JPMorgan Chase & Co at Goldman Sachs U.S. Financial Services Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Richard Ramsden - Goldman Sachs & Company, Inc. - Analyst : <_ALACRA_META_ABSTRACT>Let's start off with the place we always start off with, which is your view on the state of the economy. Maybe you can talk a little bit about what you're expecting in terms of the macroeconomic backdrop heading into next year, talk a little bit about what you're seeing in terms of customer behavior, both from spending but also from a balance sheet perspective. And it would be helpful if you could delineate between what you're seeing both across consumers and corporates. Marianne Lake - JPMorgan Chase & Co - Co-Chief Executive Officer - Consumer and Community Banking Okay. Yeah, and thank you for having me again. It's annual tradition at this point, so it's great to be here. As we look, and clearly, my purview is informed by the lens of running the consumer businesses, where we see -- and small business, obviously, where we see a lot of what's happening day-to-day in our customers' sort of pocket books. But if we look at the economy overall, it continues to be pretty resilient. I'm not telling you anything you don't know when we talk about the fact that inflation continues to appear to move in the right direction towards policy target that, obviously, preceding the interest rate cuts. There was a little bit of softness, let's say, or a little bit of increase in unemployment that led to the beginning of the cutting cycle. That has firmed a little. I think the risks are a bit more in balance. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 5:20PM, JPM.N - JPMorgan Chase & Co at Goldman Sachs U.S. Financial Services Conference That's not to say that I don't think that there's still further room to go. And our house view on interest rates is that there will be a cut at this meeting and three more by the end of the year, but the sort of resting place will be a little higher, and the trajectory will be a little slower than perhaps we would have thought even a few months ago. If you look at the consumer, and starting with balances, so cash balances or cash buffers, those have largely normalized now across income segments. And so, I think it's fair to say that the excess liquidity that people have been enjoying over the last several years is gone, but the cash buffers have stabilized. So they're not deteriorating. It doesn't feel like people are overborrowing or continuing to spend down. That said, spend trends are stable, too. Before the holiday season, before the fourth quarter, there was some discussion in the late summer that maybe consumer spending was softening a little. And I would say that we really didn't see that, but we're watching for it and have seen since then in October. And now, through the holiday season, that spend has firmed up a little. So while there's always noise in holiday spend trends, when you pick a moment in the trajectory, I would say, year over year, it feels like the spend is solid to a little firmer than it was last year. So things still feel pretty good. And credit trends are in line with our expectations. I'm sure we'll talk about that later. So with the consumer, as long as there's not a shock to labor markets or an asset price correction that's material, it feels like the consumer is on reasonably solid footing for now. Small business is in a similar place. We're still seeing normalization of balances. So there's still a little bit of room to run there. Spend, similarly stable. Credit, similarly benign. And so I'd say that the story is not materially different for small businesses than for consumers. And then just stepping back, talking about maybe the most recent sort of sentiment from our corporate clients is perhaps, unsurprisingly, that confidence is moving higher and sort of somewhat notably over the last couple of months, recessionary fears fading -- are faded a lot. Inflationary concerns are present, but not really sort of dampening what I would characterize as a sort of broadly cautiously optimistic tone coming into 2025, notwithstanding that there's significant uncertainty about how things will play out. So I would touch wood, but I don't see any. So far, everything is still feeling pretty good.

Question: Richard Ramsden - Goldman Sachs & Company, Inc. - Analyst : Okay, great. So maybe we can talk about some of the trends that you're seeing in the business. Maybe we can start off with deposits. We've had a few rate cuts. So what are you seeing in terms of customer behavior around those rate cuts? How is pricing tracking relative to your expectations? And given the experience so far, how do you think we should think about deposit betas in this

Question: Richard Ramsden - Goldman Sachs & Company, Inc. - Analyst : Okay. And then on loan demand, that's been weaker over the course of the year, maybe with the exception of card. Have you started to see that change at all now that we've had some rate cuts and the elections behind us? Marianne Lake - JPMorgan Chase & Co - Co-Chief Executive Officer - Consumer and Community Banking Short answer, not really. And I'll kind of explain. So card, as you say, was the biggest driver of loan growth in the consumer complex or in the CCB complex over the course of the last year or two, and that was in large part a result of a combination of, yes, customer acquisition, but normalization in OS as well as strong spend. And so, I would say, we would think that revolver normalization is largely behind us. Does that mean we got back to exactly where we were before the pandemic? No. But I think, in the law of big numbers, we said it's more behind us than in front of us. So we're expecting card loan growth into 2025. It's been coming down from the high-teens to still be above trend in '25, but trending back towards the sort of growth we would have seen pre-pandemic. So it's still going to be the driver of growth. Home lending saw a moment of excitement when we did see mortgage rates come down a little, but they've retraced back again. And so our expectation is that the tenure and mortgage rates will be sort of anchored close to where they are through the next year. And so we're not expecting a strong recovery in the mortgage market. But clearly, it will be a response to what we see in yields. And we've seen decent demand in auto because a lot of the supply chain challenges and the secular issues around inventories have now gone and dealer incentives are higher. So not only are we seeing reasonable demand for loans, we're also seeing a reuptick in leasing, which is obviously positive for the business over the sort of forward-looking trajectory. But the net of all of it is that we're going to see sort of low single-digit loan growth driven by card. Everything else is going to be a little bit steady as she goes. Small business, I would say, I mean, it's less rate sensitive. And so we're seeing utilization continue to normalize. So obviously, post-pandemic, it came down a lot. It's been normalizing, and it continues to normalize back towards pre-pandemic levels, but applications are stable. So neither up nor down.

Question: Richard Ramsden - Goldman Sachs & Company, Inc. - Analyst : Okay, great. So let's segue and talk a little bit about the outlook for some of the key revenue expense categories for '25 and this year. I know that you've given quite a bit on the outlook for NII and expenses already. But has your thinking about 2025 changed in any way since you last spoke? And then nearer term, is there anything in the fourth quarter that you think we should be aware of, either in terms of NII, trading, credit, or expenses? Marianne Lake - JPMorgan Chase & Co - Co-Chief Executive Officer - Consumer and Community Banking Okay. Let's talk about 2025, which, with all of the caveats about, obviously, a lot of things can change. Jeremy will give you more updates at earnings in January. But I'll start with NII. I think, last time, during the sort of third quarter process, we talked about or Jeremy talked about the fact that consensus for NII in 2025 at $87 billion was a little toppy. Well, things have changed. The rate outlook has firmed up, on average, about 40 basis points higher in 2025 than it was at that time. Consensus came off a touch to just a hair below $87 billion. So as we sit here today with plenty of caveats about the fact that these things can change pretty quickly, our 2025 NII, we're expecting it to be about $2 billion higher. Expense, there was a discussion around expense also.

Question: Richard Ramsden - Goldman Sachs & Company, Inc. - Analyst : Yeah, IB and trading. Marianne Lake - JPMorgan Chase & Co - Co-Chief Executive Officer - Consumer and Community Banking So in Investment Banking fees, client activity, client dialogue remains robust, and that is showing itself in. We're expecting 45%

Question: Richard Ramsden - Goldman Sachs & Company, Inc. - Analyst : 15% year on year? Marianne Lake - JPMorgan Chase & Co - Co-Chief Executive Officer - Consumer and Community Banking Or a touch better.

Question: Richard Ramsden - Goldman Sachs & Company, Inc. - Analyst : Okay. And then so on First Republic, the integration is now complete. So maybe you can talk a little bit about some of the benefits you're seeing from that integration. And maybe you can talk specifically about the wealth business. I know you just talked about that. But maybe talk about how First Republic has augmented or accelerated the growth in the wealth business. And what's the progress you've made in terms of increasing your share of customer wallet in that business in particular? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 5:20PM, JPM.N - JPMorgan Chase & Co at Goldman Sachs U.S. Financial Services Conference Marianne Lake - JPMorgan Chase & Co - Co-Chief Executive Officer - Consumer and Community Banking Okay. So a couple of things. First of all, First Republic is largely over. We're still completing the loan migration right now, but the big chunk of it was done in the middle of the year and the follow-through in the third quarter. The only reason I mentioned that is, it's a little early maybe in December to talk about the progress we're making beyond that in wallet share gains. Those things take a little bit of time, but we're pretty optimistic. We retained 90% of clients in the banking complex, 95% of deposits, more than 75% of advisers and clients in the wealth management space. And so we feel like we have a pretty stable and -- it's pretty stable base. Just we, of course, want to do an incredible job for the heritage First Republic customers. But when we've talked about our strategy and leveraging First Republic, both leveraging our learnings but also leveraging the opportunity to accelerate the affluent strategy, it was very much about deepening into existing Chase customers. And so just for context, we have over 6 million affluent customers that bank with us happily. And only 15% of them invest with us today, and those customers have $7 trillion of investments. And so we have happy Chase customers that are not yet enjoying the benefits of what we have to offer in wealth management. And this is a strategy using the concierge service, the coverage model, the First -- the JPMorgan financial centers as a strategy to deepen into wealth for those customers. And remember, if you went back five years ago, we maybe didn't have all of the right capabilities and all of the right assets to be able to feel like we could invite those customers to do that with us and feel confident that we would do an amazing job. We do now. Our self-directed capabilities just won a J.D. Power Award, so did our advised capabilities. We have built new channels. We've built new capabilities with Wealth Plan. Yes, First Republic helped us in terms of assets and accelerating getting to $1 trillion. But we're pretty excited about the opportunity going forward. It's just early, so we'll update you. We had a great year in wealth management. We had record first-time investors this year. And we've grown AUS, including First Republic, at a 16% CAGR in five years. So adding advisers and just grinding out.

Question: Richard Ramsden - Goldman Sachs & Company, Inc. - Analyst : Okay. So just more broadly on market share. The market share stats, I think, are really impressive. I think you've grown checking accounts by 20%, card by 30% over the last four years. How much of that growth stems from new markets and how should we think about the sustainability and the marginal returns of growth from here? Marianne Lake - JPMorgan Chase & Co - Co-Chief Executive Officer - Consumer and Community Banking Okay. So I'll update you. The 20% and 30% in consumer bank and card accounts over four years is now 30% and 40% or very close to that over five years. So that momentum continues, which was my point earlier about like we continue to lean into growing the franchise, which is the sort of catalyst for everything else that comes after that. If I start with the consumer bank, our share gains, sorry, as you say, we're pretty proud of it. 220 basis points over the last five years, and 80 basis points of that came from branches that we've opened since 2018. And remember, they're still pretty young. And so, those will continue to fuel growth in the future. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 5:20PM, JPM.N - JPMorgan Chase & Co at Goldman Sachs U.S. Financial Services Conference But that First Republic was a piece, so that was close to 40 basis points, which means that more than half of it came from our legacy footprint as we continue to invest in bankers, in banker tools, in omnichannel capabilities, in branch tailoring and customer segmentation, making sure we have the customer and the right product for them. And so as we look forward, we're expecting the same, which is more than half of the growth is going to come from the legacy platform. And if you include the branches we've already built, 75% of our growth towards our 15% target and beyond will come from a combination of legacy, legacy and the branches we built through '24, but we're not stopping. And so, the remaining 25% will come from the branches we're about to open, and those will continue to grow for decades. So we're pretty excited about that. And as I said earlier, those branches that we're opening are performing really well. So if not -- each individual net -- next new branch we're opening isn't getting worse from a performance basis. In fact, they're in line to better than our model. And these things are not straight lines. So on average, we've gained 30 basis points share over the last 10 years. We think that's a reasonable trajectory going forward. But in any one year, it could be plus or minus of that. And so it's a flywheel we're just going to keep going. In card, it's a similar but different story. Obviously, it's not the same. We don't have new markets. It's a national business. But it does benefit when we enter new markets with branches. So we do see growth in accounts and share when we start really investing in new markets. So it is a beneficiary of that. In card, we start from a higher share place, but similarly have gained share over the last four or five years, 50 basis points of sales, 30 basis points in outstanding. And that momentum, which was at the end of last year, has continued into 2024. And we highlighted outstandings as being an area that we felt we could see some outside share gains because we felt like we were punching a little below our weight. And so, we saw that happen in '23, and we've seen that continue in '24. But it's not that we have to dial up premiums or like pay for the privilege. It's about making sure that we're investing in the segments where we are currently able to and see outsized growth starters, small business, affluent. And we have record new accounts in each of those last year. It's about making sure we're capitalizing on our owned channels, (inaudible) and branches, because they are the most efficient channels that we have, leveraging our data to make sure we're underwriting as deeply as we can, but profitably and with confidence. And then also making sure that in addition to sort of core card, we're innovating on installment lending and other sort of lending options, like Pay Over Time, which is gaining traction. And so I would say, we're feeling pretty good about that, and we're at 17% share and growing towards our 20% target. So in both cases, we think that there's more share gains ahead of us. It's hard work. I mean, this is like a branch at a time, a vintage at a time, a tactic at a time. This is no -- there's no silver bullet. It's everywhere, but we know what to do.