JPM Q3 '26

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   “And we, you know, we haven't, I don't think we've disclosed the number, but the first year is probably over 200 already.”

   Analyst asked: Yes, thank you. Good morning. Um, my first question just is on capital management. You know, we were fielding a lot of inbound questions from investors in terms of the billion dollar buyback versus, you know, 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. Um, but perhaps, you know, take us through how you should think

   Management, 16.2x volume, adj. next 5 min: +1.17% raw vs +0.07% sector

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   Move began earlier. high confidence

2. 208:54 ETQ&A▲ +0.54%

   “I think the simple answer is no significant change to our core expectations here.”

3. 309:19 ETQ&A▼ -0.17%

   “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 deposit data.”

4. 409:23 ETQ&A▲ +0.33%

   “So the conditions that we've had recently were essentially every part of the franchise is beating records or are not typical by historical standards.”

1. +0.05%0:00OperatorGood morning, ladies and gentlemen. Welcome to JPMorgan Chase's third quarter of the 2026 earnings call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. 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 Barnum. Mr. Barnum, please go ahead.
2. +0.05%0:40ManagementThank you very much and good morning, everyone. The firm delivered net income of $15.3 billion, EPS of $5.57, and an ROTC of 20%. These results included $658 million 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 AWI and SBCB. Expenses of $27.3 billion were up 12% year-on-year, largely driven by higher volume and revenue-related expense, as well as firm office hiring and wage inflation.
3. -0.19%1:23ManagementAnd 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 CT1 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.
4. -0.14%2:06ManagementNow moving to our businesses, CCP reported net income of $5.7 billion. Revenue of $21.2 billion was up 9% year-on-year, predominantly driven by higher balances and yield and 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 spending categories, including gas and travel, supported by consumer net. Deposit growth of 4% year-on-year was stronger this quarter, as we continued to grow our customer base across consumer and business banking, and we retained our number one position in retail deposit share based on FDIC data.
5. -0.14%2:47ManagementClient investment assets crossed $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 an 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. In markets, fixed income was down 4% year-on-year, with lower revenues in commodities, rates,
6. -0.08%3:28Managementand credit, largely offset by higher client flows and currencies in emerging markets. Equities was up 49% year-on-year, with continued on performance across the franchise, notably in prime and derivatives. Turning to asset and wealth management, AWM reported net income of $1.8 billion, with pre-tax margin of 36%. Revenue of $6.9 billion was up 14% year-on-year, predominantly driven by growth and management fees on higher average market levels and strong net inflows, as well as higher loan balances. Long-term net inflows were $51 billion, largely driven by continued strength and fixed income. AUM of $5.2 trillion was up 13% year-on-year, and client assets of $7.9 trillion were up
7. -0.08%4:13Management15% 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. The implied full year numbers are on the page. We expect fourth quarter NIIX markets to be approximately $25.5 billion, and fourth quarter total NIIX to be about $28 billion. And as we've done for a couple years, you'll note we gave you a central case for 2027 NIIX markets of approximately $107 billion, which we'll refine for the next quarter.
8. -0.08%4:58ManagementIt'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 circumstances. 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.
9. +0.01%5:32OperatorThank you. For participants dialed in on the analyst side of today's conference call, if you would like to ask a question, please press star one to be entered into the queue. We kindly request that you ask one question and only one related follow-up. If you would like to ask an additional question, please press star one to be re-entered into the queue. Our first question comes from Ibrahim Bunawalov with Bank of America. Your line is open.
10. +0.01%5:56AnalystHey, good morning. I guess maybe one question, there's been a lot of discussion around all things AI over the last couple of months. Maybe if there are two things that you can address specifically, one, when we think about the disruption risk to agent-tech 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 agent-tech AI inside a bank given the emergence of all the rogue agents and does that make it harder for a bank to actually deploy agent-tech AI as we think about just competitive challenges.
11. +0.30%6:41ManagementI'll start and you want to jump in? Yeah, okay. So on the disruption point, a couple things. There's obviously been a lot of focus on smart cash solution, which I think is a small piece of the overall story, but that is live now actually as of the last couple of 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 I mean, we're going to come on that in the future, early days, interesting so far. I think the bigger picture here is around, you know, there have been a couple of releases
12. +0.07%7:24Managementof personal agents this quarter, which have really gotten a bunch of attention in the market and saw a little bit of a response in, you know, 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 that, but that doesn't mean that we're complacent about it. 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 race cycles with a lot of competition from yield seeking flows and our strategy remains focusing on primary
13. -0.06%8:06Managementbank 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 really new. The other piece is, you know, competition from FinTech for innovating and providing great customer experiences. And 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 experience. And so in that sense, the kind of agentic personal agents, whatever stuff, it's just the intersection of those two things.
14. -0.06%8:47ManagementThat doesn't mean we're complacent develops and what we ourselves offer. You know, when you take a really big step back from a competitive position, I think we really like our hand and no small part because of the sort of multiple decades of investment and the branch network, the value proposition and not least trust. I would say 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 our focus always be do a great job for customers. And so we're not against agents or for agents, something like that. There are tools, you use them for customers.
15. -0.10%9:30ManagementThere is a defensive side, which is you've got to make sure our customers aren't hurt by it. And so that is of concern, but that's I think of that as an AI agenda concern, which is heightened because, you know, 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. If people are using them, they should understand the risk. There's a liability transfer. They should understand the liability transfer. If that is being misused, they should understand being misused. So, you know, we have to make sure we protect our customer in the right kind of way. So we will build, we're building tools to do that too. In the meantime, we're not going to allow just any agent to come, you know, outside agent to come in inside the company because it's just too risky for clients and for Jake and Morgan.
16. -0.26%10:13AnalystThat'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 tenure and just the fed hiking a few times. Do you think the risk of a market event or just stress on the economy is meaningful as we, as we kind of discount that?
17. -0.26%10:44ManagementI think you have to, we always prepare for all different events, you know, 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, the sick or thin. So of course things like that can happen. I would never take it off the table and they can happen for good reason, which is a lot of demand for capital, a lot of productivity and things are fine, you can have a bad reason, you know, in thinking inflation around the world, they can happen not because it's in the United States, you have, because what happens overseas. So not predicting it. You know, I've always thought there's a higher chance of other people. I still kind of think that, but there's not a prediction that's just a, because that is cautious preparation. Thank you. Thank you.
18. -0.11%11:28OperatorOur next question comes from John McDonald with Truist. Your line is open.
19. -0.11%11:34AnalystHi, good morning, Jeremy and Jamie. Was hoping Jeremy, you could unpack the new outlook for 2027 and AI, the central case that you gave, including some of the assumptions around the balance sheet growth, deposit pricing and the impact of higher rates.
20. -0.11%11:49ManagementYeah, sure. John, no problem. So if you start with what we've given you as the AIX markets guide for fourth quarter, which is 25 and a half, and you annualize that, you get something like 102. So we're essentially giving you, you know, guiding to 5 billion of growth from that to the 107. That 5 billion, probably about a quarter of that, I would say, is related to the yield curve. So we remain, you know, asset sensitive and probably a little bit more asset sensitive than the EAR shows just because of the lower than modeled deposit betas. So, you know, about a quarter of that is the hikes that are, that are currently in the forward curve. I think there's one in December and then two through the first half of the year.
21. +0.28%12:32ManagementAnd the rest of it, I would actually describe pretty straightforwardly as just a continuation of the balance sheet growth and mixed trends that you've seen this year. So both continued, you know, modest consumer deposit growth, continued wholesale deposit growth, probably a wholesale a bit weaker than what was very strong this year, but we don't actually know. And then card loans, which obviously can be a big driver of NII, continue. Actually a pretty straightforward caveat, but you know, I gave you the caveat on the prepared remuneration. I mean, I mean, I think there's more uncertainty around that number than normal because of all the things going on around the world.
22. +1.04%13:14ManagementAnd obviously it also relates to what we do, which we can change at any point in time.
23. +1.04%13:21AnalystOkay. That's awful. Thank you. And Jeremy on expenses, if we move over to there, do you have any preliminary thoughts on your investment spend plan for next year? The other drivers of expenses and how those might line up with the current street forecast for expenses next year?
24. +1.04%13:37ManagementUm, yeah. So, um, you know, we try to draw a little bit of a distinction between NII and expenses in the sense that, you know, despite Jamie's comments, which are obviously true that we can modify, you know, 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 it's not that sensitive, um, to the budget cycle. And therefore we feel like we don't have a very good excuse at this point in the year for pretending that we don't have an opinion about 2027. Expenses are a little different in the sense that they are still sensitive to the 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
25. +1.14%14:21Managementour preliminary read on 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, you know, how the budget cycle finishes and, you know, 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.
26. +1.29%15:10OperatorThank you. Our next question comes from Erica Nazarian with UBS. Your line is open.
27. +1.29%15:17AnalystYes, thank you. Good morning. Um, my first question just is on capital management. You know, we were fielding a lot of inbound questions from investors in terms of the billion dollar buyback versus, you know, 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. Um, but perhaps, you know, take us through how you should think. We should think about your capital priorities, particularly given that we're hearing that Basel three end game and GSIB should be finalized at year end.
28. +1.29%15:48ManagementYeah. So I think we've told you all that we have probably 30 billion or something of excess capital rush roughly just estimating what all the end games are, which we don't know, but that's plenty. But the capital hierarchy has always been the same. I mean, after you pay a dividend, which hopefully be steady, are we like, we really like investing in organic growth that is the highest and best use of capital for shareholders. And, you know, obviously buyback is comes after that, particularly when stock prices are up. Stock prices are up. So the positive news is the main reason to buyback is down and it's got nothing to do with AOCI or, or guessing about the environment, or even Basel three. We believe now, which is different than we told you in the past, that
29. +1.10%16:29Managementwe 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 bought it today. Uh, and that's simple. I mean, that's good. That's good for shareholders. I'll give you one example. And I think there are many more, but you know, the security resiliency initiative, we told you all, we deploy $1.5 trillion over 10 years. And we, you know, we haven't, I don't think we've 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'll be considerably more than that. And the world needs capital. The world needs advice. The world is becoming more complex. Uh, you know, assets and management around the world are bigger.
30. +0.75%17:14ManagementAnd so we think that's good. We think that's good news in the long run. And we can't tell you what it means, you know, for the next six months, but, uh, that's why we're doing it. We hope to deploy it very well for our shareholders. Yeah. And the only thing I would add to that, Erica, is just that if you notice what the journey has been on the C2-1 ratio, I want to say that we 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 and the RWA and some of the investments that Jamie alludes to. Um, and during that period, we've also, also done a bunch of buybacks. So, but at this point, you know, we're, we're, as Jamie says, it, you know,
31. +0.75%17:56Managementthe, the, the speed with which we've been able to deploy organically relative to the amount of access that we have and the environment seems pretty clear that it makes sense to keep drive out. I want to brag on the investment bank a little bit, but they've hired a tremendous amount of very talented people at SRI. And we're lucky to have Todd Combs here, you know, investing some of the capital. They've had a lot of ideas. It's not just meetings 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, what can you do to accelerate, you know, security resilience United States around, you know, what's chip building or, and we had a big announcement in Philadelphia.
32. -0.23%18:39ManagementUh, so I, I just, I'm proud of them. You know, we've had a bunch of people who retired, who raised a hand. They're coming back, you know, more for patients than anything else. And so, uh, it's been just a great effort for the company. And as we pointed out, it's global and the global response has also been exceptional. I have something across my desk, which is alone, you know, over 10 or $20 billion of financing, uh, in one country. So, uh, uh, a lot more to come here. And I would put the same category of American dream initiative, the innovation economy initiative, uh, the commercial banking initiative around the world, these things are working. Uh, we think we're doing the right kind of good business at good returns.
33. +0.21%19:20AnalystSo as a follow up here, that all sounds, um, you know, um, 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, it has a chilling effect on activity levels. Maybe talk about what the pipeline looks like for activity levels in both, uh, you know, the investment and both quote, wall street and main street.
34. +0.21%19:52ManagementWell, first before I do that, the bond volatility, the market, the fear is not going to change what we do. We serve clients with sick or thin. We know that I call some of the economic wins. It's the weather. That's not exactly referred to the pipeline is fine. No, but I pointed out many times before the pipeline is like an accordion, it could open closed pretty quick. You've seen in the United States has been built. I, as Jeremy says, the word delayed, probably we don't really know when you will see, but 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, uh, we just don't know. And it's serving the clients and doing a good job is the most important thing. No pipelines. We always forecast the pipeline.
35. +0.50%20:37ManagementIt's called the probability. Probably. And we know, and we know one thing for sure. It'll be wrong. 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 breath 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 and, you know, the second half of September, basically. And we'll see how that plays out in December, but I mean, sorry,
36. -0.23%21:23Managementbut the big picture, I think, is pretty clear. Thank you. Thank you.
37. -0.23%21:31OperatorOur next question comes from Chris McGrady with KBW. Your line is open.
38. -0.23%21:37AnalystOh, great. Thanks. 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. Where are you pulling back? Where are you seeing structures or peers maybe doing something you may not want to do? Thank you.
39. -0.23%21:54ManagementI'm not going to give you very specific stuff, but we're tightening up a little bit on credit. I think some of the credit terms are kind of a little bit loose. And you've heard us talk about that before and other people, you know, a little too much pay, a little too weak governance, a little too much priming, good assets, a little too much pushing on it. You know, we just don't feel like we have to chase that kind of stuff anymore.
40. +0.24%22:17AnalystGreat. 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 and debit and credit. If we're a year from now and we still have rates where we are, what's your expectation for the ability for the consumer to hold on? Thanks.
41. +0.24%22:41ManagementI mean, you know, obviously if you keep real rates very, very high for a long time at some level, you know, 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, you know, I think that the conditional expectation of, you know, consumer credit health 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,
42. +0.97%23:25Managementprimarily because of a healthy labor market. But, you know, 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. Thanks a lot.
43. +0.97%23:49OperatorThank you. Our next question comes from Ken Houston with Autonomous Research. Your line is open.
44. +0.97%23:56AnalystThanks. Hi, good morning. On the consumer side, it's nice to see the 4% year over year CCB deposit growth. I'm just wondering, you know, aside from agentic, just what do you think in terms of either rate seeking behavior, the deposit margin has been up for the last few quarters, which is also good to see. And I'm just wondering, you know, any change in your expectations for either growth or how you're adjusting to the current marketplace and competition for deposits? Thanks.
45. +0.54%24:22ManagementSure. Yeah, 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, you know, 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.
46. +0.21%25:07ManagementAnd all else equal, you would probably expect some amount of additional internal migration out of checking savings into, you know, CDs or simplicity, resulting in higher weighted average rate paid. And maybe you see a little bit of additional outflow pressure in 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, you know, these things are relatively insensitive to slightly higher rates. I don't personally believe that.
47. +0.21%25:48ManagementI continue on 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 by the net new checking account acquisition, which I think we have like 650 this quarter or something. So it's really for our marketing efforts and the power of the brand. So from a long-term perspective.
48. +0.60%26:30AnalystExcellent. Thanks, Jeremy. One follow up on the markets business. Obviously, we're seeing quite a bifurcation of just the continued strength in equities. And as you mentioned earlier, just some tougher comps, I guess, and the impact of higher rates on FIC. 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 in the markets business in terms of activity and kind of your willingness to provide balance sheet, but more so the demand side too? Thanks.
49. +0.08%27:04ManagementYeah. So at a high level, I think the simple answer is no real change. So I like your insatiable demand for capital. I think that's a 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 in so many different pockets, there's capital being tapped for all kinds of different mechanisms. We just need to be really, really on top of things to make sure that
50. +0.08%27:45ManagementThank you. Just that concludes your question. This question comes from Mike Mayo.
51. -0.32%28:01OperatorThank you. Our next question comes from Mike Mayo with Wells Fargo Securities. Your line is open.
52. -0.32%28:06AnalystHi, can you say the degree that AI helps out? JP Morgan, I saw you were ranked highly in a recent AI and bank poll. 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's stale if you could update that. And then also address the risk that AI agents will take deposits out of JP Morgan. 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.
53. -0.32%28:51ManagementYeah, so Mike, let me just tidy up a couple 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 at the time and I think it is a little stale at this point, the AI expense number was significantly less than that. I wanna say something like 700 annually or something like that. But more importantly, 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 probably get a higher number too. So it's at this point, not really something that you can ring fence. It's pretty well diffused inside the whole institution and it's obviously a very, very high priority.
54. -0.30%29:35ManagementOn 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 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. So that I think is the more relevant focus right now.
55. -0.34%30:20ManagementAnd I'm just very reluctant to spend a lot of energy quantifying it, cuz it winds up wasting a lot of people's time inside the institution when we actually need to get them focused 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
56. -0.34%30:58Managementbenefit technology organization that supports finance are increasingly exciting. We've done some experiments of some minor legacy tools that needed to be rewritten and trying to see if we could essentially one shot the rewrite in a couple weeks and it didn't work perfectly. But you're starting to see some really exciting opportunities for acceleration. And how long it's gonna take for that to show up, we're gonna be offset with token costs, which is a whole other conversation. But and I guess your other question was the agenda question and the trust question.
57. -0.15%31:42ManagementI think I addressed some of that earlier already. But high level, as Jamie pointed out, the true north here is protecting the client. And the company, obviously, but narrowly focusing on agents giving customers access to money movement, their accounts. I think right now, some of the services that offer that do it through credential sharing and we have a long record of being against that, scraping, etc. It's not secure. And so to the extent that we're able to block those, more than the customers understand that if they give up their credentials
58. +0.08%32:25Managementto the agent and the agent has 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've 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 cost.
59. +0.09%33:01AnalystAnd one short follow up on the token costs. Do you get a benefit from scale with the token costs, say, versus a small bank? And are you also transitioning more toward kind of open model AI systems that can cost a lot less?
60. +0.09%33:17ManagementIt'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 we've gone on our data center. 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 own testing. And there are tools coming that will model routing but send it to the best, quickest, cheapest. You don't need the most expensive thing for every query you have. And very often people just use the one they're comfortable with. So that's all coming to have that, of course, under control.
61. +0.11%34:01ManagementGreat, all right, thank you. Thanks Mike.
62. +0.11%34:07OperatorThank you. Our next question comes from Gerard Cassidy with RBC. Your line is open.
63. +0.11%34:12AnalystHi Jeremy, hi Jamie. Can you guys share with us the deposit-based outlook? Obviously, interest rates are starting to go up. The Fed Fund futures are suggesting more rate increases over the next three to six months. And with your growth in your consumer deposit base since the last tightening cycle in 2022-23, 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 2022. So could that mean deposit betas may not be as high this time around for you folks?
64. +0.11%34:55ManagementSo 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 rate cycle is arguably even more unprecedented than the last one. 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 this 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,
65. +0.29%35:40Managementactually, in the sense that you can almost think about the franchise as pretty barbell 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 this cycle. And, you know, 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
66. +0.31%36:23Managementtherefore we have to be thinking about all scenarios. Very good.
67. +0.31%36:29AnalystAnd then pivoting over to a different question, the IMF came out very recently this month with the Global Stability Report and they've talked about how the hedge fund industry has grown dramatically and now in their eyes, there's systemic risk. Leveraged finance in particular was highlighted as another high risk. Obviously, that's your guys' 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?
68. +0.40%37:07ManagementWe worry about a lot of stuff, not what the IMF thinks about it. Got it. And they aren't wrong because there's a lot of leverage in some of this stuff. Yeah, 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 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.
69. +0.40%37:48ManagementObviously, that's the business is knowing it and hedge fund leverage as a category of no and no. Doesn't mean it's riskless, but we kind of know what it is. There are a couple of unwinds that happened recently, not huge, some of the equity sides, some of the fixed income arbitrage type of side, and they were handled pretty easily by the street. Very good. Thank you.
70. +0.21%38:22OperatorThank you. Our next question comes from Glenn Shore with Evercore ISI. Your line is open.
71. +0.21%38:28ManagementHi. One quickie follow up on the whole agentic and AI impact across the deposit 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. Yeah, no, I understand the question, Glenn. I mean, you can argue that it's sort of downstream of the narrative that, you know, the SVB run was a sort of social media phenomenon. And, you know, we were never big buyers of that idea.
72. +0.19%39:11ManagementI think the better way to understand that situation was as extremely concentrated and diversified deposit base that was wholesale, non-op and kind of monoculture in terms of who were shaping the thinking around that. And so arguably, you know, in a world with TV and fax machines, I think you probably would have gotten, you know, essentially the same answer in terms of the speed of the run. You know, it might have been the processing of the fax machines into wires might have taken an additional eight hours, but the core ingredients there were the same. So I think everyone's pretty eager to tell a sort of fast deposit run story in this new technology enabled world.
73. +0.19%39:54ManagementI'm just a little bit less persuaded that you really have good effects there. And sure, therefore, like in movement, even easier to move cash under certain types. I think the right way to sort of ensure that your deposits are stable
74. +0.14%40:18Managementare supposed to be that once you take a big step further, we have one point five trillion of cash in model security. So not worried about changing our liquidity cards and money and insured deposits and need the branches. And one of the ways you earn that is N.I.I. from that way.
75. +0.13%41:03ManagementGetting investment accounts combined with checking accounts. And so over time, it will adjust. We want to do a great job for our clients. You know, it costs a lot of money to run these banking systems. Most of us have fixed costs. So I'm not worried about over time, but in the short run, of course, you've 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 regulators be thinking about what they're going to do with some of these things? Yeah, of course they should. It's a new world. And, you know, and with all these bots and agents and stuff like that, could someone get hurt and cause a problem? Maybe. If I was a regular, I'd try to be prepared for that. Gotcha.
76. +0.13%41:46ManagementI have 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, you know, breaking some concentration limit issues? Like, can the market digest what the compute powder suggests for the spend? Yeah, it's a really good question, right? Because, I mean, we think a lot about our current exposure to that,
77. -0.05%42:31Managementbut 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 demands of requirements for capital. 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, you know, 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
78. +0.16%43:13Managementto assess your individual issuer exposure across the ecosystem. And you can assume that institutions are going to contain that. And, you know, 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, you know, I think at the system level, you know, some people are talking about crowding out effects, so that'll be interesting to see. But anyway, I think for us, we need to focus on our institutional risk capital and institutional risk capital. I think there, in addition to the obvious single name focus,
79. +0.16%43:55Managementthe 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, you know, traditional, you know, construction lending. Now increasingly, it's working capital revolvers. You also see it in the equity markets. It's kind of everywhere. And so you really need to be running stresses that test your resilience to a meaningful change in the overall theme across the entire enterprise. And that's something that we spend a lot of time thinking about. You know, 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
80. +0.11%44:37Managementto a major change in sentiment in the age of anyone, frankly. Great. Thanks so much, Jeremy. Thanks, Flynn.
81. +0.11%44:52OperatorThank you. Next, we will go to the line of Manan Gasalia from Morgan Stanley. Your line is open.
82. +0.11%44:59AnalystHi. Good morning. I wanted to check in on the commercial banking side. What are you seeing with your core middle market client? 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?
83. +0.05%45:20ManagementYeah, I don't think that when we talk about the insatiable demand for capital, we're talking about our core middle markets 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 always like, oh, I'm worried about this,
84. +0.05%45:41AnalystI'm worried about that. And it's like, how are you doing? Oh, I'm doing great.
85. +0.05%45:45ManagementSo it's kind of an interesting dynamic there. No question that higher rates, I think input costs, inflation, the diesel narrative, 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 yeah, I don't think insatiable demand for capital applies to that subset of the client.
86. +0.18%46:21AnalystGot 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 timeframe?
87. +0.18%46:50ManagementI just, I think it's right for the regulators to look at all these things again. And it's not just the discount window, it's FHLB, inconsistencies between resolution, recovery. It's what counts as HQLA to start with. How you do LCR, I think they should look at all that, because with the view that I think you can create safer banks with more deployed capital and more liquidity you can use to intermediate markets. And that should be the goal, but it's hard to answer the question, because this is gonna be up to them. Either way, J-Mobile will serve our clients and do a good job, take care of, 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 gonna do. There are a lot of proposals out there,
88. +0.21%47:33Managementas far as international rules, but I applaud them for looking at it. Yeah, now I think that I agree with everything Jamie said, and it's really particularly complicated across a range of dimensions. I will note that at Company Update, we actually talked about this, and in some sense 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 but it's relatively constrained, is that just at the margin, it leads you to have your asset deployment be in 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,
89. -0.14%48:18Managementincluding mortgages, consumer lending, also some of the more secured C&I type structures. I was gonna say, if they wanna reduce the size of the Fed balance sheet, they're gonna have to make some changes. Got it, thank you.
90. -0.14%48:38OperatorThank you, our next question comes from Matt O'Connor with Deutsche Bank, your line is open.
91. -0.14%48:43AnalystGood morning, I was hoping you could talk more about how the growing non-interest-bearing deposits when a number of peers aren't, and then just how you're thinking about that specific buck or deposits in a higher rate environment if you can continue to grow.
92. -0.14%48:59ManagementYeah, 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 NIO book and 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 supporters, so people are reacting, they're responding well to the marketing, they're 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
93. -0.17%49:43Managementin 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 beta 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 deposit data. I think that's part of the spring.
94. -0.18%50:14AnalystOkay, and I guess I was thinking more specifically the non-interest-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, you know, things that have been a key driver.
95. -0.18%50:30ManagementThe cash, most of the non-interest barriers is consumer, and that's because we're growing the business and you have different products for different types of consumers. And I think the wholesale side, commercial is much more competitive than that. Yeah, 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 non-interest. You want a bit more color on that, Matt. You can say that wholesale deposits have been, continue to be, and in fact, at the margin are a little bit more. The way to think about that is not that
96. -0.01%51:14Managementthe product offering allows us to grow an overall margin that you earn on your deposit or your service offering is, and we have quite a good track record there. I understand, thank you.
97. -0.01%51:39OperatorThank you. Our next question comes from David Chevarini with Jeffreys, your line is open.
98. -0.01%51:45AnalystHi, thanks for taking the question. So JP Morgan's ROTC 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?
99. -0.07%52:07ManagementI'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 17% consistently for a long period of time, that's a really good return for shareholders. That's our goal. I don't want to change every time something happens in the marketplace. So far so good. And we'll hopefully enjoy this good environment for a while. We just don't know when it's gonna stop. I don't wanna 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.
100. -0.07%52:51ManagementThe conditions have just been exceptionally favorable. So is every company. Yeah, it's not just us. And so that hasn't historically been true. Historically, you've tended to see a bit more internal diversification in high rate environments. Some businesses do better than others and vice versa. So the conditions that we've had recently were essentially every part of the franchise is beating records or are not typical by historical standards.
101. +0.33%53:17AnalystMakes sense. Thanks for that. And then shifting to credit quality, you addressed 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.
102. +0.33%53:30ManagementSure. Yeah, 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 and CNI 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,
103. +0.29%54:15Managementbut there are a lot of pressures building up. So we'll have to see what happens. Great, thank you.
104. +0.29%54:25OperatorThank you. Our final question comes from Kunpeng Ma from China Securities. Your line is open.
105. +0.29%54:33AnalystHi, good morning. Morning, Jamie and Jeremy. This is Kunpeng China Securities. I have a question on the revenue of the market business. Just seen some volatility in the market revenue across quarters. So I don't know whether we have a meaningful estimate of the 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 estimates, that'll be very helpful. Thank you.
106. +0.46%55:04ManagementYeah, so I had trouble exactly applying your question, but I think you're asking me for a fourth quarter outlook for the market's revenue. And so as you know, we don't actually guide to that. It's obviously very, very hard to predict and essentially a function of outside enforces. 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 those 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 caveat supplies.
107. +0.46%55:48ManagementWe'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, firstly. Interesting. Too much going on in the world. Thank you. Thank you so much. Thanks very much. Thank you. That's all the time we have for questions today. Thank you very much everybody. Thanks very much. See you all next quarter.
108. +0.44%56:16OperatorThank you all for participating in today's conference. You may disconnect at this time and have a great rest of your day.