JPMorgan Chase & Co. Price & Performance (JPM)

Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's First Quarter twenty twenty five Earnings Call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. The presentation is available on JPMorgan Chase's website Please refer to the disclaimer in the back concerning forward looking statements. Please stand by. At this time, I would like to turn the call over to JPMorgan Chase Chairman and CEO, Jamie Dimon and the Chief Financial Jeremy Barnum. Mr. Barnum, please go ahead.

Thank you, and good morning, everyone. Starting on page one, the firm reported net income of $14,600,000,000 EPS of $5.07 on revenue of $46,000,000,000 with an ROTCE of 21%. These results included a First Republic related gain of $588,000,000 which was previously disclosed in the 10 ks. On page two, we have more on our first quarter results. The firm reported revenue of $46,000,000,000 up $3,500,000,000 or 8% year on year. NII ex markets was down $430,000,000 or 2%, driven by the impact of lower rates and deposit margin compression well as lower deposit balances in CCB. This was predominantly offset by higher card revolving balances the impact of securities activity including from prior quarters, as well as higher wholesale deposits. And IR ex markets was up $2,200,000,000 or 20%, and excluding the significant item I just mentioned, was up 14% largely on higher asset management fees, lower net investment securities losses, and higher investment banking fees. And Markets revenue was up $1,700,000,000 or 21%. Expenses of $23,600,000,000 were up $840,000,000 or 4%, largely driven by compensation, including growth in employees across the front office technology, higher brokerage and distribution fees, as well as marketing and legal expense. The quarter also reflected a $323,000,000 release of the FDIC special assessment accrual compared with a $725,000,000 increase in the prior quarter.

Credit costs were $3,300,000,000 with net charge offs of $2,300,000,000 a net reserve build of $973,000,000 We have more details on the reserve build on page three. With this quarter's reserve build, firms' total allowance for credit losses is 27,600,000,000.0 Let's take a second to add a little bit of context to our thinking surrounding this number in light of the unique environment of the last several weeks. Our first quarter allowance is anchored on the relatively benign central case economic outlook, which was in effect at the end of the quarter. But in light of the significantly elevated risks and uncertainties at the time, we increased the probability weightings associated with the downside scenarios in our CECL framework. As a result, the weighted average unemployment rate embedded in our allowance is 5.8%, up from 5.5% last quarter, driving the $973,000,000 increase in the allowance. So with that in mind, the consumer build of $441,000,000 was driven by changes in the weighted macroeconomic outlook. The wholesale billed of $549,000,000 was predominantly driven by credit quality changes on certain exposures and net lending activity. As well as changes in the outlook. In addition, it is important to note that the increase in the allowance is not to any meaningful degree, driven by deterioration in the credit performance in the portfolio, which remains largely in line with expectations.

With that, let's go to balance sheet and capital on page four. We ended the quarter with a CET1 ratio of 15.4%, down 30 basis points versus the prior quarter as net income and OCI gains were more than offset by capital distributions and higher RWA. This quarter, the firm distributed $11,000,000,000 of capital to shareholders, reflects $7,100,000,000 of net common share repurchase and the payment of our common dividend, which has been increased to $1.4 per share. This quarter's higher RWA is primarily driven by overall business growth in markets and some seasonal effects. Now let's go to our businesses, starting with CCB on page five. Consumers and small businesses remain financially healthy. Despite the recent downtrends in consumer and small business sentiment, spend, cash buffers, payment to income ratios, credit utilization are all in line with our expectations. Moving to the financial results, CCB reported net income of $4,400,000,000 on revenue of $18,300,000,000 was up 4% year on year. In Banking and Wealth Management, revenue was down 1% year on year, driven by lower deposit NII, predominantly offset by growth in wealth management revenue. Average deposits were down 2% year on year, and flat sequentially, end of period deposits were up 2% quarter on quarter.

Client investment assets were up 7% year on year predominantly driven by market performance, and we continue to see strong flows into managed products. In home lending, revenue was up 2% year on year, and originations were up 42% year on year off a small base in a slowly growing market. Turning to card services and auto, revenue was up 12% year on year, predominantly driven by card NII, and higher revolving balances, as well as higher operating lease income in auto. Card outstandings were up 10% due to strong account acquisitions. And in auto, originations were $10,700,000,000 up 20%, driven by higher lease volume. Expenses of $9,900,000,000 were up 6% year on year, predominantly driven by growth in marketing and technology, higher field compensation, as well as higher auto lease depreciation. Credit costs were $2,600,000,000 reflecting net charge offs of $2,200,000,000 up $275,000,000 year on year, predominantly driven by the seasoning of recent vintages in card, delinquencies and losses in line with expectations. The net reserve build was $475,000,000 of which $400,000,000 was in card. Next, the commercial and investment bank on page six. CIB reported net income of 6,900,000,000.0 on revenue of $19,700,000,000 which is up 12% year on year.

IV fees were up 12% year on year, and we ranked number one with wallet of 9%. In advisory, fees were up 16%, benefiting from the closing of deals announced in 2024. Net underwriting fees were up 16%, primarily driven by elevated refinancing activity, particularly in leveraged finance. In equity underwriting, fees were down 9% year on year, reflecting challenging market conditions. In light of market conditions, we are adopting a cautious stance on the investment banking outlook. While client engagement and dialogue is quite elevated, both the conversion of the existing pipeline and origination of new activity will require a reduction in the current levels of uncertainty. Payments revenue was up 3% year on year, excluding equity investments driven by higher deposit balances and fee growth, predominantly offset by deposit margin compression. Lending revenue was up 11% year on year, driven by lower losses on hedges, partially offset by lower balances. Moving to Markets, total revenue was up 21% year on year, reflecting record performance in equities. Fixed income was up 8% with better performance in rates and commodities against a relatively weak prior year quarter. Equities was up 48% as the business performed well during a period of elevated volatility supported by higher client activity and strong monetization of flows, particularly in derivatives.

Security services revenue was up 7% year on year, driven by fee growth and higher deposit balances, partially offset by deposit margin compression. Expenses of $9,800,000,000 were up 13% year on year, predominantly driven by higher compensation, legal and brokerage expense. Average banking and payments loans were down 3% year on year and down 1% sequentially, as we continue to observe payoff activity and limited demand for new loans across client segments. Average client deposits were up 11% year on year and up 2% sequentially, reflecting increased activity across payments and security services. Finally, credit costs were $75,000,000 largely driven by the net reserve build. Then, to complete our lines of business, asset and wealth management on page seven. AWM reported net income of $1,600,000,000 with pretax margin of 35%.

Revenue of $5,700,000,000 was up 12% year on year, predominantly driven by growth in management fees on strong net inflows and higher average market levels as well as higher brokerage activity and higher deposit balances. Expenses of $3,700,000,000 were up 7% year on year, largely driven by higher compensation, including revenue related compensation, continued growth in our private banking advisor teams, as well as higher distribution fees. Long term net inflows were $54,000,000,000 for the quarter, primarily driven by equity and fixed income. In liquidity, we saw net inflows of 36,000,000,000 AUM of $4,100,000,000,000 and client assets of 6,000,000,000,000 were both up 15% year on year, driven by continued net inflows and higher market levels. And finally, loans were up 5% year on year and flat quarter on quarter, and deposits were up 7% year on year and down 2% sequentially. Turning to corporate on page eight. Corporate reported net income of $1,700,000,000 Revenue of 2,300,000,000.0 was up $102,000,000 year on year. NII of $1,700,000,000 was down $826,000,000 year on year, NIR was a net gain of $653,000,000 compared with a net loss of $275,000,000 in the prior year. Current quarter included the significant item I mentioned upfront, while the prior year quarter included net securities losses of $336,000,000 Expenses of 185,000,000 were down $1,100,000,000 year on year driven by the changes to the FDIC special assessment accruals I mentioned upfront.

To finish up, let's turn to the full year outlook on page nine. We continue to expect NII X markets to be approximately $90,000,000,000 The firm wide NII outlook has increased to about $94,500,000,000 reflecting an increase in markets NII which you should think of as being primarily offset in NIR. Our adjusted expense outlook continues to be about 95,000,000,000 And on credit, we expect the card net charge off rate to be in line with our previous guidance of approximately 3.6%. So to wrap up, we're pleased with another quarter of strong operating performance, but of course, the focus right now is on the future, which is obviously unusually uncertain. But no matter what outcomes eventually materialize, we are eager to do our part to continue to support our clients, the markets, and the broader economy and we believe the banking system will be a source of strength in this dynamic environment. And with that, let's open the line for Q and A. Thank you. Please stand by. Our first question comes from Ken Usdin with Autonomous. You may proceed.

Good morning, Jeremy. Wondering if you could start by just kind of amplifying just the macro commentary that you started off on and given the uncertainty in the world that you referenced, just how are you seeing the activity change across customer base from consumers to wholesale? And can you just talk through how that's also just informing any changes in your some of your growth and reserving expectations? Thanks.

Sure, Ken. So mean, at a high level, would say that obviously some of the salient news flow is quite recent. So we've done some soundings and some checking both on the consumer side and on the whole side. I think on the consumer side, the thing to check is the spending data. And to be honest, the main thing that we see there, if it were appear to be a certain amount of front loading of spending, ahead of people expecting price increases from tariffs. So ironically, that's actually somewhat supportive, all else equal, but I think what it highlights is that during this transitional period and this elevated uncertainty, you might see some distortions in the data that make it hard to draw larger conclusions. In terms of our corporate clients, obviously they've been reacting to changes in tariff policy, and at the margin that shifts their focus away from more strategic priorities with obvious implications for the investment banking pipeline outlook, towards more short term work, optimizing supply chains, and trying to figure out how they're going to respond to the current environment. So as a result, I think we would characterize what we're hearing from our corporate clients as a little bit of a wait and see attitude, I do think you see obvious differences across sectors.

Some sectors are going to be more exposed than others and have more complicated problems to solve. And also across the size of the clients, think, you know, clients, small business, and smaller corporates, are probably a little bit more challenged. I think the larger corporates have a bit more experience dealing with these things and more resources to manage. So that's a little bit our read of the situation right now, but certainly a bit of a wait and see attitude. It's hard to make long term decisions right now, and we'll see how that plays out.

And just one question on the, NII X markets holding at 90 Can you just walk us through the puts and takes of just what's the new curve you're using, which also is subject to change every day? And what might have been some of the positive offsets to if you put in more expected cuts than you had before? Thanks.

Yeah, that's a good question, Ken. You're right. If you remember, last quarter, we said that we had one cut in the curve. I think the latest curve has something like three cuts we've talked a lot obviously about how we're asset sensitive, you now see our EAR disclosed in the supplement. And probably our empirical EAR is a little bit higher than our modeled EARs, result of the relatively low lower than modeled rates paid in consumer. When you put that together, all else equal, the drop in the weighted average IORB, which is about 22 basis points, should produce a notable headwind in our NII ex markets. Even the curve base [indiscernible] so that's mechanically just falling through the curve.

So yeah, your question is that given that, why are you not revising down, and the answer to that is that across all the puts and takes actually, our number is a tiny bit lower, it's just not enough to warrant change in the outlook, but we do have some offsets. So we have some balance effects that are favorable You will have noted that I talked about higher wholesale deposit balances, for example, We see beta outperforming in a couple of different places in CDs and in wholesale. The other thing is that you'll recall we talked before about having a placeholder in our NII outlook for the potential impact of the card late fee rule. We've now removed that So that's a little bit of an offset as well. So that's kind of how you get to unchanged even though clearly all else equal the lower expected front end rates are a headwind. Thank you. Our next question comes from Erika Najarian with UBS. You may proceed. Yes, good morning. This question is for Jamie. Jamie, you were on the media today talking about potential economic turbulence. But Jeremy also mentioned that banking should be, the banking system should be a source of strength in this turbulence.

The equity market always seems to think about the banks as weaker players given how they trade the stock more on sentiment and fear rather than the mass of the ability of banks to absorb provisions going forward if we do fall into a slower economic downturn. So I guess just the question here is, you double click on how you think this is going to impact the economy going forward? And maybe double click on Jeremy's statement that banking system should be a source of strength.

I just before Jamie answers that, Erica, I just want to make one brief comment, which is the banking system being a source of strength means what it says. In other words, banks doing their job to support the economy. That's not a statement about bank equity performance and the extent to which banks are sick of or not. Obviously, recessionary environment, as I've frequently said, all else equal, is bad for banks. From an equity performance perspective. We're talking about the financial strength of banks' balance sheets and our ability to support our clients in the difficult moment. Everyone trades stocks in a different way, so [indiscernible] a cork in the ocean when it comes to the economy.

If the economy gets worse, credit loss will go up, volumes can change, yield curves can change. We're not predicting all of that. But I would say is our excellent economist, Michael Frohle, I called him this morning specifically to ask him how they're looking at their forecast today, They think it's about fifty-fifty for a recession, so I'll just refer to that. Obviously, if there's a recession, credit loss will go up. And other factors will change too. Think the one thing I'll add to what Jeremy said is and I don't usually pay that much attention to anecdotes, but this time I am. And I think you're going to see a lot of companies you guys, not you, but the analyst community is already doing this, earnings estimates for the S and P by 5%, so now it's up 5% as opposed to up 10 My guess is that will be 0% and negative 5% probably the next month.

And then you're going to hear 1,000 companies report and they're going to tell you what their guidance is. My guess is a lot. We'll remove it.

They're going to tell you what they think it might do to their customers, their base, their earnings, their costs, their tariffs, It's different for every company. But I assume you'll see that. And anecdotally, a lot of people are not doing things because of this. They're going to wait and see. That's M and A, M and A with middle market companies, That's people's hiring plans and stuff like that. People have to adjust this new environment. And I think you will see what it is. I just also want to point out, just so you can round it up, this is to make you feel comfortable, not uncomfortable, When COVID hit, unemployment went from like 4% to 15%. In a couple of months And we had to add to reserves in a two month period of $15,000,000 And then, to show you how stupid CECL is, in the three quarter period, we took down the $15,000,000,000 So that just sizes up a bad recession. If it's a mild recession, it will be less than that. If it's a really bad recession, will be more than that. Either way we can handle it and serve our clients. Earnings won't be great and the stock to go down, which I look at as an opportunity to buy back more stock.

Got it. And a second follow-up question. I don't disagree with you guys on equity market performance of bank stocks. It's just that the mindset of portfolio managers is they always go back to sort of the lowest common denominator of fundamental performance versus thinking about resilience. And to that point, the second question is on the reserve. Jeremy, you mentioned a weighted average unemployment rate of 5.8%. I think that's above where economists are thinking we could peak even in a recession scenario. How should we think about any incremental builds from here and what you're going obviously, deterioration. Outlook, but what more do you need to see in terms of how you make decisions about further builds from here?

Yeah, Erika, it's a good question with the truth is there's just a little bit too much uncertainty right now for me to sort of give an outlook for reserves, which is generally not a thing that we do anyway. As I mentioned in my prepared remarks, the accident forecast at the end of the quarter was the sort of bog standard no landing barely any increase in unemployment, given that we knew at the time that there was some big pending announcements and there was quite a bit of elevated uncertainty around that. It felt like the forecasts were kind of lagging because people were just waiting to actually get the information, and so it felt appropriate to add a little bit of downside skew to our probability assessment which is what led to the increase and what led to the bill. We use this weighted average unemployment thing as a useful way to help explain what's going on inside the reserve, but obviously the actual mechanisms are quite complex. The depth of the eventual recession, the timing of it, distribution of outcomes, which sectors it has, idiosyncratic stuff in wholesale, there's a lot. I think on consumer, as Jamie mentioned, it is worth remembering that by far the most important variable is unemployment.

So if the labor market remains very strong, consumer credit will probably be fine. If it doesn't, then you're going to see it play through the way it always does.

Thank you.

Thank you. Our next question I apologize. Our next question comes from John McDonald with Truist Securities. You may proceed.

Hi, good morning. Jeremy, on that same topic, no change to the full year credit card net charge off forecast. How do we square that with the rising recession risk? Is it because you already have a couple of months of delinquencies kind of baked in the cake and this is more an issue for next year or just too early to call?

We should have not given you that forecast. We don't know what the number is going to be. I would say it's a short term number And based on what's happening today, there's a wide range of potential outcomes.

Yeah, okay.

Okay, yeah, that's what we were kind of thinking.

Mechanically, John, though, as you alluded to, there are some mechanical elements to the way a car charge off works that means that it pretty big, pretty far out of time.

A couple of quarters, yes. So sort of echoing Jamie's point, it just doesn't necessarily tell you that much about what might actually happen. Through the end of the year, even if unemployment were to increase significantly, it probably wouldn't flow through the charge offs until later. [indiscernible] got it. And then just on capital, how does this type of macro uncertainty impact your thinking around conserving capital as opposed to deploying it through your investment agenda and buybacks as the stock gets cheaper? Just still looking to arrest the increase? Or does this kind of change it?

The investment that we do in banks, branches, technology, AI is going to continue regardless of the environment. And then we have depending what happens to Basel III and CCAR and G SIFI and all that, 30,000,000,000 to $60,000,000,000 of excess capital And in the Chairman's letter, I wrote about what we think of that. But based upon the environment, the turbulence, the issues, I like having the excess capital. We are prepared for any environment and that's so we can serve clients. That's not for any other reason. So we have plenty of capital and plenty of liquidity to get through whatever the stormy seas are.

Okay, thank you.

Thanks, John. Thank you. Our next question comes from O'Connor with Deutsche Bank. Your line is open.

Just wanted to drill down on the credit card spend.

Any comments in terms of changing patterns on the consumer card spend There's been headlines and travel kind of going down. Just talk about some of puts and takes. In that up 7% year over year.

Yes, it's a good question. We're seeing that too. So let me talk about travel. I mean we obviously saw the airlines discuss what they are seeing as headwinds for them, specifically in airline travel, and we're seeing that too through the card spend. It's not obvious to us that that's necessarily an indicator for broader patterns, There are a variety of potential explanations for the narrow drop in airline spend. As I mentioned previously, another thing that we are seeing looking at the April data is what would have appear to be a little bit of front loading of spending. Specifically in items that might be have prices go off as a function of tariffs. So you see people behaving rationally, and I have noted even your anecdotes and I've seen evidence of companies specifically advertising, you know, have pre tariff inventory and so on and so forth. So it's not that surprising that you're seeing that a little bit in the spending data. The other thing that people are kind of interested in this space is what's happening by income bands. We have seen some of the retailers and other folks talking about weaknesses, in the lower income segment.

And I think when we look at our card data, and also our cash buffers in people's checking accounts, of course it is true that it is relatively weaker in the lower income segment. When you take a step back and you ask, are we seeing signs of distress in the lower income segment? The answer is no. So sure, the margin cash buffers are lower, and you see some rotation of spend, and spending is little bit weaker than it was in the peak spending moments. But actually, some of the increases in spending that we're seeing in April are actually coming from the lower income segment.

So no evidence of distress, I would say. Okay. That's helpful color. And then just separately, if we look the delinquencies for the home lending they increased both QQ and year over year. Is that just some of the noise from the First Republic deal as you take the marks upfront? And then those portfolios essentially reseizing from an accounting point of view? Or is there something else going on there?

Sorry, I actually didn't hear which of these delinquencies in home lending. I didn't Interesting. I haven't looked at that. We'll have to get back to you on that. Whatever it is, it wasn't important enough to get raised, so It could be the First Republic accounting, yes. Yes, anything is possible. We'll get back to you on that. Okay, thank you.

Thank you. Our next question comes from Steven Chubak with Wolfe Research. You may proceed.

Wanted to start off with one on the proposed SLR changes. And just the impact of rate volatility. The Treasury is committed to providing relief to the banks under the SLR just to help mitigate some of the volatility in the ten year.

But given the geopolitical concerns, weakening global demand for treasuries, how does it inform your appetite just for purchasing U. S. Treasuries if those reforms are implemented? And just how you're managing rate risk maybe more across the firm just in light of some of the recent volatility?

So SLR alone isn't going to change that much for us. It may change for other people.

You really need reform across SLR, GSIPV, CCAR, Basel III, and LCR, all of which have deep flaws in them. To make a material change. Remember, it's not relief to the banks it's relief to the markets. JPMorgan will be fine with or without an SLR change. The reason to change some of these things is so banks the big market makers can intermediate more in the markets If they don't, If they don't, spreads will come in, there'll be more active traders, If they don't, the Fed will have to intermediate, which I think is just a bad policy idea. Every time there's a kerfuffle in the markets, the Fed has to come in and intermediate. So they should make these changes. The reason why is when you have very lot of volatile markets and very widespread and low liquidity in treasuries, it affects all other capital markets. That's the reason to do it, not as a favor to the banks themselves anyway, we don't take more interest rate exposure to this in any way, shape or form. So it's not like we're going to change our position. Intermediate in the markets, help clients do what they have to do.

And if the banks could take bigger positions, would have just larger dealer positions and basically take not much more interest rate exposure. I should say our folks did a fabulous job trading this quarter.

And Steve, all I would add to that is that it is, of course, true, and we all remember the moment a few years ago when intermediaries were in fact bound by us alone as a result of the expansion of deposit base and extraordinary actions needed to be taken to address that. So we've seen when it is binding and it works not as designed, which is why we do very much agree that it should be fixed. I think our point is a little bit Jamie said in his Chairman's letter, that it's not the only thing that needs to be fixed and there are interactions among all these things. We, as a bank, are not particularly bound by it. There is some interesting nuance too in terms of the potential TLAC issuance impact there, is quite sensitive to which particular fix gets put in, so that'll be an interesting thing to watch.

Thank you both for that perspective. Just for my follow-up, did want to ask on the market's outlook. So admittedly less surprising these hear some of the cautious IB commentary in light of the uncertainty, but was hoping you could just speak to the markets businesses, which have been performing extraordinarily well of late, just given the combination of elevated volatility, but also some indications that clients are taking down risk how you expect that business to perform over the coming quarters?

It's a good question. You know, Steve, we're obviously not going to give markets guidance. Your guess is as good as ours at some level, but the ingredients are the right ingredients. I mean, We've often discussed about how this business all else equal benefits from a volatile environment if markets are operating relatively normally, which they more or less have been. Of course, it's not guaranteed. We need to do a good job managing the risk. And yeah, there are states of the world where if our clients are struggling or deleveraging or taking down risk, that could be a headwind for us. So we're going to just do what we always do and try to manage the risk well and serve our clients, But we were certainly happy to see the performance this quarter. That's great. Thank you both for taking my questions.

Thank you. Our next question comes from Gerard Cassidy with RBC Capital Markets. You may proceed.

Thank you.

Hi Jeremy and Jamie. Can you guys share with us if you take a look at the nontraditional lenders, private credit lenders, they've been very active in grabbing market share from the traditional and banks over the last two or three years, particularly since the initial Basel III endgame proposal came out in July of twenty three, is no longer applicable. But are you guys seeing any opportunities where customers may re intermediate back into the banks like you're a bank? Because of this volatility?

It's hard to tell, Gerard. I think it's too early to tell. But what I would say is that it kind of your question aligns with what we've been saying about this space for some time, which is we want to be product agnostic here and give our clients the best option that makes sense for them in the moment, whether that's traditional syndicated lending facility or something that looks more like uni tranche direct lending type structure, we're open for business for all of it.

And I would say that when we talk about the banking system being a source of strength in this environment, part of we are talking about is our commitment and willingness to lend through cycles as we have always done in the past and that we have the underwriting capability and the capital and the and the experience to be reliable lenders and serving our clients no matter what type of environment we're in. So if that means that we have an opportunity to beat incrementally even more effectively in this environment, that'll be great.

Very good, thank you. As a follow-up, you both just talked about the potential changes to the different regulatory outcomes for you and your peers, whether it's SLR or the G SIB buffer etcetera. Can you opine for us your views? Are you more confident with the new administration, the new personnel, whether it's treasury secretary, business or others the nominees for different regulatory heads, that there will be a better chance of real regulatory reform. They see it the way you guys do versus the prior administration?

Yeah, I mean, Gerard, we always say this and it's true, which is that we work with all administrations and every administration as constructively as possible. To express our opinions and advocate for the things that we think are right for the banking system and for the economy as a whole. And that was true before. And it's true now with this administration as well. Clearly, the administration has been quite vocal about wanting more pro growth policies at the margin and for wanting to make it easier for banks to participate more constructively in the economy. And as we see the various and the various agencies go through the confirmation process, It will be helpful to have people in seats, and get to work on some of the things that we want to get done. Let's see how that plays out. But we're we're looking forward to continuing to engage constructively.

I think there's a deep recognition of the flaws in the system. And there should be, and fortunately they're take a good look at it. Very good, thank you.

Thanks, Gerard. Thank you. Our next question comes from Ebrahim Poonawala with Bank of America. You may proceed. I guess, just wanted to follow-up on the macro uncertainty I think when you talk to investors, we've gone from enthusiasm for approved business administration to a lot of headwinds. And I I think Jamie mentioned you'll have companies take down guidance, etcetera, potentially over the coming weeks. I'm just wondering [indiscernible] is it you think we need to see before this uncertainty abates? Are the ninety day pause that we saw with some of the other countries on tariffs, is that enough? Or I'm just wondering when you talk to clients, corporate CEOs, what are they looking for from the administration that would inject confidence to get back anywhere close to where we were maybe sixty or ninety days ago?

Virgil, some of all the issues that are raised existed before the new administration. Like the geopolitical situation, the excess fiscal deficits, fully done regulations, and all of that. Obviously, pro growth is good, pro business is good, pro d reg is good. I think the best thing to do is to allow the Secretary of Treasury and the folks working with him in the administration to finish as quick as possible the agreements that they need to make with around tariffs and with our trading partners and I think there'll be agreements in principle. They're not going to be or trade agreements themselves would be 5,000 or 10,000 pages long And that's the best way to go about it right now. That does not mean you won't have some of the effects take place anyway.

Got it. I guess as a follow-up, I think there's a lot of concern also in the casualty markets. We've seen the ten year move from $3.99 to $4.50 in a matter of week. Just your comfort level in terms of the functioning of the treasury market, Do you see the Fed stepping in? Pausing QT, maybe even initiating some treasury purchases as any color would be great.

Yeah, but again, I mean, we have sticky inflation. We had that before. I personally have told you I don't think that's going to go away. And that relates to that. Obviously the U. S. Dollar still is the reserve currency and that isn't going to change. Though some people may feel slightly differently about it. And the Fed we've consistent There will be a kerfuffle of the Treasury markets because of all the rules and regulations. I've told you that consistently. It happened in COVID. It happened before. It happened That will happen. And then when that happens, the Fed will step in.

That's what happens. And then I can do it now because you don't have all those issues yet. They'll do it when they start to panic a little bit. And we don't know if and when that's going to happen. And we'll see. But the notion that the ten year Treasury has to go down is a full [indiscernible] If we look at history in prior times, have huge global deficits. Back in the '70s, in the '60s, the guns and butter tariffs, at least our economy will be inflationary to 0.5% or something like that. So we'll have to wait and see and deal with it.

Thank you.

So, you know, for most who haven't dealt with this stuff before, you're going to see a lot of stuff taking place. And shortly in the next couple of months and then we'll know.

Got it. Thank you so much.

Thank you. Our next question comes from Jim Mitchell with Seaport Global Securities. You may proceed.

Hey, good morning. Jeremy, just on with four three to four cuts sort of mostly in the back half June to December, how do you think about the trajectory of NII this year? Is there a little more pressure towards the end of the year into 'twenty six? Just trying to think of that around that trajectory and jumping off point into next year. [indiscernible] I was asked on the press call, how come we're not suspending guidance or whatever? My answer was like, [indiscernible] whatever.

Guidance and we do our best and it's contingent on variety of external variables and we always make our guidance contingent on that. So And that's on the wind curve you're using. Yeah, yeah, yeah. We know will not happen.

And the particular nuance as you recall from last quarter where we went into some detail about the various drivers of the NII outlook in including a little bit of a suggestion about the quarterly trajectory is that it's both the timing of rates and our expected evolution of deposit growth in the different businesses and how Harbor Volt and how that was all going to interact, producing potential trough in different moments and then so on and so forth.

I think that given everything that's going on, on that one, probably we'll wait for next quarter to give you any more color on that.

Certainly, the back loaded cuts, all else equal, from a run rate perspective introduce a little bit of a headwind on an exit rate going into next year, We'll just have to see how the balances play out. Through the next three quarters.

Right. And maybe just It will not happen that way.

We have a lot of options, what we want to do to change our exposure to interest rate. [indiscernible] And maybe just on that point on volumes and deposits, obviously, this kind of volatility tends to drive as corporates and investors go to cash tends to drive higher deposits. Did you see that trend in March and particularly in April? What are the trends like in the deposit side of the equation? It's a little hard to tell, to be honest. It is true that wholesale deposits this quarter outperformed for us. Relative to our expectations. I don't think I can say with any confidence that that's a result the environment that we're in. So I think next quarter will probably be a better time to assess that.

I would just also say that it may not be deposits It may be treasury bills or there is other things.

And what you've seen, which is different, is not the risk off trade in the ten year. That is fundamentally different this time. [indiscernible] Okay, thanks for taking my questions.

Thanks.

Thank you. Our next question comes from Betsy Graseck with Morgan Stanley. You may proceed.

Thanks. Good morning, Jamie. Good morning, Jeremy. Two questions, one for Jamie to kick off Jimmy, you've been through many cycles, and think we're all interested in understanding how you think this next cycle is likely to progress. And I'm wondering, is there anything that you've seen in the past that looks like this or that you would suggest if any slowdown coming forward is it more likely to be similar to what kind of prior cycle you've seen?

Almost impossible to answer. We look at all the cycles and we prepare for a full range of outcomes. I've I don't personally like predicting what the future is going to hold. But I do, I pointed out over and over, there's a lot of issues out there. I think some of those issues you are going to see them resolve for better or for worse, in the next four months. So maybe when we're doing this call next quarter, we won't have to be guessing. We actually know what the effect of some of these things was with some predictability and stuff like that. But the result in a bank is almost always the same, which is volatile markets, credit losses go up, people get more conservative, investments go down, It looks like a recession. Is it mild or hard? I don't know. But we are I've been quite cautious and and you can see it in our capital, our liquidity, our position, our balance sheet, and so we're prepared. But we do all that so we can serve our clients through thick or thin. I'm not guessing about what the future is going to hold. Obviously, if you look at our numbers, we have the margins and capability get through just about anything.

Excellent. Okay, thank you for And then This is different, okay? This is different. This is the global economy And please read my Chairman's letter. The most important thing to me is the Western world stays together economically when we get through all this. And militarily to keep the world safe and free for democracy. That is the most important thing. I really almost don't care fundamentally about what the economy does in the next two quarters. That isn't that important. We'll get through that. We've had recessions before and all that. It's the ultimate outcome. What's the goal can we get there? And it's literally that.

The China issue is a major issue. I don't know how that's going turn out. We obviously have to follow the law of the land. But it's a significant change we've never seen in our lives.

Okay, thank you so much for that. And yes, looking forward to the next four months and clarity coming. So, then, one for Jeremy. Question on the wholesale loans I'm going into this because I noticed your average loan growth, I think it was running at about 2%. Year on year. And then end of period loans was up 5%. And wholesale loans was up seven So, I'm just wondering if there was some line drawdowns at quarter end and it's a broader question on just liquidity Do you see your customers looking for more liquidity? Are they drawing down lines? Maybe if you could speak to liquidity in the front end of the market, that'd be helpful, too. Thank you.

Yeah, it's a good question, Betsy. So, a couple of things. One is in our soundings of our wholesale clients, during sort of the moments of peak uncertainty, we did hear them talking about wanting to focus on shoring up liquidity. Interestingly, I actually asked the question, like, a day or go, whether we were seeing draws, meaning no, meaningfully observable draws from clients. And the answer to that question was no. At least not yet. So I don't know what to make of that, but perhaps it suggests that we do not see that level of heightened anxiety, that people are more focusing on addressing their supply chain issues right now. Yeah, so on wholesale loans, beyond that I don't think there's that much of a story. Now we're seeing a bit more growth in sort of like markets loans as opposed to traditional C and I loans. The current moment, but that's another general there. [indiscernible] yield curve liquidity? Yeah.

Just in Was that your question? You know, money markets, fed funds, the front end seem to Yeah, we've heard from our our Marcus colleagues is that that's actually functioning quite smoothly.

Okay, thank you.

Thanks.

Thank you. Our next question comes from Mike Mayo with Wells Wells Fargo Securities. You may proceed.

Hey.

Jamie. You just said on this call, there's a quote deep recognition of flaws unquote. By the new regulatory regime. And can you put you or Jeremy, put some meat on the bones as far as what's been ideal scenario. You keep the safety and soundness of the system but you rid all as much as red tape and bureaucracy as possible, how much could expenses potentially decline? I assume you'd pass on some of that to customers and you'd keep some of that and the regulators would save money. So some meat on the bones.

About the potential concrete savings from deregulation but before that the negative which you highlight in the press release and the chairman letter about the trade wars Jamie, you went from trade wars, quote, get over it [indiscernible] this week say do something. So just as far as the tariff journey, what were you initially expecting to what happened and do you really think next earnings call will be through most of the uncertainty? Thanks.

Yeah. No, I don't think we'll necessarily be through all the I think you'll just know a lot more. And my quote was about to get over, wish I hadn't said it, I was specifically referring [indiscernible] relating to protecting national security. National security is paramount All things should be subordinated to it. You may need tariffs to help fix some of the problems related to national security. National security is a small part of trade. So and it's rare earths penicillin, medical ingredients, certain types of obviously, you've heard about semiconductors, That was my quote about, I did not change my view about it. I would like to see the administration negotiate trade deals. I think that would be good for everybody and they want to do it too. And they've said they want to do it. They said they're having conversations seventy eighty different people. And so I do think if the regulators change regulations, it will free up capital and liquidity to finance the system. And I wouldn't expect an expense drawdown that you're going to see.

There will be hundreds of people maybe, but it's not going be passed on, but it will reduce net net the cost of liquidity and the cost of loans and the cost of mortgages, if it's done right. I specifically pointed out the mortgage issue in my Chairman's letter this year about if they do some of these reforms, then the cost of mortgages come down 70 basis points. If I were them, I'd be focusing that right now.

No, and you also mentioned hundreds of billion of dollars of extra lending if you reduce the CET1 ratio, I guess, back down by one fifth.

So if you do all, you have to fix LCR, GCFE, CCAR, SLR, and I think would free up hundreds of billions of dollars for JPMorgan annually of various types of lending to the system. Some would be markets, some would be middle market loans, etcetera. And I pointed out if you wanted to look at the big numbers, that loans to deposits are now 70% for the banking system writ large. That used to be 100%. And the reason for that isn't it's not just capital, it is also LCR, it is also GCFE, it's also And the question you should ask, because you're a very smart Mike, is could you have the same and I believe you have a safer system lend more money, have more liquidity, eliminate bank runs, eliminate what have the First Republic Of Silicon Valley, and you could accomplish all of that with completely rational and thoughtful regulations.

That's what I would like to see them do. I don't know what's going to happen. You can read our I think our NPR is public and stuff like that. And so they should do that. Just make a better system.

You have the best in the world. Kind of started to cripple it slowly. I'd say look at these rules and regulations, see Europe. That's where we want to go, let's just go there.

One short follow-up. Just first quarter, mentioned good credit, good trading, good EPSB.

I'm not sure anyone cares. They're worried more about the things we're talking about here. But in terms of the risk of being an international company, an international U. S. Company, during trade wars? And I know JPMorgan is a firm that likes to partner with countries as well as communities and customers. So how do you think about that risk? How should we think about that risk? And hopefully your voice is being heard. To speed things along to whatever can be done getting it done because you could be in the crosshairs at some point.

Yeah, honestly add that to the list of worries. We will be in the crosshairs.

That's what's going to happen. And it's okay. We're deeply embedded in these other countries, people like us, but I do think some clients or some countries will feel differently about American banks. And we'll just have to deal with that.

All right. Thank you.

Thank you. Our next question comes from Glenn Schorr with Evercore. Your line is open.

Hi. Just one follow-up on this whole risk managementregulatory front You know, I see, I hear and I agree, flawed regulatory system could be better. We've had massive volatility the market plumbing has held in okay so far, and you and others have had borderline spectacular trading results. So has something changed? Are the systems better, are they better able to handle as your risk management, your people, the diversity of your platform better? Or are there still environments where not all volatility is good? Just curious to get your big picture thoughts. Thanks.

I mean, maybe I'll start with that one, Glenn. So I guess I think that your points aren't mutually exclusive, meaning we're always continually improving the franchise. We've talked a lot about inward investment in all of our businesses, including markets. And so we try to be more complete and invest in technology and work more closely with our clients I'm sure we're kind of better at it than we were five years ago, as I think probably everyone is at the margin. I'm not sure that you can associate that with current performance. I think these just happen to be very favorable conditions. That we've managed very successfully. And to your point, I think your specific question of like, are there still forms of volatility that can be bad for the market's franchise? The answer to that question is definitely yes. When you have gap E volatility with no trading volume, people paralyzed, clients unsure what to do, active managers struggling, those environments are bad. So people make fun of the kind of good volatility, bad volatility story, but whether we like it or not, it's real. And in the end, we just have to manage the risks and serve the clients, and I said earlier, we're happy to see that.

Jeremy, agree with Jeremy. I'd answer that volatility leads to bigger bid ask spreads, that, all things being equal, is better. And it leads sometimes to higher volumes, you've seen really high volumes in FX and interest rate swaps and a whole bunch of different things, treasuries, that's better. But as you already pointed out, sometimes that can evolve, but it'd be some very low volumes. Like you see in DCM today, when you don't have bond deals, you have less trading, when you have so it will have lower volumes in certain markets and stuff like that. How it all filters through is almost impossible to tell. But our folks do a great job and we're here help our clients. So we know that volumes can go up or down and spreads can go up or down and we've had. But the plumbing of the system I would say the plumbing worked well during COVID too. I mean, it wasn't the plumbing that was a problem in wasn't even a problem to go back to some of the real crises we've had. So But you should always worry about that kind of thing. Make sure it stays true.

And I do think that the fact that the revenue performance in this quarter is good shouldn't make us lose focus on the importance of the larger fixes around financial resource deployment by regulated banks to supporting the markets ecosystem. Everything Jamie's been talking about, about SLR, LCR, ILST, GSIB, Basel III and MRWA, the whole panoply of items which interacts as we've often talked about and is miscalibrated, it will, at the margin, make it harder for banks to serve a stabilizing function in a difficult moment. That remains quite important as a policy priority.

That's a great point, thanks for that.

Appreciate it. [indiscernible] Thanks.

Thank you. And our final question will go to the line of Sal Martinez with HSBC. You may proceed.

Hey, good morning. Thanks for taking my question. Most of my questions have been asked and answered, but I guess I'll ask [indiscernible] Since nobody's asked it. But I guess, how should we think about the cost structure and any sort of cost optimization efforts. If you do see a revenue slowdown but not necessarily a severe downturn. I think you do have in the $95,000,000,000 guidance, you do have good amount of growth penciled in for investing in bankers and branches and tech and marketing in I guess, do you does it make sense or under what conditions would it make sense for you to maybe pull back on some of these investments?

Do you think that's just completely shortsighted unless we see a real significant downturn in the economy.

Yeah. So you've slightly answered your own question. There are several. But it is nonetheless a good question, so let me unpack it a little bit. So the way I think about it is there are some elements of the expense base which automatically reset as a function of the business environment. So talk about those as volume and revenue related expense, so you will see those come down as a function of the environment. It's also true that there are conceivably certain investment business cases, which depending on how the environment changes, could no longer make sense analyzed the same way that we analyzed them originally, I. E, the lens of their ability to generate long term shareholder value through a long cycle. And so if for whatever reason the environment changes in such a way as to make certain of those investments less compelling, we would obviously adjust. Of course, thing that we're not gonna do is stop investing in things that we still think are very compelling to work traditional long term investment plans simply for the purposes of achieving a cosmetic reduction in expenses in an environment where you may or may not have a reduction in revenues for unrelated reasons.

As you well know, that's just not how we run the company. This quarter, as it happens, a question you might have is, how are you managing to keep your guidance the same with what you're saying about, for example, the investment banking outlook? But it's worth noting that investment banking performance this quarter was actually fine, as you know, markets performance was very strong, and there are also some ups and downs in there, I should note, including the fact that there is some sensitivity to the expense base to the strength of the dollar, weakness in this case, and while some of that is offset in revenue, it's a little noisy, so that's a factor as well. It's small, but I'm just highlighting that there's some slightly non obvious things that aren't great for teaching I think said a management thing, because I think it's very aren't important. And I always talk about good expenses and bad expenses. The good expenses of the bankers and branches that we think will pay off. But there are also bad expenses, which I would put in the category of bureaucracy, lack of efficiency, things you don't need to do, And if you go to if you read my Chairman's letter, last section is called Management [indiscernible] And if you look at companies that over time fail, it's almost always bureaucracy, complacency, arrogance, and lack of attention to detail, And so there is we're making [indiscernible] I'm mad at myself for not doing it sooner.

To spend a little more time that after COVID, that the buildup in headcount the buildup in rules and regulations, the people working or not working from home, After all of those things, we just think there's more efficiency here. And I think some of the and Mike Mayo mentioned the thing about regulatory, he is right. There will be reductions in cost because rules and regulations will be modified a little bit. I mean, I pointed out resolution recovery, which is a complete waste of time, is 80,000 pages long. It'll never happen that way. CCAR, which is virtually a waste of time, is 20,000 pages long. Okay, we report a trillion I think it's a trillion bits of data every day or something like that to the all the various regulators and stuff like that. There is this excessive cost built up that hopefully we can get rid of and reduce the cost of the system and But it's not the new branches. So the folks here are working on we call streamlining, Jim Pepcet has got a war room going on it, We already have a significant amount of saves and stuff like that. And we're having fun doing it.

It's like, to me, it's like exercising eating your spinach. It's what we should be doing haven't done it for a while, so I apologize. To my shareholders for not having done this a little bit. Okay. That's very clear and very helpful.

Thank you.

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