through investments in growth as well as expense discipline. And talking about the long term, last year at Investor Day, each of our lines of business shared their long-term ambitions. While I won't go through every item on the page, I want to emphasize that we are making progress towards these goals, though, given the longer time horizon, you shouldn't expect progress to be linear. Our line of business CEOs will be on stage shortly to answer your questions about our businesses, and we'll gladly provide additional perspective.

In closing, as the slide shows, we believe the company's prospects are bright, and we are optimistic about the future. With that, I'm happy to take a few questions about what I've just discussed, and I would remind you that my colleagues will be on stage shortly. So while I'm happy to answer questions about the lines of business, you'll likely get higher-quality answers from that.

So Mikael, over to you.

Do you have any questions, raise your hand. We will go first to Manan Gosalia from Morgan Stanley.

Great. Manan Gosalia, Morgan Stanley. Thanks, Jeremy. In terms of Basel III game, you mentioned that there is some uncertainty associated with what the rules might be. [indiscernible] surcharges also, there's some uncertainty associated with that. But I guess once you have more certainty, how quickly can you deploy that excess capital, it sounds like with the liquidity slide that you also need some changes to come through on the liquidity side. Is that correct? And what is the time frame to deploy that?

Yes. Sure. So that's approximately correct, and you've made some relevant [indiscernible]. So let me just add a little bit of nuance there. First of all, I would reemphasize the point that you also made that, yes, as everyone is assuming at this point that the RWA outcome under Basel III approximately neutral at this point. And part of the reason for that is that the regulators have been quite transparent, including [indiscernible] and the speech recently on what she's thinking about mortgage RWA risk weights and so on.

So the information has been out there, and I think the consensus outcome is sort of converging to a relatively narrow one. But it's not over. And so until the rule actually comes out, I think we should just not jump yet, point one. And point two, people kind of forget about GSIB sometimes they don't realize that those are 2 separate rule makings. And [ GSIB ] is a very important thing that we continue to feel very strongly about the need to fix that in order to, among other things, ensure that the American banking system can remain globally competitive. The way that the GSIB surcharge punishes success is a real problem, as you obviously know, especially probably for us. So that's a big focus but fine.

Setting that aside, assuming that things come out roughly in line with consensus, the reality is that's been clear for some time, I would say. And we have had excess capital relative to any plausible range of outcome for some time. So I guess I would slightly challenge your employed mental model that we're kind of at the starting gate, ready for the starting gun to go off to start deploying. In reality, as I think my page has showed, we've done a bunch of [indiscernible] ready and that's just going to continue, again, in line with all of the above approach, we're going to deploy. We're going to grow our RWA. We've done buybacks, we've done dividends and all the other organic and inorganic opportunities are always on the table.

And on the final point, yes, like we can certainly deploy it in its current form without changes to liquidity. But at the margin, the stuff I showed on the page kind of highlights how -- what it winds up, meaning is that the capital deployment will be disproportionately focused in relatively higher risk density instruments. And that's fine. There are many opportunities there. But with the system as a whole needs is the broadest possible set of deployment to be unlocked so that we can do our part to drive economic growth and to achieve that, you need to address some of the liquidity things that I also point out.

All right. Ebrahim Poonawala from Bank of America.

Question on ROTCE. I think on the earnings call, you talked about incrementally when capital is deployed, the return on equity could be below the 17% target. I'm just wondering, as you see mature customer relationships across businesses, are those return on equity, the return profile of those north of maybe 17% or even 20%, and it's because you keep growing the bank and the incremental growth is below. I'm just trying to understand as we think about the maturation of the new clients that are coming in, structurally, is this becoming a more profitable bank?

Right. Okay. I mean that's an interesting question. I guess I think the answer, unfortunately, is quite nuanced, right? Because I think there's a couple of -- at least off the top of my head, 3 or 4 different dynamics that sometimes compete with each other or shall we say. On the one hand, as you know, we're doing a ton of investment. We're growing. We're onboarding new clients. In many cases, I'm looking at some of my colleagues from the corporate and investment bank, the growth of new clients comes with lending. That lending is relatively low returning, and you eventually get other business.

So yes, that's an example of an investment today that as it matures, has higher returns. Similarly, CCB branch expansion strategy obviously has the same types of characteristics, right? So yes, sure. If you want to, you can persuade yourself that the maturation of many of the investments that we've made are a source of a significant tailwind going forward. On the other hand, like there's a bunch of excess capital and we generate a bunch of organic capital every year. And as I think we tried to emphasize this year and we emphasized last year too, it is simply value destructive to return capital to shareholders just because the opportunity does not return 17%. And when the alternative is buying back stock at whatever, 2.8 or 3x tangible book. So we're -- and that's also not the same thing as being a sort of dumb SBA maximizing machine.

Jamie is not a fan of the SVA acronym, which is why we talk about it as long-term shareholder value generation. Buying generic par assets and adding bank leverage to them is fake [ SVA ]. That's not what we're going to do. but organic good customer business on a 14% return is obviously better for us than buying back stock. And so that's how you get the mix of push and pull in terms of the evolution of the ROTCE.

All right. We'll take our last question for Jeremy from the Zoom. Matt O'Connor from Deutsche Bank.

All right. I just want to clarify on the markets net AI. I guess, first.

We're having some audio problems Matt.

Am I echoing bad?

There's like a specific audio issue. The image looks good, actually, your bandwidth is probably.

Maybe I'll email my question and it can be addressed later.

Probably [indiscernible] you should turn your camera off though.

How about now?

No.

Sorry. Matt, we'll go to the next question, sorry. Maybe we'll take one from the room, if there is one. Yes, Chris Kotowski. Go ahead.

Chris Kotowski from Oppenheimer. Just all of us listen to an awful lot of bank earnings calls. And just 2 or 3 years ago, it was like everybody was on an RWA diet, everybody was getting their returns higher. And now I feel like every earnings call you're on every bank management feels like they've earned the right to grow and to spend more and you even hear it from the European banks and [indiscernible] kind of phrase there a little expense number. And I'm wondering, have you noticed that have an impact on the effectiveness of your spending? Has the competition increased? And how would you measure that?

Now look, I think there's absolutely no question that the competition under. We've been talking about that for a while, right? I mean the rest of the system has been recurring itself for a long time. U.S. system and even the European system. And at this point, there was a while where there were some significant tailwinds just from the weaknesses of our competitors. I just don't think that's true anymore. And you see that in a bunch of different ways. And I think my colleagues can probably give you examples in a second. So that's fine, right? I mean that's hopefully, we never shy away from a company.

So it's there, it's real, and it's hard. And we talk a lot about the nature of the competition is different too. Like it's not just the large traditional banks, it's also other types of competitors. So it's everywhere. And that's why, obviously, we're going to do judiciously we're going to do it with discipline. We're going to do it in an economically rational way. But this is not the environment in which to be penny-wise and [indiscernible] some fundamental sense Yes, I agree with you. I don't measure it, but I agree.

All right. Thank you, Jeremy, and I will now let the LOB heads take the stage.

Please welcome to the stage, Marianne Lake, Mary Callahan Erdoes, Doug Petno and Troy Rohrbaugh.

So I know you're all very eager to ask questions. But before that, I actually have a question and it is for Troy. And I was wondering if you could take us through the banking and markets guidance for Q1.

Sure. I feel like this year, Mikael, I want to go with guidance before you get to ask questions. This quarter has started out for both banking and markets very well. So in IB fees year-on-year, we're currently forecasting up mid-teens. And if the quarter remains constructive, that could easily be the high teens. And then for markets year-on-year, we're currently forecasting up mid-teens as well. But as all of you know, that is very dependent upon volatility and other factors in the market. And it feels like volatility continues to pick up almost every day. So again, we're hopeful for the quarter. It started well, but there's definitely plenty left of it.

All right. Thank you, Troy. Mike Mayo. Go ahead.

This is a question for everybody on the panel, and we're in the middle of the AI scare trade and some of the views expressed I think, have some merit, right? You have to adapt to survive. Remember the old JPMorgan in the early '90s, they didn't quite adapt and now you guys own them. So there is some merit to this. On the other hand, some of the [indiscernible] express team really, really stupid. So when you look at your businesses, are you in AI and tech victim or beneficiary and in plain English, if you're a beneficiary, why is that the case? And what metrics are you monitoring?

I could just start off by saying at JPMorgan could be an endgame winner in the AI space. And you've heard it from a lot of the sort of more prolific people in the field say that it's really for the [indiscernible] and so if you have a very high tech spend and you know exactly what you're doing and where you're headed and you're very disciplined about it, you have a higher probability that you're going to have success. If you also have taken pretty aggressive steps, we were one of the first companies to have both [ Lori Beer and Teresa ] beyond the operating committee with a dedicated AI specialists to help us to think through how we were going to organize ourselves, how we were going to be disciplined about it, how we were going to be precise about what we were going to do and how we were going to measure it. And each one of us benefits from each other's successes.

We just had a business review this morning at the operating committee, and we talked about something that I did in my line of business in Asset and Wealth Management, where we took 200 people. We tried to figure out some of the controls work they have to do, where each one of them have to read 50-plus pages of something and then compare and contrast and ask the right controls questions. With some very sophisticated AI work that we did, we were able to take that technology. We have now spread it to 3,000 people across the company that have done it, and we've identified another 3, 4, maybe even 5,000 people that will be able to benefit from that. technology, the 80 specific pumps that we've put in and make it safer, better, less error prone and frankly, take out the no joy work in our employees daily lives so that they can get on to higher level added value.

Yes. I'm happy to add to it, too. So I think there's a lot to be said for the fact that you're going to get more efficiency and the competition will become more efficient, but we have some strategic advantages that we've nurtured over decades. So trust, confidence, value beyond price, our customer relationships, both the scale of them and the scale of everything, quite frankly, the depth of our relationships and our data assets. So we have a bunch of strategic assets that I think are hard to replicate. That will be one of the reasons. And then only the paranoid survive.

So we are walking around thinking we have a defined right to success. We are walking around. We're thinking about how to optimize the value that we give to our customers, how to perfect our processes and our systems there will be price competition, but we compete on a lot more than price. So deep sense of and healthy paranoia, lots of strategic assets.

Maybe just to add on Mary's points, we didn't just start this work in the last couple of years. We have a center of excellence for machine learning and AI over the last decade. And to paint for -- with a finer brush within CIB, just to give you a sense of the categories of opportunity for us. One big standout category is just giving value back to clients to think agentic commerce better cash flow forecasting and analytics. The team productivity, banker enablement, sales enablement, we see real productivity gains there through AI and advanced analytics, we obviously have AI and ops and AI and tech.

So when you think about these coding assistance, we're essentially a tech company. We're a center of the bull's eye for deploying those capabilities. We're using it in risk-fraud compliance, extensive use basis across those and then pricing optimization. So I think loans deposit securities and have a higher order of analytics around that. Every one of those categories has multiple use cases, dedicated teams trackable KPIs. And then there's a whole book of work that's just kind of table stakes and unmeasurable and you'll never really know. But you need to do it and actually have to have the modern tech stack, modern data stack and a foundation to be competitive. But I think what were the categories we were giving one or the other. I think we're in the one you'd want us to be in.

I mean all I would add is, obviously, I grew with [indiscernible] and I think Marianne's point about the paranoia that we live in around this for every one of our businesses. We don't just think it holistically at our level or even the next level down, like every small piece of our franchise, we have dedicated teams, embedded people that are focused on every day.

And I think one of the main points is the size and scale, even marginal gains in efficiency that we can get from AI just accrue at levels that other people don't have. If you look at the size and scale of just something as simple as FX, just 0.25 basis point with our size and scale, just gives us a revenue outcome that other people don't have. And that's manifest across our whole business. I think that's a huge advantage if we get it right.

All right. Erika Najarian, go ahead.

Thank you for my question. I feel like the dorky student in front of the class. The positive narrative where that started the year has started very quickly over the past 2 weeks and maybe wanted to address one for the CIB business and one Mary for your business. The first is the investment banking pipeline. I think there are a lot of concerns that given the volatility, the pipeline is not as robust as people would like for this year. Additionally, it would be interesting to see if there are any sort of update in terms of sponsor sentiment given the market hiccup.

And Mary, alternatives within retail has been a big positive theme in terms of growth. And I'm wondering if you could shed some light in terms of how you're seeing the next 6 to 12 months shape up in terms of progress in penetration.

I mean I can just start, that's [ Anton ] [indiscernible] in the back of the room and runs the part of the alternatives business for us that focuses on making sure that we do that we find the right investments, both inside JPMorgan as well as across the street for all of our GPs that we invest in. And the most important thing is size of risk that's appropriate for clients. And so I can't comment on how the rest of the industry is doing that. But as you can imagine at JPMorgan, risk-adjusted return rightsizing, proper disclosures, liquidity stress testing for each and every one of our clients, all the way down to the first-time buyer of something is of utmost importance.

And so we think that we have a standard that's pretty high for that, and we are watching every one of these little ripples that you see in the market. We have forecasted it. We've been talking about that. You've heard that from Jamie on many earnings calls, talking about when you put less liquid investments into things that people are expecting liquidity in, it needs to have been placed properly in the client portfolios, and we're hoping that, that's the case across what we see out there. whether those should be in all sorts of accounts or only in the ones that it's properly managed or that's what the industry is going to quickly find out here.

Yes. And so for investment banking, you heard the guidance in the caveat on high teens was pointing to exactly the market conditions you described. So and last year showed us it can go hot and cold pretty quickly. But we started the year strong. Pipelines were very good. and it was broad-based. It was across DCM, ECM and M&A. The one thing I will say in M&A, these are powerful strategic drivers. Companies really see a strategic imperative to be bigger in global and they need growth. And I think that they're seeing through a lot of market disruption, whether it be uncertainty around tariffs, some of this AI disruption, I think a lot of these transactions will survive that volatility and carry on. Capital markets will be much more subject to whatever the broader fundamentals are, but the pipelines are very strong.

And it's not simply a U.S. marketplace, a large majority of the wallets in the U.S., but we're seeing strength in Europe, seeing tremendous activity in Japan. So it's very much a global opportunity right at this moment. In terms of private equity, if the market shut down, if the IPO market slows down, it is the most fickle of the capital markets, and they slow down some of their exits, but they have tremendous dry powder. They're looking for opportunities to invest and they're constantly hunting and market shake-ups create disruption for them and they behave opportunistically as well. So the sentiment hasn't really changed. I think they're a little frustrated with the pace at which they're monetizing their investments but still a tremendous opportunity, and we're staying very focused on the private equity community.

All right. Let's do zoom question, Mr. Cassidy from RBC.

This is directed a little bit of a follow-up on Doug's comments. But to Doug and Troy, we've seen some disruption in the private credit markets very recently. What's your guys read on that, number one? And number two, what are the opportunities or consequences that we should all be looking out for a bank like yours because of what's going on in the private credit markets at this time.

Sure. So I won't comment on any specific player in the market. They're all our clients, and you can read the press just like we do. But I would say, I mean, people should be -- I'm shocked that people are shocked. I mean the reality is, in this environment, as the world gets more volatile, as you get towards the end of the cycle, this outcomes should be expected. So we prepare for all of these scenarios. We stress test our book. We're very thoughtful about the risk we take. We feel that in many ways, we're quite conservative compared to our peer set. So this is just part of the scenario analysis that we do on a regular basis.

So again, I think at this point, it feels a bit isolated to a handful of situations but that could quite easily change, and we're prepared for that, both from managing our own portfolio, which we feel quite comfortable about at this point and also from the opportunity it potentially gives us and others. So at this point, there's still a lot of capital in the private credit ecosystem. We see lots of deployment. We see lots of people chasing opportunities. So this hasn't changed that overall ecosystem, but we're watching it closely. We're very risk disciplined. We're comfortable with where we are. But I'm just a little surprised that people are so surprised. This is inevitable.

The only thing I would add is our strategy is to serve clients and lending is an outcome, not the strategy. And we went into to direct lending product, specifically. So we'd have a broader base of debt solutions, credit solutions that can provide an agnostic capital structure financing alternative we're not trying to acquire loans. We're building relationships and we take a [indiscernible]. So our model is slightly different. And the underwriters that are underwriting those private credit or the direct lending assets for us are the same underwriters that underwrite our C&I loans generally and bringing all the level of expertise, the industry knowledge, the through-the-cycle judgment and it's not a loan aggregation business. It's a client business.

John McDonald from Truist. Go ahead.

Question for Marianne. Marianne to what extent are you seeing this revitalization of competitors and increased pressure on, especially in retail banking in areas you're looking to grow? And then when you think about your embedded growth from all the building you've done in branches, how should we contextualize this 1.7 net new checking? Is that a hard number to keep up? Or is that something you think you can grow over the next couple of years?

Yes. So thanks for the question. I would say that I mean you've seen that a lot of our competitors have strategies now that are shocking be similar and playbooks that are similar. And I think that imitation is the highest form of flattery, I suppose. And so what we have been doing and investing in for decades is working. It's working in terms of our customer experience. You saw we have record high customer experience is working in terms of deposit share and profitability. And so yes, we've seen lots of people announced plans. I will say it is easier than done. Building branches is one thing, building them in the right places, building them well, hiring the right team, having the right products and services is part of it.

So when you look at our share gains, in Consumer Banking, while 40% of it has been on new build, 60% of it has been in our legacy footprint because we're just continually refreshing and evolving our products and services and just doing it better. So we have a long track record of doing it. So it will take a bit for anyone to be able to build a muscle to catch that up. In terms of customer acquisition, which is the beginning of everything, we've been acquiring customers at a 3% to 4% CAGR pretty much consistently over time, 3% last year, 2-ish million net checking accounts, 1.7 million last year. So I would say there was a phenomenon in 2025, well.

No, I'll stop. Now I'm kidding. Phenomenal in 2025, so we saw -- it was a little harder last year. The nonresident population was an issue. And so -- but we're going to grow over that this year, and we would expect that to continue onwards and upwards. So we feel like we have the right playbook. We know what we're doing. We expect our share gains to continue. But we do expect the competition to be there. Everybody is trying and it's not just in consumer banking. We talked -- somebody asked a question earlier about the competitiveness everywhere, premium card base is competitive, very competitive right now, and we're still doing quite well. So yes.

Right. Ken go ahead. Ken Usdin.

Ken Usdin from Autonomous. Maybe for the wholesale side of the business, a different question on wholesale deposits and just with the advent of tokenization and potential use cases for stablecoin? Just how are you adapting the ecosystem based on the building blocks that you obviously already have well established in scale as we go forward in terms of just does it become all embedded parts of the of the environment at JPMorgan. How are you kind of facing that? And how do you expect the defensibility of new products and offerings coming up also in...

Sure. I'll take a stab at it first. So first off, I mean, you said it yourself, we have a great starting point in this business. We've been investing in the space for over a decade, [indiscernible] over here and I highly recommended cocktails that you grab because they are the experts in the space, but they've been investing in [ Canexus ] for over a decade. We have incredible products already in the space, whether that be our own JPMorgan coin, which is the tokenized deposit, our support and our participation in the stable coin environment, our tokenization of money market funds and other aspects of the business and other growing products.

So I think we feel really comfortable from a bank perspective, we are either at or beyond our peer set. We also embedded in each one of our businesses on the wholesale side, whether that be secure payments, banking or markets at the business level and we spend quite a bit of time on what the future ecosystem could look like.

So I would break it into 2 parts. In the market space, there's like tokenized assets or securities. I think in some ways, we may be trying to solve a problem that doesn't exist. But the reality is if we go that way as an industry, we're fully prepared. We're ready to trade it. We're ready to provide custody out of security service for on a digital ledger for these types of assets. So we would provide a same services that we provide in the traditional securities, and we think we'll be very competitive there. On the payment side, maximum are completely ready for the space. It's our view, tokenizes deposits is the more likely logical path forward, but that could change. We think that while it may have some effects on our business in terms of people shifting from traditional deposits to tokenized deposits. With our capabilities, we can continue to grow share, and we'll be finding any of those outcomes, and we're prepared for it.

Yes. And of course, our clients expect that. They expect one-stop shopping from JPMorgan. So we have to have every solution for them, be able to go on a continuum and things change and we're there or them, and that's the most important.

All right. We'll take a question from the webcast. So Martinez, please go ahead.

[ Sol ] I think that's for you.

Technical difficulty.

We will [indiscernible], and we'll go to Steven Chubak.

So I was actually hoping to build on that last question, but really look at tokenization from a retail perspective because Marianne one of the key concerns that we've been hearing from folks increasingly is whether it's the emergence of agentic tools that people can leverage to optimize their cash balances and the yields that they're earning and the emergence of tokenized money market funds and deposits, do you view -- do you see a potential risk that if that's introduced at the retail bank that you are going to see some level of deposit attrition as these customers become more sophisticated and just look to optimize some of their returns. And any perspective you can offer whether this is real risk in your view would be very helpful.

Yes. So I mean, listen, I think, first of all, I should say that yield optimization is not a new phenomenon. There are plenty of high-yield options that exist today for consumers who are looking for that, including within our own complex, including within the bank and in Asset Management. And we sort of offer that, but you can go elsewhere and moving money is increasingly easy. And so of course, you'll see a little bit more help in optimization, but this is not something that has been that difficult for people. So I would just say that, that risk has been out there. Therefore, when you think about, for example, the sort of advent of are you thinking...

Yes, it's really more in the context of immediate settlement versus if I'm a Chase customer, I have to sell a money market position, wait a day, transfer it to a checking account and potentially doing things like bill pay from some sort of tokenized vehicle get that immediate term.

So in that sense, I would say the answer for retail is similar to the answer for Troy, which is for the vast, vast majority of consumer use cases today to all the practical intents and purposes, there's access to 24/7 real-time. It is true that in real assets, there is some lag. And so we're similarly going to be investing in making sure using [ Canexus ] for proprietary solutions. You've seen some announcements with [ EWS ] on a consortium for payments. We're going to continue to invest in understanding how we could continue to reduce friction in some of those processes, but we can provide real-time access to funds within our ecosystem already today. I think that digital, I think that blockchain, I think the tokenized assets, I think that stable points may be part of the future for retail at some point in time. But I don't think that's going to be in the immediate future. We're building the capabilities right now.

We'll try again with the Zoom. Chris McGratty from KBW.

Great. Moving to Slide 11, where you unpack the components of PPNR over the past 5 years. I think it's really helpful and powerful. I believe in Jeremy's remarks, you talked about perhaps being past peak modernization. So I guess my question is, number one, how should we think about the degree of operating leverage over the medium term? And then Secondarily, that's the right conclusion. Maybe comments by business line would be great.

I'm going to -- all right. I'm back. So look, I don't want to like bore you with like we don't believe in operating leverage speech, but I kind of do things that I need to give it. And I think as we were thinking about this, so let me just give it because it's actually interesting. So number one, in any given year, and we've seen this over the prior cycle, realistically, the operating leverage number is going to be primarily driven by revenue dynamics, not expense [indiscernible]. Number two, as you go from the short term to the long term, the question is then, okay, Jamie always talks about how like it's not realistic to have like the ever-expanding margins that are associated actually delivering operating leverage year after year for years is not consistent with capitalism.

Now sure, if you're a company with a serious expense problem that's extremely inefficient it's reasonable to have your kind of near-term plan be I'm going to deliver a lot of operating leverage over the next few years, and that's going to return me to reasonable margins, and that is my PPNR growth delivery strategy. But a company like us, which is starting at a very efficient place with very healthy margins, operating leverage is just not how we deliver growth fundamentally. Now obviously, that's not the same as saying we don't care about expenses. And we are very committed to being extremely disciplined about it. We do recognize the market doesn't love years like this year where according to the analyst consensus, we will have negative operating leverage. But we believe very strongly that when you're in the position that we're in as a company focusing on those types metrics is a recipe for under investing in the future and for seriously weakening our strategic position.

So in the context of that, the peak modernization point is that, like reaching the peak is not the same as having it go to zero. So we're still spending money on modernization, and we will always modernize our infrastructure. It's just the focus is shifting from kind of a particular momentum, a lot of focus on cleaning up the data center state to a focus on modernizing applications, rewriting things, modernizing data and et. cetera.

Yes. And if I just maybe build on that point slightly, because when you think about our expense base and what we spend on strategic investments, and I'll just use CCB as an example of that, a lot of our investments payback will sort of break even over a few years and pay back over a longer period, but are extremely profitable. And so when we build branches, when we acquire cards, when we're building -- spending on marketing more broadly, these are investments that are going to drive long-term growth and profitability at strong margin. And we don't want to feel constrained this year because of dynamics that are going on. So we're just looking very much at the long term and spending every accretive dollar that we can well.

Okay. Glenn Schorr, go ahead.

Glenn Schorr at Evercore. Troy, I wanted to see if we could drill down a little bit more on your shock that people are shocked comment. So I was a little shocked here.

I think you should save that one for Jamie.

The implication is -- and forgive me for putting words and so put me straight, if I get -- but the implication is that this is not liquidity-led volatility on certain products. This is -- there were some loans extended that are actually going to have some real loss content. If that's the case, that means the equity is zero. So I guess I'm just looking for a perspective, I heard your comments about your book, but perspective, overall, what kind of loss content are we looking at? And is it isolated in private markets because it's a wide-ranging investment fill that usually credit cycles aren't isolated to public or private. It's a broader swath of companies.

Yes. I mean I almost think in some ways, you answered your own question. We don't view this depending on how the economic environment develops, either this year or in the even into '27 that it will be isolated to a very small part of private credit. So first of all, when we say private credit, the ecosystem is huge now. It goes from very large investment-grade deals to very small middle market companies that are below investment grade. So it's a huge spectrum. Also, the public and private markets are merging together. Some of the largest deals out there are now hybrid deals, there are some very large deals that in some ways are done in the private space, but look like public deals for all intents and purposes.

So our view is that this isn't going to be isolated to just private credit. As you move forward, get near the end of a cycle, if it were to get more of a significant downturn we'd expect this to be a little bit more broad-based and not be isolated to just private credit. So the boss may have a slightly different view. I don't think so. But more broadly, like we don't think about it as just private credit. We think about it as the whole credit ecosystem. As Doug mentioned, we use the same underwriting standards. Yes, we understand each space is different. They all have their own characteristics, but ultimately, a credit and it's going to be across the whole spectrum if we get a more significant downturn. It won't be isolated there.

In terms of your question of where are we specifically right now, it appears to be isolated, much like the things we announced third quarter were isolated from our perspective. It doesn't mean they're good or we're proud of them. But ultimately, more and more of these things happen as you get late cycle, at this point, they're arguably isolated, but that could change.

Ebrahim Poonawala. Go ahead.

Troy just talk to us in terms of -- Jeremy talked about all the changes in regulations. When we think about banks versus nonbanks regulatory arbitrage, there have been many areas where banks have lost market share over the last decade. When you look at the playing field today, do you think you're -- you've run the markets business for a long time, are you better positioned to compete with the nonbanks. So when we think about market makers trying to get into high-touch trading gain share there. Just when you look through all of that, do you think you're better positioned to defend and even gain share relative to some of these players?

Sure, you mean specifically to markets? Or do you mean broadly to the CIB? Because we compete with nonbanks in [indiscernible].

Yes, one, just the likes of Citadel Securities leaning into high touch. Can you defend that share one? And then just more broadly, as we think about even lending -- you heard [ Scott Besson ] talked about lending move to private credit. He wants it into banks. Is that happening?

Sure. That's sort of what I was getting at. I'll separate the 2. So in markets, I mean everyone mentioned Citadel Securities and [ Jane ] Street because they've been incredibly successful. They've done an amazing job. They've grown significantly. I think from the very beginning, we know them very well. We compete with them in some smarts of our business very aggressively with each other, other parts we partner and other parts, they're a real client. And we have like a long track record of having relationships like that. They happen to be very good. We've always assumed that they would be successful.

But without talking about them specifically, I don't think their success or nonbank market makers are really because of regulator. I think it's electronification in the market, overall change in market structure, the fact that they've done a very good job, the advent of [ quant ] trading. So we're going to absolutely compete in the space. I feel very comfortable that we can hold our own and gain share. They may gain share as well, but it will arguably, in our view, be at the expense of someone else. And we're prepared to go to toe to toe, not specifically with the 2 of them, but with everyone in the space, including them.

I think it's going to be hard for some of the players that are more traditional because they're not going to have the resources to invest in the space. I don't think it's because of regulation just because there's a change in capital rules, it's not going to change our ability or what we have to do to compete with them in that space. We're going to compete, but regulation won't be the driver of that. When it comes to nonbank lenders, again, I don't think the regulation is going to change enough to dramatically change the playing field. But again, we're competing there. We've been competing -- but as Doug said, like we have a very different business model there. Whereas in market making, we have the same business model. We are market makers. We're competing for the same trades particularly as these nonbanks go to higher touch parts of the business.

But in the lending space, they're lending to get assets like that's their goal. That isn't our goal. As Doug mentioned, our goal is to have a holistic relationship with our clients. And we feel like we're doing a really good job there. We have our own direct lending solution. I mentioned previously in the month that we have deployed almost $14 billion of capital right now there. At the end of last year, that's about where we were. We have over $25 billion of partner capital available. We're in the heart of the ecosystem. We're doing a lot of financing. We're doing a lot of lending. We're not doing it to develop assets like that's not what we do. We're doing it to be in the ecosystem to create a halo effect with our clients and create velocity in our portfolios. And we really have a competitive advantage because we have all these ancillary products that we want to do with these clients. The people that are just lending don't.

So we think both can grow. I know everyone likes to write the article about us fighting with each other. But I think in the most part, there's opportunity for both sides and we will compete there.

It's exactly why the last question that was just asked about expense management and why you would take a break, like we would never take a break for the areas that we're fiercely competing against. We're going to win. We're all focused on the long-term shareholder value up here. No one has a short-term measure at all for wanting to hit a profit target of any kind. We could if we want it to, you could just shut things off in a short term, if that's not how this place is driven. And so you shouldn't expect it to happen, which is exactly why Jeremy's point about how the whole thing works is so important.

All right. Gerard Cassidy on the Zoom.

Can you hear you, Mikael?

Yes, sir.

This is for Mary. Obviously, 2025 was another spectacular year for Wealth Management, Asset Management at JPMorgan. Two-part question. First, when all the excess capital, does it make sense you've had great organic growth, of course. Does it ever make sense to do an acquisition in your space, in your specific area? And then second, can you parse out for us how much of the bull market or the asset inflation we've all seen over the last 2 or 3 years, how has that contributed to the success that you guys have had?

In Asset & Wealth Management, we had a tremendous year last year, over $550 billion with flows like Jeremy had mentioned. And very importantly, thanks to Ben and his obsession with the ROE number, we hit a 40% ROE target, and we're well above our targets that we laid out for you of 25% margin, 25% ROE, 4% flows and 5% revenue growth. And we will continue to grow on those. The markets have been very healthy. So that has obviously helped. But our investment performance is the thing that is our North Star, as you always know. And so our investment performance garners new clients as well as more assets in.

On the M&A front, it's something we think about every single day. I think Ben signed a different NDA once every 2 weeks last year. And so there are about 25 of them. Most of the big deals, except for one big one last year, we had seen and turned down for a variety of reasons, it didn't fit either culturally or otherwise. But it is something that we are always in the game on. We are always looking, we are always learning. It's a very important part of the muscles that we have here, not just in Asset and Wealth Management, but in each of our businesses, we need to know what's going on. We need to know if it's better to buy or to build organic or acquisition. And so that's what you would expect us to be doing, and that's what we're doing each and every day.

Erika, go ahead.

This question is for both Marianne and Mary and follow-up to Mike's question on AI. Another part of the market disruption is this concept that AI will disrupt financial advisers, that there'd be no need for financial advisers. And I guess I would love your just raw response to that, Mary.

And Marianne, as you think about acquiring client assets through the branch network, is there a role for AI in terms of helping customers in the beginning of their investment journey and tax planning journey?

So yes. So AI for our bankers in the branches and for our advisers to whom they refer their clients, their sort of adviser tools and wealth planning tools are a critical part of our strategy and have been. It's one of the reasons why we're seeing adviser productivity go up so much, but also while we're seeing record levels of client satisfaction, too. And so using what we know about our customers from their deep relationships they have with us being able to deploy that through -- with AI to the desktop of advisers and the desktop of bankers has meant that we've been able to deliver twice as many net flows per adviser over the last 5 years. So it's definitely a big part of it, and we're just at the beginning.

Honestly. Yes. I would just say -- I actually think about it very differently. I think that the companies that invest the most in AI, particularly in this space where you need an adviser, not just on the wealth management front, but when you think about our investment bankers, you think about our asset management advisers when you're talking to the CIOs of different sovereign wealth funds, et cetera. The more you invest, the more the ecosystem creates a moat for you in the company because you know more about the client and you know more about the adviser so that each and every day, when the sell-off happened today, you can know immediately who you should be calling, what you should be -- we talked about it at our operating committee today. What you should be grading if your stock drops 5% while you're sitting in a meeting, like how do you be thinking about that? That stuff starts to be highly fine-tuned but not just AI alone.

And so we had a deep dive on an AI question that I had with [ Dave Frame ] and his team last week, who runs a global private bank. And one of the things that AI will do is it will take what you say to it and it will take it seriously. And so if a client says, "I don't like fixed income or I don't like bonds." And you find that their portfolio just continues to morph into things without fixed income of any kind or any ballast to their portfolio. That's not the right answer, but that's where AI will go. And so you need the combination of really smart AI and then really smart advisers to say, you need to counteract what it's what you're feeding the AI in order to give the right advice.

It would be the same thing on whether you stay private longer or you go public or all these things like -- so there's a very intentional way that we are creating our AI systems here in JPMorgan where we take the best of the models outside and over cocktails, I think it's really important. You talk to [ Teresa ] and [ Laurie ] and [ Derek ] and the whole team because embedding it in what we do takes the decades of experience that we have fine tunes it to help our people get smarter, better, faster, cheaper, quicker, all that stuff and then creates the thought that as a client, the more you know about me, the more you see what my questions are, how could I ever not be with you because somebody else doesn't have all that information and all that history.

So I think again, it just goes to the original question that Mike asked, which is you're an endgame winner if you are heavily invested in these areas and you obsess about it every single day, which is like what you would feel if you walk to any of the floors right now.

And there was a thing in that paper that said, a relationship business might be dead if the relationship is just a human faced fiction. That's not what this is, right? So when our customers come in for advice, whether at the beginning of their journey, whether it's later on, whether it's a company, they're coming in to get like real advisory and real help and the human in the loop is definitely is a part of that.

Manan Gosalia, go ahead.

Manan Gosalia, Morgan Stanley. Marianne, can you talk about the international opportunity in your business? And how do you size that on both the deposit side and the lending side?

Yes. So I mean, we're at the relatively early stages of the consumer -- international consumer expansion, although very excited about it. So remember, we really only launched in the U.K. in 2021. So we're an infant in that context. And we aim for a multi-country digital bank at the intersection of banking and investing that sort of differentiates on service and value. We have seen really great momentum in the U.K. And so in the U.K., we have 2.8 million customers and $35 billion deposits. Obviously, there are some limitations to how much you can grow in the U.K. if you don't want to become a ring-fenced bank. And so we're not at that stage yet.

What we're doing is expanding our product offering and deepening into primary relationships and looking for primacy. And we're entering Germany in the second quarter of this year with a savings-led proposition. And so we're in the early stages. So we're not declaring this as a goal of some number of deposits. We're looking for primary relationships. We're looking for value for our customers and value for us. JPMorgan Personal Investing is also a really important part of that. So we bought an asset, we've integrated it, rebranded it, JPMorgan Personal Investing. That's also scaling really nicely at $12.5 billion of assets under management and integrating that with banking, delivering on self-directed delivering on pensions is a big part of it. So we're early, early days right now. Very, very, very good momentum. We're super excited. There's no one in this company, including Jamie that is more excited than me about the proposition of having tens of millions of engaged European or international we've seen it above. Hundreds of millions, [indiscernible] of millions. We'll get to hundreds of millions.

All right. We'll take one last question for the break. Ken?

Marianne, can you talk a little bit -- Jeremy mentioned that credit is in good shape and expectations as the fine but remain alert. Talk about both sides of the K, I think there's more questions today about the top end of the K then there's even been about the bottom end of the K of late. So just what might be you looking for in the data that could be at least different than just unemployment rate? And how do you see that -- the trends on the top and the bottom evolving?

Yes. So we have -- I mean, I don't actually have risk. We have an entire pack of leading indicators across the board that we look at but some obvious ones like payment rate in card still look in line with expectations. Typically, we -- when subprime auto was a debate, Auto is at the top of the payment hierarchy for consumers, people need their cars. And so when they default on their cars, you usually see that they've already started defaulting on unsecured credit. We're not seeing any of that. And so early -- like roll rates, early roll rates are steady. Year-over-year delinquencies are down. Everything looks pretty solid actually goes right now, I can't see any word. And so we're not seeing any new trends.

Now on the K-shape, if we look at the bottom end, and I think this is what Jeremy was talking about earlier, we are seeing a continued separation between the sort of higher earners and lower earners, but we're not seeing deterioration at the lower end. So we're still seeing everything is solid. And nothing is that so out of track from pre-pandemic trends as to be concerning. So as we sit here today and remember in card, which is the elephant in the room for us, the first 6 months of next year is already baked. We shifted our guidance down at the end of last year, the losses of between 3.3% and 3.6% and we're going to come in at the lower end of that range so far, all things being equal.

All right. Thank you. We will now take a short break.

[Break]

Please take your seats. Our program is about to begin. Welcome to the stage Jamie Dimon.

So I can see a bunch of people down here. I didn't realize that. I'm going to go right to Q&A folks, but I don't have to describe it many times over cocktails. It's arthritis, own spurs, old injuries, they had to get fixed because it was killing me. I hope it worked.

Okay. Mike, you've been very quiet so far. So why don't you go ahead?

We were thinking it was a curling injury? Let's just go right to the big -- you have so much excess capital. This is a unique window for you to do a deal, do something different. I know the company update is push the gas on what you've been doing all along, we get it. But sometimes, you get opportunities we have the capital, there's liquidity in the market. You're the #1 position, you're expanding in Europe. So what about buying a payment firm or non-U.S. bank or when you think about your pool of possibilities, what's in that pool?

Yes. Look, that's a great question because obviously, inorganic is very important. I think the most important thing that you guys are shareholders and represent shareholders. We can grow organically in every business we're in. Organic growth is hard, but it's your way, your culture, your people, your technology, any merger you do. Any one of them, you are talking about consolidating systems and people and back offices, the comm schemes and cultures and they're hard. I like the fact organic works. And I will make a prediction, we can deploy all that $40 billion to $50 billion organically over the next 5 years. That's what I believe now. And I believe that to be true because of [indiscernible].

So [indiscernible] comes sitting over here. I hope you guys talked about over cocktails, but we said $10 billion of investment, well, we could do $20 billion. And the deployment of capital, I think, will be much faster SRI. I think the opportunities in markets and investment banking globally are pretty large. It's very hard. We look at -- and Mary mentioned that she looks a lot of stuff, I'd love Mary to buy something if it makes sense. But if it doesn't make sense, I see George here and [indiscernible] pill back there. These guys have the ability to just to grow and hire people. David Frank can hire people and Martin [indiscernible] on and -- and we like that. So yes, we'd love to do something that.

Payments I would look at all the time. We've done several. Some did not work, as you know, but that doesn't mean we wouldn't try again. In commercial banking, investment banking, it seems very hard to meet it growing ourselves organically wouldn't be better. And you're hiring -- you take other people's books and other people's systems and other people's credit and their loans and stuff like that. And then they didn't mention it, but technology, there are some examples. We're putting $30 million into payments technology can create incremental revenues of $60 million or $70 million perpetually. So -- and we're doing that. That's in those numbers you saw.

So organic growth, I get it. So what's your scorecard to measure your company's success using AI or technology? Is it revenues per employee should go up 10%, 20%, 30%? What metrics can we see on the outside other than just the end result market share to know that you're spending that $20 billion this year wisely.

Of the $20 billion or AI?

I mean just generally, what's your scorecard.

AI, I think they all spoke about it. We were 6,000 applications. And we never come to you guys and said, "Well, here we spend another $10 million on the global FX system to create this amount of revenue to justify it." And we simply can't do that. every single thing we do in AI and technology like in AI their NPVs. Some are revenue enhancements, some are cost of voyage, some are risk and fraud. Some -- there are some things in GenAI do not we can measure it. We don't give a credit in terms of that because it's too vague. Like we have LLM model, 150,000 people use it every week. They think they're saving 4 hours a day. That's not an MPV. We don't see the 4 hours a day in terms of reduced headcount like that. So we look at all of it. And it's deeply embedded in what we do. And that's true [indiscernible] project.

I think the harder thing to measure has always been tech projects. That's been true my whole life. It's also been true my whole at the tech is what changes everything, like everything, going to mainframe, going to servers, going to speed, going to -- when I take 5 days to do a trade and equities and $0.25, and now it's seconds and not even pennies anymore. So that's tech, it is all tech.

So just one last one. The AI, [ Scartrade ], some people think that JPMorgan is going to be a victim very cocktail napkin explanation. Why is JPMorgan an AI winner when somebody in the market today, this week, the last couple of weeks, thinks that you and the banking industry will be a loser.

Yes. No, look, look, the -- in my view, we will be a winner. But at the end of the day, if you look at 100 areas, we'll be a winner in 75 and maybe a loser in 25. There are some very smart people out there who are cherry picking very narrow parts of the ecosystem. That could be your rent payments that could be lower income accounts that could be cross-border payments, and they may very well succeed. It doesn't mean we can't do it, and we will try to do it, but I think you might lose them some. But another area is we've always had the strategy to use technology to do a better job for our customers. And we're quite good at it, use our technology to do a better job for our customers.

If you look, Marianne spoke about it, but she made a list of new products and services over the last 10 years, it's extensive. From wealth management, self-directed investing to really direct deposit to better use of debit cards, [ Zelle ] didn't exist, 7 or 8 years ago. Pays, which we're putting a lot of money into today through a very specific stuff, we're investing a lot of money that's solving a lot of the problems people talk about. And we're completely prepared to pivot on some of these issues.

All right. Glenn Schorr, go ahead.

Wanted maybe just a quick follow-up on that one. So part of the last handful of weeks, I would say there'd be a release and then everyone runs and says, "Oh, who has that type of exposure and try to [indiscernible]. " my question is broader than that. And I'll just keep it to JPMorgan, but if you want to opine on the rest of the industry, great. So as technology comes and as it changes people's opinions in certain markets, how do you specifically re-underwrite the loans you have, the assets you own for new risks that get presented into the market. I mean you're doing that all the time, but I'm curious in this age of AI. And then what can you do about it? You have loans on your books, you have customers, I'm just curious on how you adapt your exposure.

I should point out, if you take credit, and this has been true for most credit cycles is always a surprise in a credit cycle. And even if credit cycle is normal. So you have a recession, you have rising credit losses. The surprise has often been which industry. You didn't expect newspapers in 2000, [ Marin Buffett ] businesses. You didn't expect utilities and phone companies in '08 and '09. And this time around, it might be software because of AI. And that -- and we've already talked about there's a moving tectonic plates underneath that caused the industry to be challenged. You'd be shocked about what you guys have been through on software, loan by loan, name by name, customer by customer, to look at what it means for us, what happens if they were downgraded, what happens to their ecosystems and things like that, trying to forecast it forward.

So we are completely confident we may get core a little bit in that, too. We're not immune from missing the industry. But it wouldn't be enough to change our credit losses that much. I mean, it will be part of that curve. And I agree with what Troy and Doug said about the credit cycle. I'll just add one other thing. You got to look at the credit cycle is if -- when it turns, and it will turn, that's when people will be surprised more about what industry, what types of credits? And also, in my experience, there's always been people who do a bad job at it and people do a good job at it. And that's what people are trying to guess today, and I'm not sure you can actually see in today's numbers.

Ebrahim, go ahead.

Sticking with AI, I think at [ Davos ], you talked about maybe the policymakers to think about banning layoffs due to AI. Given just your sort of lens with which you're seeing the adoption of AI, just talked about if we think about 2 or 3 years from now, do you see the risk of high job losses that the governments of the United States, Rest of the World need to be prepared for an address? Or do you think the risk is overstated.

I didn't -- I wasn't about banning my office. Going to be [indiscernible] for us. we are going to deploy AI as best we can to do a better job for our customers. That's what we are going to do. We're not going to put a head in the sand. We're going to do it at a very detailed level. We're going to go bottoms up. We do a top-down, it's really incremental type of things. We already have huge redeployment plans for own people. In fact, we spoke about it today, and we have to up that a little bit. So we can take people who were displaced and we have displaced people from AI, and we offer them other jobs. They're usually well trained and highly talented, very good at things. And so we're going to do it ourselves.

What I was mentioning when I was asked that question in [ Davos ], this is now public policy. This is not JPMorgan I'm talking about. This is what do you -- I gave a specific example. What have -- I think there are 2 million commercial truckers in the United States and there are lots of other examples you can give, there's a thought exercise, and you can push a button, eliminate all of them, and they make $120,000 on average save fuel, save lives, save time and more efficient system, less destructive highways, all that beautiful stuff. Would you do it, if you put 2 million people on the street with the next [indiscernible] there are jobs available, that next job is $25,000 a year stocking shelves.

And I was saying, that's kind of like really bad, kind of like civilly should we a society agreed? I don't think so. I was talking about the business and government and they should start thinking today, not when it happens, what would we do to deal with the issue, it's got to be business in government. I would give you the example in that case, maybe you phase it in over 5 years. And during that 5 years, you have time to retire people, income assistance, relocate retrain, but you have to have systems to actually work. We actually had a thing called trade adjustment assistance that was put in place, I think when Clinton was President and it didn't work. But society has got to think through what it wants to do if this becomes a kind of problem. I'm not predicting it's going to be a problem. I'm going to be saying now is the time to start thinking about what you do if it does.

And I ask that just because from a bank's perspective, even today, the concern was if there are mass layoffs to AI, does it become credit card defaults, auto defaults as white collar job losses. And I'm wondering if that conversation is happening today or not between businesses and policymakers?

No, the conversation [indiscernible] happens today. It's just more fear and things like that. And I do think, ultimately, will create more productivity, but it could create another derivative effects like you just said. Absolutely, laying those people up will cause a problem, even if it creates more productivity in society. And that's why society got to think this through a little bit. It may happen faster than we can adjust to it like it took years for farms to adopt tractors and fertilizers. It took years for electricity to be put into cities, this may happen faster, and therefore, we should be prepared. But you guys, you're all smart right, what you think the policy should be. Don't just ask.

All right. Were you going to ask questions today? Mike Mayo, go ahead.

What do you think about the competitive environment today versus other periods? I mean you've highlighted or Jeremy slide has -- this is the most competitive period before the global financial crisis. And you know as well as anybody, this is when stupid things are done, right? You have foreign banks that are back. You have all the regional banks are back after problems in 2023. Everybody's front footed, everyone's playing offense, and now you have to compete against these same players just by spending more, hopefully, in your mind, getting more market share. I mean, how do you think about this competitive world?

Unfortunately, we did see this in '05, '06, '07, almost the same thing. The rising tide lets all boats, everyone was making a lot of money, people leveraging to the hilt. The sky was the limit. Yes, I think you're absolutely correct. And I think today, the rising tide is [indiscernible] boats. My own view is people are getting a little comfortable that this is real. These high asset prices and high volumes and that we won't have any kind of problem whatsoever. So we're quite cautious about that. We stick to our own rules. So you -- we have to -- these guys lose business because we don't want to underwrite a leverage loan. So be it. We're not chasing anything. We will not do stuff the wrong way for the wrong reason.

But I would say competition is tougher than that. So all of our main competitors are back in the United States, in Europe, the Japanese are back here. I mean everyone is back. I think that's good. It's good for the world, et cetera. I don't know how long it's going to be great for everybody. I see a couple of people doing some dumb things. They're just doing some things to create NII or say they're winning in the markets business or something like that. But the competition is much more than that today. I mean, it is all -- it is tons of payments companies is [ Chime and Revolut ], PayPal, [ Stripe ] and built and ramp and its automated companies, it's everywhere. And even the tech side from all the traditional banks, some are doing a great job.

In fact, we've got our assets kicked in certain parts. So I won't go through and I won't give names. So we got beat, beat badly. So we should be very cautious of that. This has been -- we're still going to win in a big time. We're going to -- every now and then strike out, but it's a lot. And then when we do a lot of this investing we're talking about, we have to do something to put $30 million tech thing to do a better job on a client starters or somebody that we're going to do it. And then we were trying to be very disciplined about it, but we have to compete at that level, too. We can't just put a head in the sand and say that doesn't affect us. That's what we saw with [ Stripe ] when it came out. So what we said with PayPal. That's where we saw with cash, okay? So we're not going to do that.

And then one follow-up. Just philosophically, I mean, this had been described as a commoditized industry for decades. And I thought the 3 most important words I heard today just reiterating, it's not just price. I think Mary, you said that. But I think that's your theme throughout the firm. So when you say it's not just price, and this goes back to the AI argument, like the excess profits, the intermediation fees will all be going down to 0 and why should people pay that and JPMorgan make money from that. So describe what you guys mean when you say it's not just price, in ways that I could explain to somebody who's not in the business.

There are certain things which are completely commoditized, but it's not just price, it just take an FX rate. If you don't kind of give the best price at that split second, you will lose the trade. But we have to build the system to do a better job there. We create more global flows that actually create the better price. We have research and all these other things that we do that make -- and we'll spend the money and the technology just for that trading desk to create it.

But Marianne said it like take trust and advice. We treat your data well. We don't -- we want to charge you fairly if you're sending your data outside, there's been a big point of ours about open banking. We want them to use your data properly. We don't think you will -- how many of you use some outside services for your payments. They're taking all your transaction data or your card data, all your and there's a liability shift. We want you to know about it, and I want you to be able to go on the screen and decide what you give them, how you give them, when you give them, what the durations we give them. So we are a trusted adviser to people.

If you're a private -- I'm sure some of you might be private bank clients, you trust our adviser to do the right thing in the right way. If we make an error, we're the first people to say, we're sorry, and we owe you. We build the best voice systems, the best scam systems, the best [indiscernible] and we want to be paid for it. One of the things about banking and I've told for years the cost of -- just giving you a checking account is like $200, [ fixed ] a year. So when I hear people say deposits are free, deposits aren't free. That's how you get paid for the $200 a year of fixed cost. There's the same dynamics in credit card. It's called APR, but just to give you the account to do the credit, to give you add to daily payment systems to balance out your payments has a cost. So building the best and then take in our businesses, this is a generalization in the wholesale businesses, you were generally paid by the task or the product to service okay? And you have to compete at that level.

But at the end of the day, these clients when they close up on a Friday night, and they want a $20 billion bridge loan to do something like EA they get hundreds of people working around the clock for them. That's what they want. It wasn't just the best price. In fact, we had a client in stage that are senior leaders in you're saying about one thing I learned about how we should treat at JPMorgan, it's not the basis points, is what you do for us day in and day out, year in and year out. And we're also there for them in good times and bad times. Remember, we did not fail in '08 and '09. We build out a lot of companies, in fact, almost a few countries, if you look at it, so we're really good. We're trustworthy [indiscernible]. We're decent. We're great citizens and communities and people like that, too. And obvious saying the wholesale, so you get paid by the trade or by the ticket or by the M&A fee or something like that. It's very episodic, but it's not necessarily bad. But in the consumer business is actually a packaged product.

So when you have a consumer account, you get the debit card for free, you get this for free, you get ATM for free, you got branches for free. You get Wealth Management for free, you get SDI for free. You get all these things for free as part of that. So it's a bucket of beautiful things we're giving you, and then we -- and then we -- we're going to do a better job. So take SDI. I don't know if Chris is in the room. We're going to give you order flow. So when you pay -- when you use our self-directed investing, we're going to run it through JPMorgan's institutional systems and give you the best price probably in the world with no markup which is not with payment for the flow is. It's not the breast price in the world and you get a markup. And so we're going to give you the best. And we're going to put it up on the screen. We going to show you the execution, the cost the seed and that may mean some of the people it means something to me because of between the fourth right.

Right [ Manon, ] go ahead.

Jamie, with the changes coming at the head of the Fed, there's talk about another round of QT. How do you expect QT will impact JPM and maybe also the broader banking system.

Yes. I loved [ Al ] and Jeremy's alphabet soup, very good complement to my spaghetti chart and that they were brave enough to do it, okay. They're out of Stockholm, they're out of jail at this point. First of all, I'm surprised that they're calling it not QE. They do another $40 billion a month. They're doing that because they recognize, as Jeremy mentioned that when we have to hold $1 trillion of cash and model securities unencumbered which cannot be used to facilitate transactions in the marketplace, which are basically risk-free that if they don't provide the reserves in the marketplace, there will be a problem like we had in February of '23 and February '19 and February '18, it's just so predictable, and it will happen again.

So I think they recognize that QE does affect sometimes it's hard to exactly measure how it affects like if you do a lot of QE, does it show in wholesale, showing consumer does it up? And all analysis at first shows up in wholesale and leaks into consumer. It takes over time and things like that. Whatever it is, we'll deal it. So when JP -- more is not sitting here saying whether they do it or don't do it or whatever they're the Fed is going to change how we serve a client. We will serve a client, we'll get our returns, we'll do okay. That to me is adjusting the financial architecture to the company so we can serve you properly. It may change how we price certain things and stuff like that. I think they're right to talk about more narrow banking. I think that the balance sheet of the Fed is too big. They've lost $1 trillion. They did air into DEI, climate, social policy.

I think it all -- they took their eye off the ball on interest rate exposure, which is what happened to Silicon Valley Bank and First Republic it was interest rate exposure, and it was too much HTM securities. And he mentioned we have almost $500 billion that we have collateral posted the fed every day that we can go if we had to do it. We do that so we're a sound, secure bank that you would never have to question this. A lot of those banks didn't do it because it costs money. And I would question whether -- obviously, it was their own decision on their part. So I think it will be okay. And I think -- and if I remember correctly, [ Keven Morse ] came out and said that it will take a year for them to do the work in the study to tell us how they're going to change those policies. I don't think they're going to do anything that's like unwise and too quick that's going to cause a lot of promotion. If they reduce the size of the balance sheet of the Fed, they have to change those rules. They cannot reduce the balance sheet of the Fed and not change LCR and liquidity rules.

And I could show you numbers they cannot do without change those rules. To me, I'm righting about my Chairman's letter, I believe that we can create a safer system, capital and that capital is not issued almost anywhere that creates more capital to be used, more loans deployed, more liquidity deployed that's actually safer than we have today by changing post-failure rules pre-failure, at point of failure and after failure in a way that you don't have to worry about if the bank fails, I think that could be done. I hope they put their best brains to work because that's where they come up with. And I can come up with a lot of ways it right now. In fact, I was the banks would just fund all these problems because we end up paying in a really bad way when it goes to the FDIC.

Okay. We have a question on the zoom, Gerard Cassidy, please go ahead and mute yourself.

Thank you, Mikael. Jamie, the outlook that you have described today and your colleagues is quite positive for JPMorgan as well as the industry. At the risk of sounding like a [indiscernible] , can you tell us when you look around corners, what are you looking for in terms of risks that could be out there that are not apparent to us today?

Yes. Well, I'm not -- I think if you listen closely, they said, pipelines like accordions, everything they're writing times that's an all boats. I'm not quite optimistic about the year. okay? We know -- and Jeremy had the chart up there that there are all these tailwinds. The One Big Beautiful Bill, bank deregulation, other deregulation, animal spirits, faster permitting. I think some of the stuff that's being spent I think it's all going to drive growth this year. Our economists say it, we all say it, it may have slight inflationary effect.

At the bottom of this chart, in geopolitics, global deficits, trade issues, [indiscernible] in the world, those are long-term things that may affect the economy, but they could be harsh. And if you read history books, there are a lot of examples where you get surprised. So we don't run the company hoping for good times. We don't run the company just thinking they're bad times. We run the company look at a full range of possible outcomes so that regards to the outcome we can serve our clients day in and day out. We are adults.

If our ROE goes to 10% next year on one of these scenarios, we are completely fine. It will make no difference to the future [indiscernible]. In fact, I would tell our people, I said before, if and when that happens, our opportunity will be bigger. As Mike says, to buy something or deploy capital or people can or something like that. So there will be a cycle one day. I don't know when is going to be a cycle. I don't know what confluence events will cause that cycle. My anxiety is high over it. I'm not assuaged by the fact that asset prices are high. In fact, I think that answer the risk, and that was on your chart too.

And then you feel stupid everyone coining money and everyone's great so I have wonderful things going to be. It's still stupid I feel the same way it does feel really good. And then when I think about all the factors taking place I like to take a deep breath and say, watch out.

Right John McDonald, go ahead.

I just want to ask a general question and then a specific one. Generally, two of the other large banks or a few of the other large banks are considering combining the Chairman and CEO role and just get your perspective on why that's a good arrangement at a large financial institution. And then second, if you could comment a little bit on succession planning, your time line. Obviously, you continue to come in with a lot of energy and enjoy the job and how that lines up with the succession plan.

Yes. So I'll do that first because it's the easiest. I think I was told to say this very specifically. We're -- I'm here for a few years as CEO and maybe a few [indiscernible] Executive Chairman and Chairman, [ Penny ] whatever the Board wants to do it, whatever it makes sense for the company. That's what it is. Okay. I see that right.

I've never been for or against Chairman and CEO. That's why you have a Board to decide how you properly structure a company. There are times they should be separate. There are times they should be combined. It is almost a nonissue. [ Steve Burke ] here our Lead Director or maybe in the Zoom, if you look at the authorities in the proxy of the lead director okay? They have all the authority of what you would call a Chairman, say in the agenda, calling meetings. But I think the most important thing that I've been trying to tell the FT who can never get the straight, they're obsessed with this issue in the U.K. it's that isn't the important thing. The important thing is does the Board have an open, honest conversation and not just with the CEO, with the management team every time they meet.

So [ Dodd-Frank ] mandated that the Board has to meet without the CEO once a year. When I got to Bank One, I asked my Board, I was Chairman and CEO to meet with me every meeting without me every meeting. Every meeting or every single meeting since the year 2000, my Board meets without me in the room. Sometimes it's for 15 minutes, sometimes it's for 2 hours. Very often, they call me up afterwards with a little bit of help, advice coaching, things they want worried about, things they want to think about because I'm just trying to do the right job, and I know that I'm in the room, it may be hard for them to have their conversation. So I think things like that, which are not structural in chairman and CEO split, but are so much more important. Like that is that you should be asking about how does the place function.

They also have total and complete access to -- they know -- I mean all the management team in this room, they know all of them but they really know the people up on stage and a bunch of other folks in this room like that you just sort of presenting and Jen who's here and Robin and Jeremy, and they know all of them. They have lunch with them, they see them, they present. I have never made a presentation that I can remember at the JPMorgan Board of Directors ever. And these folks do it. And I usually don't do it, I may even raise my hand and add, particularly when Jeremy says something which when you start taking those rabbit halls, I'm like, okay, let's. You're going to scare them , Jeremy. And I think those are the most important things, total access, total openness, so they feel like they're totally brief. They know what's going on. And most of us are just trying to do the best we can.

Do we have a last question is we have one from Steven Chubak.

So Jamie, you propose some recommendations on the regulatory side, GSIB surcharge was not one of those areas that was covered. I was hoping to get your perspective on what you think the Fed you consider in terms of changes to ensure that U.S. banks are, in fact, on a level [indiscernible].

We should do it the same way the Europeans do it. What they allowed was unethical and wrong. They were supposed to just GSIB from the beginning to the size of the global system and inflation, all stuff like that, and they did not. They should just go back to that. They shouldn't have American gold plating. They should give all that c*** and just do it. And even if they did all that, I mean, we changed the numbers, and I forgot how much 2% or something they should do the numbers the right way. That's all we've been talking for years. Do the numbers right way, stop playing games with artificial targets and we're just about right, show it. I mean I spoke for years of [ CCAR ] is not right. It is a dishonest disclosure of what our loss would be under things under a scenario like that.

And I can then go tell the shares, it's wrong. And they should say it. that doesn't remotely remember resemble reality. So that's what they should do. And if they wanted to add and say we want to be more conservative in the rest of the world and add something, but they should do the numbers the right way. And I think they might. We'll see.

Folks, thanks for taking time with us. We have cocktails. This floor -- on this floor and that way. Folks, thank you very much. Appreciate it.

Thank you for attending JPMorgan Chase's 2026 Company update. We will now conclude the evening with cocktail hour please make your way out of the presentation room and down to the 16th floor balcony. Our event staff will be happy to help direct you.

All right. Good morning, everybody. This is absolutely big bank morning. So obviously, now we have the biggest bank of them all, JPMorgan. And with us today, we have the co-CEO of the CIB, the commercial investment bank, Troy Rohrbaugh. Welcome.

Thank you very much for having me.

Absolutely. So you're going to be following up a bunch of really bullish presentations this morning. So we're excited to hear from you. So speaking of which the lion's share of investors sitting in this room today and listening in are positioned for a capital markets renaissance of sorts in 2026. What stage are we in with regard to capital markets activity for this upcycle?

Sure. I mean you should rename it not big bank morning, but bullish morning. Look, we feel very similar, like we're quite positive on the outlook for 2026. First off, 2025 was a very good year in Investment Banking overall. And we would expect that to continue. I mean the pipelines continuing through the end of '25, into '26, look excellent. I think it can be really possibly one of the better years we've seen in a very long time in M&A or certainly in that top decile.

Capital markets, I think, are a little bit more challenging because if you look back at the previous high, it was really driven by an incredible year in ECM, and that was also the year of the SPAC, and you're not going to have that SPAC involvement this year, but you have the possibility of a very robust IPO pipeline, the possibility of some true mega deals happening, and we'll see how that plays out. So we're quite bullish overall. I don't think you'll necessarily see the peak of the previous wallet because of the capital markets activity being a little bit lower than those levels. But overall, quite bullish.

And maybe just to unpack that a little bit. So obviously, 2021 is a tougher comp for ECM. But as you think about advisory, and as we think about some of the uncertainty around the world, is that pipeline pretty solidified at this point? And to ask another way, would it take quite an exogenous event to disrupt that advisory pipeline?

Well, I feel like we live in a world where those events are more common than they used to be. And we, in banks are very good at getting the prediction for the wallet wrong. And if you think about just last year, we were very bullish to the start of the year. We would have probably sounded just like we do this morning here a year ago and then April 2 happened. And I even look at ourselves, I mean, we were predicting at Investor Day for the end of the quarter, in the middle of the quarter, and we've got both banking and markets wrong. And we were only 6 weeks away.

So if you think about it, I think things can happen that really could affect that pipeline, but assuming you don't have that type of event, and we don't see any of those on the horizon. I mean, you see possibilities geopolitics, other things. But assuming none of that happens, I feel the pipeline is quite stable. There's lots of tailwinds to that pipeline outside just individual company stories. So I think it really bodes well for this year.

So other than AI. What are the key sector themes that will drive activity levels in '26? And maybe if you could connect that to your recently announced security and resilience initiative.

Sure. Well, first, we're super excited about SRI, and I'll get to that. But really, it's the same 3 themes that you saw in '25 and broadly drive banking wallets overall. It's technology writ large, not including just AI. There's health care, I think, including biotech this year. And then there's diversified industries. Like if you don't get those 3 right, you're not generally going to have a good year in investment banking, and they're really the large drivers of wallet historically.

And obviously, there are idiosyncratic other events, and there are other parts of the business that will drive it on a given year, but they are the real 3 backbones of any banking business, we think, for at least this year and has been for the last couple. I think that we're really excited specifically for us in health care. We've already had a very good franchise. We've added some very good high-quality senior bankers. So we're pretty excited about, a, the wallet growing; and b, our positioning there.

In technology, we're coming off a very strong year, both overall for the industry and for us specifically, and we'd hope to continue that momentum. Obviously, there's a lot going on in AI, and I'm sure we'll talk about that a little bit. But we think there's more going on in the whole technology sector writ large. And then diversified industries, I mean, again, we have a very strong practice, but we feel like our SRI initiative really, really fits well with that. We identified originally 27 sub areas. We now are at 28, and we are attacking all of them. And the way our strategy is working with SRI is, generally speaking, when you look at those 27, 28 subsectors.

We generally, over the last 10 years, put out about $100 million of financing per year. So just below $1 trillion over that 10-year period. And we think it's very easy to increase that by at least 50% in the next 10 years to $1.5 trillion. I actually think it will be bigger than that. When you think about the tailwinds of reshoring the investments from a strategic nature that we here in the United States, North America and our allies need to make. I think there's a lot of reasons that, that number could be bigger.

And then, which gets a lot of the press, but is a smaller piece of it, but very important is our own $10 billion of capital that we're willing to invest. And like many things we do at JPMorgan, we give a number, we start there. It's reasonable. It could be bigger. There's no reason it can't be $15 billion or $20 billion. And we definitely plan to do it with partners. And it's not specifically for the U.S., so it will benefit our franchise on a global basis.

And we're already seeing the benefit of it. I mean we're seeing lots of incoming interest, both from a financing, from a banking, from an investment perspective. And we think while we're not doing it simply to improve our banking business, we're doing it for very altruistic reasons that it's the right thing for the country. It's the right thing for the West. We are highly likely to see the benefit of that in our banking franchise, and we're quite excited about that.

Well, that is very differentiated, actually. So thank you for diving deeply into that. There was also a recent journal article on another newly formed group at JPMorgan, the Private Capital Advisory and Solutions group. I think you alluded to some of that. What does this tell us about sponsor monetization, which is -- was a huge theme in the keynote this morning that investors are hoping for in terms of IB revenue drivers in '26.

Sure. I mean I think it's an acknowledgment both about the private ecosystem and sponsors' role in it. So privates both in equity and in debt have grown substantially as everyone in this room knows, sponsors are a significant player and therefore, have grown in importance to our franchise, both in banking and overall for the CIB. And getting that ecosystem right is absolutely critical. I think -- we've said that everyone says that like we feel well positioned. We've always had a strong sponsor practice.

But we feel we need to be able to provide like holistic solutions across the equity, both public and private and debt, both public and private. The initiatives you named, and we like initiatives at JPMorgan, and we like naming them relatively complicated things. But broadly, that's an effort particularly focused on equities, but it can be broader than that to advise and help companies raise equity or raise capital in private markets.

And if you think about equity raises, while the IPO market, we're all expecting it to be quite strong this year, some of the largest raises you see going on in the market are in the private space. And in order to succeed with sponsors and with your banking business, you have to be there. And that's an effort to target that directly.

So just as a follow-up there, where do you think we are on the valuation versus timing debate with sponsors?

That's a tough one. You could probably have some of the sponsors floating around outside this room. Look, I think there's clearly a desire to create liquidity for your investors. And there's clearly been an extension of the private equity investment time frame. So I think there's a really big hope and desire to create that liquidity this year. And I think that's one of the tailwinds to the banking wallet. So we're pretty excited about the ability to monetize these investments at, what I would say, increasing pace.

So switching topics a little bit. You have clearly done well in growing indirect lending. And of course, you've previously talked about -- you just mentioned your direct lending efforts. You've explained in the past that this initiative is not a way to grow assets, but a way to stay in the middle of the ecosystem. What kind of opportunity has this initiative presented to JPMorgan? And how are you guys uniquely positioned to address this opportunity?

Sure. So we have announced, and we do a series of things in the private credit ecosystem. I don't want to say we're the first bank to do financing of pools of private credit, but we were one of the first banks and we have one of the largest financing businesses. We have always lent money. I mean we've been around for over 200 years and lending money to clients is not new to us.

Direct lending is just lending in a new type of format or an old type of format, however you want to think about it. So we believe our goal is not, as we've said at Investor Day, to just grow assets on the balance sheet. Now that's a byproduct, so if you think about what we've done, we have a little bit over $12 billion, roughly $14 billion on our own balance sheet of direct lending. We've announced that we'll do up to $50 billion. We've always said we do that in a risk-adjusted manner. So there's no rush to get to that number. It's just putting a number out there that shows the capacity and the size and scale.

We have roughly $25 billion of partner capital that we can use alongside us in various sleeves. So we are very significant. And I think what we've seen on the back of that announcement and the creation of these pools of capital is we're not there just to create these assets on our balance sheet or to compete with our clients because our sponsor clients are and our alternative clients are very important to us. We're there to partner in that ecosystem for both buyers and lenders. And it's kept us in the conversation, meaning there's no deal that a client can't come to us, no regardless of the size where we can't participate. And then we always look to bring in partners.

So our #1 goal is to be agnostic to the borrowers need to be able to go in and provide a whole set of solutions and I used to say and people who know me well at JPMorgan, know, I love analogies, like we used to go in and say, okay, you need to buy shoes, would you like red or green. And that's how we sold our products. And then someone else came in and said, you need to buy a shirt. Now we go in and say, what do you need? And I think we always did a bit of that. We're just being more coordinated about it. And we can provide anything, whether that's a broadly syndicated loan, a direct loan, a hybrid loan, we can do any size, we can do complicated deals. And we will partner with lenders in the private credit ecosystem. We're not looking to do this on our own or displace them. We're looking to stay in the middle of it.

So I know that's a long-winded answer, but we spend a lot of time on this. And we feel we're uniquely positioned. We feel that all the pieces of the puzzle we have to offer and our size and scale and our ability to move quickly makes us unique.

I can't wait for your outfit analogy and market structure, by the way, later in this conversation.

I mean I've got a whole bunch. I'm looking out there at Mikael, and he's getting nervous already.

Great. Mikael is nervous, I'm excited. So before we go into markets, let's maybe just pull up in terms of the internationality. I know that's not really a word of your pipeline because we have talked and or heard from CIB leaders in the past about opportunities in India, Japan and the Middle East. And of course, EMEA, where you have a long-standing presence has also gotten more active. How global is your pipeline?

Sure. I'll answer that narrowly and broadly. On the narrow answer around a banking pipeline, Europe and the Middle East and Asia all look quite good. So we saw very similar to the U.S. levels of growth. The difference is the absolute level of the pipeline is just a lot smaller. So at the end of the day, the significant growth from a revenue perspective and size will come in North America and in the U.S. specifically.

And I also think at least there for now, the pipeline looks even stronger than it does relative to Europe, Middle East and Asia, but that's also simply because the U.S. pipeline is so strong, but we're expecting a good year across the franchise on a global basis. I mean, we have, as you said, an incredible franchise in Europe. We're seeing real momentum, a solid pipeline. So we're expecting growth from an IB pipeline basis on a global basis.

When it comes to broadly, I think maybe more importantly for us in the CIB is we think we're extremely well placed to exploit what we think is a fundamental shift in trade corridors. So if you look at it, we, along with other U.S. banks, but we particularly dominate the dollar corridors. We're the largest payment bank in terms of dollars. We have huge franchises. We have great revenue bases and client bases going in and out of the U.S. in some of the bigger markets as well.

But if you look at absolute growth, a lot of this is Middle East to Asia, Middle East to Europe, Middle East to Latin America. Asia to Europe. And they're going to be the corridors of growth in my mind in the future that probably maybe not reaching the size and scale of a dollar corridor anytime soon, but they're going to grow faster than the dollar corridors.

And we are trying to position ourselves to take advantage of the fact that we've been in many of these locations for a very long time. We have good base franchises to really accelerate growth. And I think particularly the Middle East, Japan, South Korea, obviously, the China ecosystem continues to be very important and then in Latin America, particularly Brazil and Mexico.

So to wrap up the discussion on banking, investors have been using a mid-teens growth number as a placeholder for the banking wallet in '26 year-over-year. Is that the right ballpark for the wallet?

I mean I'm a trader, so I get really nervous when you start predicting wallets. I mean it's certainly possible that we see that. I think there's real factors. Like I said, from an M&A perspective, I think you can have a top decile or possibly the best year we've seen in a decade and certainly beat the previous high. I think capital markets is really going to depend on the environment. And it's going to depend on whether some of these large mega deals get done. So it's possible we get there. I'm hopeful that, that's the right number. But I think you're going to need a lot of things to go right to get to that level.

So let's switch topics to the markets business, and I'm excited about your analogies, Troy. So we're coming off...

I'm getting nervous. I might have to tone those...

We are coming off another stellar year for the industry. And so, of course, investors are wondering how sustainable is this? So maybe you've talked about this in previous Investor Days. Remind everybody about how this thing through the pre-pandemic and post-pandemic wallet. And additionally, a peer of yours talked about market growth in '26 at 2x GDP growth. Does that fare to you?

Sure. I'll start with a little bit the way we think about it is we were at a fairly consistent run rate post GFC going into the COVID year of 2020 and we were growing market share and growing revenues slowly with a wallet that was basically flat and in some cases, down slightly. So 2020 was that exceptional year where you saw, I think, almost a 30% increase in the size of the wallet in 1 year. And all of us predicted 75% of that would normalize away in the following year. And it just didn't -- so we saw a little bit of normalization and then it really quickly went back to that 2020 year.

And then you saw the last 2 years like a significant expansion, particularly 2025. So number one, as I said in the beginning, we're really good at being wrong at predicting the size of the wallet and we got the wallet post-COVID wrong. And I think we sort of missed a few fundamental things. Base volatility is significantly higher than it was in the pre-COVID, post-GFC years. The size of the corporate wallet is significantly higher, and that's created real opportunity. The banking wallet has grown and there's a bit of a halo certainly from M&A and other things in capital markets into our markets business.

And the demand for financing as alternatives and sponsors have grown has grew dramatically, so it's created a much bigger ecosystem for the market business to participate in with higher levels of volatility and opportunity with more corporate activity, and we just didn't predict that. And I think that makes the new level of the wallet, much more sustainable and durable. Obviously, you can go up and down in any given year.

Our boss likes to call markets revenue, the weather. It's like very hard to predict, and we're going to try and do as well as possible. Our view is we're just incredibly well placed as a franchise to keep growing in the areas that are growing. To keep doubling down on our clients. We have the resources to commit both from an investment perspective and a financing perspective. And we're committed to doing that in a thoughtful risk-adjusted way, and we think we can keep growing market share along the way. And if you do get a big spike in volatility. Historically, that's when we perform extremely well, and we would hope to see that again.

So there's been a bunch of talk, and this has been a topic of this conference about market structure evolution. Particularly tokenization. I like that smile. It's going to be a good answer. What is your view on JPMorgan's view on this evolution? And how does the bank balance sheet fit into this?

Sure. I mean you're broadly talking about sort of tokenization and digital assets. So I mean we break it into 2 parts of our business. One is how it will affect market structure in terms of our markets business. And then obviously, the effect that it will have on our security services, payments and the rest of the JPMorgan Chase franchise. So first off, I think we're incredibly well placed for whatever does happen. I mean despite JPMorgan maybe having a reputation to having views on cryptocurrencies and other things, we've invested absolutely heavily in blockchain for a very long time. We have an effort called Kinexys that we believe is the leading bank effort on blockchain and in digitization of assets. We have our own stablecoin the JPMorgan coin.

So this is an area that we are very experienced in that we are investing heavily in, and we're well prepared for -- so if you see market structure in securities shift to tokenization or digital assets, we're well prepared for it. Now I think in some cases, I'm still trying to figure out the problem they're trying to solve because realistically, market structure in many securities like equities works extremely well. But we're not going to resist the trend. This isn't us standing in the way of it. It's us being completely prepared for it if it indeed does happen. I do think there are parts of our markets ecosystem that digital assets could actually benefit and open doors for smaller investors. And I think that could be exciting. But we're just going to have to see how it develops, but we're well prepared for it. And we think will be -- whatever happens, be able to participate as a leading player.

What areas are those where digitization could open up the...

I think you look at things that are more complicated, like an SPG in terms of like large financings that historically are the purview of only investors or large investors, you could see some democratization of those types of investments if you can make them digital friendly. But again, that's like in the future.

Yes. So generally speaking, there have been market share shifts in the markets business for certain products, particularly following the global financial crisis, right? So with strong momentum in deregulation in Washington another theme of this conference, is there an opportunity to profitably recover some of that lost market share for the industry?

Sure. When it comes to pure markets, you're obviously talking about nonbank market makers or nonbank financial institutions. I would make the argument that the trend towards them was happening before the GFC. And I think more so than regulation in the market making space is really electronification. They embraced electronification, electronification made it a lot easier for them to access markets. They started in, what I would say, the anonymous like exchange, like CLOB, our central limit order book markets, and then they've expanded from that.

And I think they historically were areas where banks weren't as significant and that they honed their skills, they grew, they created revenue, they created capital to continue to invest. And they've done an incredible job. Now I might argue they've taken most of their market share from the banks in the lower part outside of the top tier, but they certainly have taken market share from everyone as they've grown. We're fully prepared to compete with them. But I'm not convinced the change in regulation is going to have a meaningful impact on how we are able to compete with them. It's still going to be about investments in technology, investments in quant trading, central limit risk books internally.

So it's really about how you organize yourself, how you invest the skill sets you have and your willingness to compete in that space a little bit more than regulatory change because I think the regulatory change will have a little bit more of an impact on the financial resources or liquidity that we have to deploy, which will not affect our market-making businesses in a meaningful way.

So speaking of financial resources, Basel III finalization, potential G-SIB surcharge recalibration, which management has been calling for forever, would particularly impact JPMorgan. Does that impact how capital is allocated to your businesses? And how you think about it? I mean you mentioned that, that's not necessarily going to impact how you compete, but...

So look, we're very blessed at JPMorgan to have...

A ton of capital already.

Lots of capital and have all the financial resources we need to grow the business. So obviously, at any given moment, there's a whole bunch of variables that affect the capital that we have as a company and the capital we have as a business and then how we allocate that capital within our business. Doug and I like to think that we spend a lot of time on this. We work very closely with Jeremy and Charles Bristow in the center. Brett, who's sitting out there is our CFO. We dynamically allocate capital not only as a company but as a CIB business. And we're not afraid to move it around based upon what has the most client impact and has the best risk-adjusted return.

And client impact is arguably #1. Obviously, we want to do that with a high risk-adjusted return. But we're in the business of serving clients with these resources first. So again, we're not really bound in a significant way. There are points, but I don't feel like we've been unable to grow our business anywhere as a result of these constraints. It's really that these capital changes would potentially give us more capital above and beyond what we have now or resources, liquidity, et cetera, that we could invest and lean into the franchise.

I think that will be a benefit to, a, the whole company, but b, specifically the CIB. Because when you think about deploying capital, usually the easiest, fastest way to deploy it is in your markets businesses or in your lending businesses. So clearly, the change in capital rules will be beneficial and one of the first places we probably will deploy excess capital, assuming we believe we can find a risk-adjusted return or we're comfortable with the risk we're taking, would be in markets and in our banking franchise.

It takes longer to deploy it in payments and security services in other parts of the company because they're longer-term investments. But there'll be places we do it across the whole JPMorgan Chase entity. Now I think, though, we'll be deploying that in a world where a lot of people have excess resources. So we want to be really careful about the returns and make sure they're accretive to our franchise and our clients.

Maybe just switching topics. In the fourth quarter earnings presentation, your IR team laid out the drivers of 2026 expenses in a very clear and color-coded manner. And I noticed how much CIB was allocated in terms of year-over-year expense growth under the category, bankers, advisers and branches. Could you unpack that a little bit and give us a little bit more color on what kind of talent you're hiring and where?

Sure. I mean we've made publicly stated a significant investment in our Global Banking franchise. And just as a reminder to people, that's the commercial bank, that's a Global Corporate Bank and GIB or the Global Investment Bank. So we've hired roughly 1,000 people last year in the front office, about 1/3 of those are senior bankers with the majority of them either being in the CB or the GIB. So if you think about the CB strategy, Doug and his team have done an incredible job over the last decade or more.

They've invested systematically as we've grown the franchise across the U.S., new locations, going deeper in existing locations, really expanded both the quality and the size of the CB offering. And we're continuing to do that. We're probably in the latter innings of that because we've just done so much of it, but there's still real opportunity there, particularly in like the innovation economy clients. But that's a place where we're always going to be investing the scale and speed may slow down as we get some maturity, but there's still room to go there.

The GCB, we're growing on a global basis. We think there's a lot of opportunity there for bankers to partner with our offering and payments, and we think there's a lot of growth opportunity. There's also mid-cap banking, which has been very successful in the U.S. that we think we can deploy on a global basis, and really expand the footprint of clients we have. And when you think about deploying capital resources, that could be a space where with the right places, the right geographies, the right companies, we could really look to lean in.

And then there's the classic GIB, with our CSRI initiative, like we're adding bankers there. We have identified every subsector where we're not #1 or where we have the possibility to grow more market share. And we feel that there's really a lot of white space there for us to keep growing. It's an incredibly competitive environment. So hiring high-quality people is a challenge, but we're focused on it. And we're not going to -- in the GIB space or really anywhere in global banking focused on quantity over quality, but we feel like with the right effort we can get a little bit of both.

Of course, I have to ask an AI question specific to your business. So in terms of the CIB impact specifically, I think previously, you've talked about cost efficiency opportunities, KYC, for example. And I think the number that you may have thrown out there is the unit cost coming down here, 40% from AI. Maybe talk a little bit more about the back office opportunities, but are there revenue opportunities in your business that could emerge from this technology?

Sure. There's both. I think -- when I think about the opportunities for AI for us in the CIB, there's clearly where we've been using it very aggressively for a long time, and it continues to evolve from machine learning to AI is fraud detection or fraud prevention. And that continues to be a huge piece of where we deploy AI both from protecting our clients' basis, but also like we feel like by having a very safe offering that tracks people to us. So we don't really call that a revenue opportunity, but we think it has some revenue impact. There's the cost savings. You mentioned KYC, AML. That's, as you said, roughly a 40% reduction.

But if you look across all of our ops, we started with automation. We're now deploying AI in a more significant way across our operations franchise. And if you look at the amount of volumes we now process across markets, across payments, across security services and the leverage we're getting with the fact that we're just not increasing our costs anywhere near that volume or complexity growth, that's all a result of automation and early-stage AI, and we think there's a lot of possibility for that to continue, and that's cost mitigation.

On the revenue side, we're in early days. I mean, we have roughly 400 AI projects across the CIB. We're seeing some show significant possibility. And what we do is we deploy a project. We see if it works, if it's working and it's scalable, we try to not only scale it where it's being deployed, but does it have applications in other part of the franchise. So just to give you some high-level examples. We're seeing real revenue growth with our AI projects in our Prime Finance business. We're seeing it in our FX business. We're seeing it with our bankers in terms of helping them be more efficient knowing the clients the call, knowing the deals to pursue.

And again, this is all really early stage. I think there's lots of possibility here. And we're, again, uniquely positioned. We have a huge amount of data. We have a huge franchise. We have a lot of front office people out there that if you just make them 10% more efficient, the revenue growth is substantial. So I'm particularly excited about it. I mean we're going to attack the cost side, but I'm really excited about what we potentially can do on the revenue side because that's the game-changing part of AI for our franchise.

How much of this can you keep versus it getting competed away?

I mean, first of all, we can't. No one can answer that question, like, well, we're going to keep 47%...

No, of course, but this is the essential question, right...

You have to be realistic. This is just a personal view. I think where you think you're going to explicitly charge for it. You're going to get competed away. Like if you're going to say we're going to provide you with this extra service because of our capability in AI, and we want you to pay for it on top of what you already pay us as a client, that's going to be difficult.

But when you think about like us being more efficient in our ability to trade foreign exchange or deliver service to Prime, it's going to allow us to grow our franchise, increase our profitability and that we should be able to retain a reasonable part of. But as other people deploy it, I think it's one of these things where the benefits will be shared between us and the customer. Exactly how much either way, it's really hard to tell and will arguably depend on the product.

And I'm sure we'll hear a little bit more from the company during the update later this month. But maybe just talk a little bit because you touched on it, about some of the near-term momentum and opportunities in both payments and security services.

Sure. I mean we're excited for our company update 2 weeks, I think. I would say -- and I don't say this lightly, and I'll start with security services, I think Doug and I call this like our secret gem. He and I are like super proud of this business. And it doesn't get anywhere near enough coverage, I would argue. No, I'm not going to name any of the people in it, but you can look them up because I don't want to call them up and people saying, like, how do we get such an incredible management team. But really, the team is fantastic.

They've built a state-of-the-art system. They've grown not only the assets under custody and the NII associated with that, but they've really grown the fee line and other services, both data services, alternatives, fund servicing, they've really created a ton of momentum. So while they've grown in market share, they've really done it more profitably than anyone else on the street. So I think there's a lot of momentum there. That business can keep growing. And we're really excited about it. We feel very well placed there.

In payments, again, I think this is a space that we probably have the most to gain from an outside bottom line -- like top line and bottom line because it's so accretive to shareholder value. So we're growing our banking coverage. We're growing the number of clients we cover. We're improving our product suite and payments. We're investing heavily in digital offerings to clients across the whole spectrum. And we have the capability really to grow our FX on an international basis between markets and payments and Global Banking. And that's, again, something that we've historically been behind some of our peers that there's real opportunity in. And we've seen market share growth there, but we're really just scratching the surface.

And finally, Troy, could you give us an update on how banking and market trends are faring so far this quarter?

Mikael told me not to answer this question. So no, I mean, we'll give real guidance at the company update. The way I would say is it started well across the franchise.

Okay. Great. Well, we'll wrap up there as another exclamation point to our bullish morning. Thank you, Troy.

Thank you very much.

Thank you.

Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's Fourth Quarter 2025 Earnings Call. This call is being recorded. [Operator Instructions]

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 now 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.

Thank you, and good morning, everyone. This quarter, the firm reported net income of $13 billion and EPS of $4.63, with an ROTCE of 18%. These results included the previously announced reserve build of $2.2 billion in CCB related to the forward purchase commitment of the Apple Card portfolio.

Revenue of $46.8 billion was up 7% year-on-year on higher Markets revenue as well as higher asset management fees and auto lease income. The increase in NII ex Markets was primarily driven by higher firm-wide deposit balances and revolving balances in card, largely offset by the impact of lower rates.

Expenses of $24 billion were up 5% year-on-year, predominantly driven by higher volume and revenue-related expenses and compensation growth, including from office hiring, partially offset by the release of an FDIC special assessment accrual.

Turning to the full year results. I'll remind you that there were a few significant items in 2025, which are listed in the footnote. Excluding those items, the firm reported full year net income of $57.5 billion, EPS $20.18, revenue of $185 billion, with an ROTCE of 20%.

And in terms of the balance sheet, we ended the quarter with a standardized CET1 ratio of 14.5%, down 30 basis points versus the prior quarter as net income was more than offset by capital distributions and higher RWA. This quarter's higher standardized RWA is driven by increases in lending across both wholesale and retail, including the Apple Card purchase commitment, which contributed about $23 billion of standardized RWA, partially offset by lower market risk RWA. You'll see that, sequentially, the advanced RWA is up more significantly than standardized. And as you know, our SCB is now at the 2.5% floor, which makes advanced RWA more relevant, so we have added it to the page. The Apple Card transaction's advanced RWA contribution was about $110 billion based on the sum of expected drawn balances and undrawn lines on closing. The elevated level of advanced RWA is temporary and is expected to reduce to approximately $30 billion in the near term.

Moving to our businesses. CCB reported net income of $3.6 billion, or $5.3 billion excluding the reserve build for the Apple Card portfolio. Revenue of $19.4 billion was up 6% year-on-year, predominantly driven by higher NII on higher revolving balances in Card and a higher deposit margin in Banking & Wealth Management.

A few points to highlight. Consumers and small businesses remain resilient. We continue to monitor leading indicators for any signs of stress. And despite weak consumer sentiment, trends in our data are largely consistent with historical norms, and we are not currently seeing deterioration.

Across income groups, debit and credit sales volume continued to perform well, up 7% year-on-year. For the full year, we had strong growth in our franchise with 1.7 million net new checking accounts, 10.4 million new card accounts and record households in wealth management across digital and advised channels.

Next, the CIB reported net income of $7.3 billion. Revenue of $19.4 billion was up 10% year-on-year driven by higher revenues in Markets, Payments and Security Services. Giving a bit more color, IB fees were down 5% year-on-year, reflecting a strong prior year compare and the timing of some deals that were pushed to '26. In terms of the outlook, we expect strong client engagement and deal activity in 2026, supported by constructive market dynamics, which is reflected in our pipeline.

Markets fixed income was up 7% year-on-year, with strong performance in securitized products, rates and currencies in emerging markets, largely offset by lower revenue in credit trading. Equities was up 40% with robust performance across the franchise, particularly in prime.

Turning to Asset & Wealth Management. AWM reported net income of $1.8 billion with pretax margin of 38%. Revenue of $6.5 billion was up 13% year-on-year, predominantly driven by growth in [indiscernible] fees on higher average market levels and stronger inflows as well as higher performance fees. Long-term net inflows were $52 billion for the quarter and $209 billion for the full year, positive across all channels, regions and asset classes. In liquidity, we saw net inflows of $105 billion for the quarter and $183 billion for the year. And we saw record client asset net inflows of $553 billion for the year.

To finish up the fourth quarter results, Corporate reported net income of $307 million and revenue of $1.5 billion.

Before I cover the outlook, I want to make a few points on nonbank financial institution lending given the attention it received last quarter. When we look at NBFI lending internally, we use a narrower definition than what the [indiscernible] report uses. Our definition focuses on exposure to nonbanking financial institutions that is collateralized by the loans the NBFIs are making to end-borrowers. At the top of the page, we provided a reconciliation of the regulatory definition [ versus ] our definition. And as you can see, that results in excluding, for example, subscription lending to private equity funds, resulting in about $160 billion of exposure as of the fourth quarter. We've also given you categories of the exposure that we believe are a bit more intuitive and map to recognizable industry categories and business models of the NBFIs.

Now looking at the bottom left, you can see that even though our narrower definition produces a smaller absolute number, the growth over the last 7 years has been quite significant no matter how you look at it. And the drivers of that growth are well understood in terms of market dynamics and regulatory pressures.

In terms of risk, on the bottom-right of the page, we've given you some detail on the [indiscernible] features associated with different versions of this lending and the different asset classes. Given the significant amount of credit enhancement involved in this activity as well as the absence of a traditional credit cycle during the period, it's not surprising that when we look at the loss history since 2018, we've only seen 1 charge-off, 1 related to apparent fraud. Stepping back, in light of the growth and the novel elements of some components of this activity, we are quite mindful of the risks. But given the structural [indiscernible] you would generally expect losses in this NBFI category to appear either as a result of additional instances of fraud-like problems or as a result of a particularly deep recession that erodes all the credit enhancement. In that scenario, losses associated with traditional lending to end-borrowers would likely be the greater concern for the industry.

Now turning to the outlook for 2026. We continue to expect NII ex Markets to be about $95 billion. The drivers we explained last quarter remain largely the same, so I'll cover them quickly. Usual, the outlook follows the forward curve, which currently assumes 2 rate cuts. Offsetting that is the expectation for continued loan growth in card, although slightly less than last year as the revolve normalization tailwind is behind us as well as modest firm-wide deposit growth.

For completeness, we expect total NII to be about $103 billion for the year as a function of markets NII increasing to about $8 billion due to lower funding costs from the rate cuts, which you should think of as being primarily offset in NIR.

On expense, as we told you at an industry conference in December, we expect 2026 adjusted expense to be about $105 billion. Broadly, the expense growth continues to align with where we see the greatest opportunities across our businesses. The details of the thematic drivers are listed on the page and are broadly consistent with what we've told you before.

On the slide, we've shown you 2024 and 2025 as well as 2026 and called out the foundation contribution and the FDIC [indiscernible] assessment. When adjusting for those, the 2026 growth looks a bit more in line. So 2026 in isolation clearly represents meaningful expense growth in both dollar and percentage terms. And that growth reflects our structural optimism about the opportunity set for the company when we look through the cycle as well as some optimism about the near-term revenue outlook.

More generally, the environment is only getting more competitive, and so it remains critical to ensure that we are making the necessary investments to secure our position against both traditional and nontraditional competitors.

To wrap up, on credit, we expect the 2026 card net charge-off rate to be approximately 3.4% on favorable delinquency trends driven by the continued resilience of the consumer.

We're now happy to take your questions. So let's open the line for Q&A.

[Operator Instructions] Our first question comes from the line of Glenn Schorr with Evercore.

So I want to ask on the stablecoin issue. This week, we're going to have some markings up and talk in Congress. I saw the ABA letter this week talking about the immediacy of the issue and whether or not they can close the loophole on interests on stablecoin. And I think they've estimated that -- or Treasury estimated that it's like $6.6 trillion of bank deposits could be at risk if they don't close that loophole. So my question is, it was written from the ABA standpoint, the community bank standpoint, is there any reason why it wouldn't be all banks you specifically? And then how big of a deal for the banking system if they're not successful closing that hole? Because it does put people at risk of not having insurance and all that stuff. So I'll let you opine.

Right. Okay. Thanks, Glenn. I guess I'll start by saying you probably know more about this than I do. And I think Marianne is really the expert at this point, and she did give some comments about this, at least in our recent industry conference. But I'll give you my brief take broken into a couple of pieces.

So one, it's worth saying, although it's not directly responsive to your question, that as a company, we've been quite involved in the whole blockchain technology space for some time, and through our [ Conexus ] offering, are doing a bunch of kind of really cool stuff across both wholesale -- as you know, we launched the first -- our first tokenized money market fund. And so that's a capability that we've developed over a long period of time. We are really cutting-edge in terms -- on there. And we're kind of using that kind of across the whole company as we engage more in that ecosystem.

On a related point, also, I think in CCB, we're plugging in a little bit more to the crypto ecosystem. And we have an agreement with Coinbase and it's going to be possible to buy crypto in the CCB ecosystem too. So I say that all by way of saying that like we see the interesting developments in the space, the technological innovation. We're engaged, we're watching, we care.

I would just add one quick thing. That letter was signed by the ABA, the FSF, the ICBA. It was all banks; it wasn't a handful of banks.

Okay. I didn't actually know that, so helpful. And I think what I was going to say narrowly about that point is there -- I think it's a 2-part answer to your question. One, I think it's very clear, and it's in the spirit of the Genius Act legislation and everything that we're advocating for, that the creation of a parallel banking system that is sort of -- has all the features of banking, including something that looks a lot like a deposit that pays interest, without sort of the associated credential safeguards that have been developed over hundreds of years of bank regulation is an obviously like dangerous and undesirable thing. So that is the core of our advocacy.

Your narrow question of like, if this doesn't turn out the way we're arguing it should, what is the risk to banking system deposits? I actually think that's a pretty complicated question and it involves a lot of nuances about where does the money come from, where does it go, the securities are purchased from whom, what is the impact on system-wide deposits, and how does that sort of move between consumer and wholesale. But clearly, there is some risk for some firms, for many firms and some version of a threat to the business model, and I think we always embrace competition. So this is not about saying that we don't want to compete. But it's about avoiding the creation of a parallel ecosystem that has all the same economic properties and risk without appropriate regulation.

And so -- and the final point to say, I guess, is that in the end, all of our thinking around this from a customer perspective and from an investment and from a franchise perspective is organized around the question of what actual benefit does the consumer get. So as much as like the technology is cool and those interesting stuff there, in the end, you have to ask yourself, how does this actually make the consumer experience better? And in the cases where it does, we either need to get involved or improve our own service offering. In the cases where it doesn't, it's sort of sometimes a little bit of a solution in terms of a problem. So I think the question of the risk to existing business models and banking system deposits needs to be looked at through that lens. But it's obviously an important question and our CCB folks are spending a lot of time on that.

I appreciate that. I have a very short, narrow follow-up. You noted the 1.7 million net new checking accounts opened for the year and deposit growth is small. But I also noted the 17% growth in client investment assets. Is that all of it, or are there other things at play that's limiting deposit growth despite all this great checking account growth?

Interesting. So I think what you're saying implicitly is like, is the reason that the growth in checking account balances is relatively muted that sort of investment flows are competing that away in some sense? Good question.

I would say, partially, but not really. I guess the broader narrative is about sort of a tension between the very robust franchise growth, which we've alluded to with the 1.7 million net new accounts, offset against the systems, albeit at a much lower level of yield-seeking flows. So to the extent that you consider flows into investments yield-seeking flows, I think there is a relationship between the 2. But I would probably put more traditional yield-seeking flows higher up the list relative to investments, but it's clearly both.

And so yes, as we talked about over the prior few quarters, like the level of yield-seeking flows dropped off a lot, but it's not 0. And so as we talked about last quarter, when you combine that with a slightly lower savings rate and a couple of other dynamics, that sort of moment where we were expecting the balance per account number in CCB to start growing again has just been pushed out a little bit. And so that's the reason that we talked about previously, I think last quarter, that our expectations for consumer deposit growth in 2026 are lower than they had been in our scenario analysis at Investor Day, and that remains the case.

Our next question comes from Ken Usdin with Autonomous.

Jeremy, you mentioned when you were talking about the expense outlook that there's obviously part of the investment cycle there. You mentioned that the revenue growth outlook in there also looks pretty good. I was just wondering, and we can see that in the volume-based part of the growth, but I'm just wondering, you have your NII look, we have your expenses, just what parts of the fees are you expecting to be strong? You mentioned some deals pushed out in IB. If you can kind of just help us flavor, kind of understand like just where the biggest drivers of fee revenue growth are going to be as you look across the businesses to help us kind of fill in a little bit.

Sure. Yes, good question. So -- and I sort of chose my words carefully there because I think there are 2 versions of this in terms of expenses and investments in terms of like short term versus long term. So narrowly, when you look at 2026, we do show you there volume and revenue-related expense, which what we traditionally described as good expense. And certainly, that is a driver of the overall growth and expenses. We do also note in there, there's a significant chunk of that is auto lease depreciation, which is essentially should be thought of as primarily a contra revenue item or whatever. So there's some optimism about the fee environment embedded there.

So to answer your question directly, breaking down 2026, I obviously want to kind of break our tradition of not guiding on fees/NIR given how market dependent they are and volatile they are. But you won't be surprised to hear that we're obviously optimistic on investment banking fees generally. I would say on Markets, we're very optimistic about the franchise and the environment is quite supportive, but it was an exceptionally strong year this year. So as we always say in Markets, the number will be whatever it will be, and we'll try to make it as big as possible.

And on the rest of the kind of fee items, the sort of broad wealth management, asset management across both CCB and AWM, again, we're very optimistic about the position of the franchise there and the associated implications for fees. But we're a little bit cautious about sort of market appreciation drivers given kind of where we're launching from and given the type of year that it's been this year.

So it's a little bit of a balanced story, I would say, in terms of fee outlook for 2026, not for any particularly negative reason but just because 2025 was so exceptionally strong.

And then just to briefly pivot to the larger point, and the thing I'm drawing too is the relationship between 2026 projected expense growth and the associated 2026 revenues versus the broader category of investments in long-term growth of the franchise, kind of the top part of the page, across bankers, branches, product capabilities, et cetera, which is also a reflection of optimism, but long-term optimism, that this is a franchise that rewards investment across all of its parts.

Excellent. And the follow-up to that balancing act also is I think you guys have been more than fine not counting on positive operating leverage every year. How do you balance where your efficiency ratio versus your ROE outputs are, given that you're still in this really strong upper teen zone that is obviously still generating tons of capital and allowing you to do a lot with the company?

Yes. I mean, I guess I would sort of anchor my answer on that one on the word output that you used. So on a couple of dimensions. So if you remember my Investor Day presentation, we talked a little bit about the way that we think about capital deployment sort of across the descending stack of marginal return opportunities and the fact that we will very much deploy large amounts of capital below 17%, because the alternative is to buy back stock at implied returns that are much, much, much lower than that. And that's a good thing and we don't apologize for that, and we think it's shareholder accretive.

And so for that reason, we really are starting to pivot much more to really discuss the through-the-cycle ROTCE target as simply an output of like our overall business strategy and the intelligent deployment of our financial resources and our investments across the entire opportunity set. And in some respects, that's also true about the efficiency ratio. In the end, we do what we need to do to compete, we're going to invest where we need to invest to secure the future of the company and to drive the revenue growth that we need to drive. And as long as what we're doing is still expected to be long-term profitable, in some sense, the efficiency ratio is a bit of an output. Jamie always says, perennially expanding -- the notion of constant operating leverage mathematically implies perennial expanding margins, which is an obvious impossibility in a highly competitive business that we operate in.

So it is a good sanity check. And that number drifts high, maybe you have to look a little harder at your expenses and make sure that everything that you're doing is what you want it to be with the maximum possible efficiency. But we sort of do that all the time anyway. So that's what I would say in response to that.

I would just add that capital is invested to get a good return through the cycle, which means sometimes you have a better efficiency ratio, sometimes you have a worse efficiency ratio. It's kind of more of an outcome of the decisions you make.

100%.

Our next question comes from John McDonald with Truist Securities.

I wanted to ask a little bit about the credit card business. I mean, I guess, first, in terms of the Apple Card, acquisition. Maybe you could talk about the attraction of that business to you guys, both the actual book and also what you're hoping to get out of the co-brand partnership and the platform more broadly?

Yes, absolutely. So let me start by pointing out what I think is obvious, but it's worth saying in light of how much attention this deal has gotten, which is that, as you say, like from a narrow perspective, just in terms of the portfolio and the transaction, this is an economically compelling transaction for us as a co-brand deal. And I think someone described it as a win-win-win for all 3 parties. And I think that's very much how we feel about it. So that's a good starting point.

And then in addition to that, obviously, you're talking here about a partnership with a firm, Apple, that is a leader in payments innovation and user experience, and it's obviously like a very compelling distribution channel for card. And so it's going to be challenging for us. The integration is going to take 2 years for a reason. We feel confident that we'll get it done successfully. And I think the process of getting it done in the narrow sense is going to make us better, just generally accelerate and challenge our modernization agenda, and the user friendliness of everything that we do in the card business. And beyond that, we'll see. We'll see what comes out of the partnership. But obviously, anyone should be thrilled to be in a partnership with Apple.

Okay. And then maybe you or Jamie could provide some thoughts on the idea of regulators putting caps on credit card APRs, just potential impacts on the industry and how you would think through strategic reactions as a big issuer.

Yes. Thanks, John. And I appreciate the way you framed the question, because the thing that I'm sort of trying to avoid doing is spend a lot of energy or time speculating on the probability that this does or doesn't happen in whatever form it does or doesn't happen. So I think for the purposes of this call, and obviously, we can assume that, institutionally, we'll be doing all the relevant contingency planning. But for the purposes of this call, given how little we know at this point, the way I would prefer to talk about it is just assume for the sake of argument that something in the general mode of price controls on credit card interest rates goes through, what would be the consequences of that?

And I think the first thing to say, which you obviously know very well, is that the card ecosystem is an exceptionally competitive ecosystem. It's among the most competitive businesses that we operate in. And that's true for all levels of borrower credit score, from a high FICO to low FICO. And so in that context, when you -- just basic economics, when you start with that as your starting point, the right assumption about what the response of the system is going to be to the imposition of [ these ] controls is not that you will simply compress the profit margins, which are already at their sort of competitively optimal level, and thereby pass on benefits to consumers.

What's actually simply going to happen is that the provision of the service will change dramatically. Specifically, people will lose access to credit, like on a very, very extensive and broad basis, especially the people who need it the most, ironically. And so that's a pretty severely negative consequence for consumers and, frankly, probably also a negative consequence for the economy as a whole right now.

I don't want to let this pass without saying that I think it should be obvious that that would also be bad for us. I'm not going to get into quantifying, but in a narrow sense, this is a big business for us. It's a very competitive business, but we wouldn't be in it if it weren't a good business for us. And in a world where price controls make it no longer a good business, that would present a significant challenge, clearly. Beyond that, the way we actually respond would have a lot to do with the details, and I just don't think we have enough information at this point.

Our next question comes from Betsy Graseck with Morgan Stanley.

Okay. So just one follow-up to the last question, is, does it impact how you're thinking about the co-brand cards you have, the rewards card? Is -- because I think one of the media narratives here is that it would impact only revolvers. And I'm wondering if that's a view that you share, or is this an impact on the entirety of the card book?

Can I just -- look, obviously, it would impact prime less than subprime. It would be dramatic on subprime. And some of the co-brands are a lot of subprime, et cetera, so you really have to go co-brand by co-brand, but you would have to adjust your model for the added risk by this and ongoing price control and things like that. So if it happened the way it was described, it would be dramatic. If it happens in a way which is modified quite a bit, it would be less. And we don't know the number yet, but it would be very dramatic [indiscernible].

And then on the Apple Card, 2 years to bring on, Jeremy, you mentioned for good reason. Is this primarily a function of the technology that Apple Card is built on, right? Like, so as far as I can -- I'm aware, the current offering had a built-for-purpose technology stack, and I understand -- I guess my question is for you. Are you building out a whole new technology to enable that same interface with the users of Apple Card or are you able to take -- are you able to enhance your current system to enable the users to come on to your current system? Or is it under a whole new tech stack? Or are there other reasons why it's a 2-year process?