JPMorgan Chase & Co at Morgan Stanley US Financials, Payments & CRE Conference Transcript

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

Question: Betsy Graseck - Morgan Stanley - Analyst : Not too long ago. I have several areas of follow-up questions to dig into from your presentation then. Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank Looking forwards to.

Question: Betsy Graseck - Morgan Stanley - Analyst : And is that at every Tuesday morning? Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank Every Monday morning.

Question: Betsy Graseck - Morgan Stanley - Analyst : All right. So, I'll be sending you a good vibes for next Monday at 10:00 AM. All right now, there was recently an organizational change, JPMorgan combines the corporate and investment bank with the commercial bank into a new segment now called commercial and investment bank, which is the CIB, that you Co-Head, right? Could you help us understand what drove that change and what opportunities a combined segment provides Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank Sure. We tried to make it simple and went from CIB to CIB, just a different word. So I guess the way I think about it is, we had two incredible franchises, the commercial bank run by Doug Petno and CIB run by Daniel Pinto for the last decade. They both for best in class franchises on their own, right? So you can either ask two questions, why combine them at all or why didn't you do it sooner if it's the right thing to do? I think the answer to the latter one is probably the way we think about it is, why didn't you do it sooner? I think in the early days of the CB, the idea was to not dilute the focus on middle market and commercial banking clients. Historically, when you combine them in areas like investment bank, those clients often get overlooked. And I think Jamie and the management team at that time, it was just very, very focused on making sure that did not happen. And as a result, it has been extremely successful and Doug has grown Middle Markets and Commercial Banking significantly. We felt that it had gotten to the point where by combining them you weren't going to lose that focus. You were going to keep that momentum, but get a lot more synergy across what we could provide from a holistic client coverage basis. For large parts of the CIB isn't really that meaningful change security services markets broadly unchanged. But when you think about our banking franchise, it gave us an opportunity to really create one organization from just above Business Banking, which was done in the Chase brand, all the way up to the largest corporates covered by the investment bank. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 8:00PM, JPM.N - JPMorgan Chase & Co at Morgan Stanley US Financials, Payments & CRE Conference And while both sides worked very well together and they did coordinate anytime you have two separate organizations, you get some friction and this puts us in a position to remove all of that in our mind, move clients seamlessly across the spectrum.

Question: Betsy Graseck - Morgan Stanley - Analyst : The number of clients? Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank Number of clients and like the wallet share of the client. So you can have a lot of clients, but don't penetrate very well. And we want to do both, of course. So I think we've never suffered from a lack of volume of clients and our structure today brings in like lots of ability to contact clients we have in middle markets or in the old CB alone, we have 50,000 prospects. So it's not a question of clients. Access is really a question of like how deep can you penetrate these clients? And we feel like this new organization allows us to penetrate them early, get deep with them and as they grow and become more complex where they're bank of choice.

Question: Betsy Graseck - Morgan Stanley - Analyst : Got it. So if I read you correctly, expectations for faster expansion of wallet as you're combined now? Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank Correct.

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay, great. I'm two more questions on the integration and then we'll move on to markets and banking. But you're sharing the CEO role with Jen Piepszak. Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank Yes.

Question: Betsy Graseck - Morgan Stanley - Analyst : Super. Okay, that's helpful. And I hear you get phone calls on the planes now too. Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank Jamie can get you anywhere.

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay, great. And let's move over to markets. And as you indicated at the Investor Day last couple of weeks ago. JPM has been taking share in markets and over the last decade, you're coming in a little over 240 basis points in share, right over the line and coming in at 11.5% or so of market share across -- Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank Markets like 11.3% I think.

Question: Betsy Graseck - Morgan Stanley - Analyst : Right now, there has been some movement in actors and players over the past several years. So with stabilization, should we still be expecting that kind of share gain to persist? Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank So fundamentally, the answer is yes. But we think it's just going to be much more difficult to get that share growth and it will be slower . If you look at the past decade, we've had moments where we've lost market share. So while the overall trajectory is very strong, like it's not been a straight line and it's certainly not a straight line in every individual business. And also I think we attacked a lot of the low hanging fruit. Our equities business was subscale a decade ago and we meaningfully close the gap and hopefully put ourselves solidly in one of the top two or certainly top three spots on a perennial basis now. And so a lot of our market share gains over that period of time. We've been just catching up in equities. In fixed income, I would say the growth in market share was maybe front weighted in that period of time. And then you had a big spike in COVID, which is subsequently normalized, which we talked a little bit about Investor Day. So, you know, there isn't an obvious gap anymore. There isn't a significant product suite that we don't have. There's not a geography that we're not in. There's generally not clients that we aren't speaking to. So the market share growth gets more difficult from our starting point today. But we believe strongly that we can continue to grow. The other piece you mentioned is in the early part of the decade, particularly in fixed income, our European peers were in a much weaker position than they are today. And I think as a result, while not as many of them as there used to be, they're certainly the ones that remain are very strong and coming back deploying balance sheet, they're very aggressive in their home market, but they're expanding again. And with the wallet growth in markets being so significant and everyone making more money that's given them capital to invest. And we would expect that to continue again, making it not impossible to grow market share but making it more difficult. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 8:00PM, JPM.N - JPMorgan Chase & Co at Morgan Stanley US Financials, Payments & CRE Conference The other piece that I think on that we spend a lot of time thinking about is nonbank financials like they've become an increasingly important part, they've grown share. I know people don't normally talk about them. They compare banks the banks, but when you think about the overall wallet, they've definitely taken some of that share. And so as a result, the competitive environment is just significantly more aggressive than it was at the beginning of that decade. But again, we believe we can grow. It's just going to be more difficult.

Question: Betsy Graseck - Morgan Stanley - Analyst : Right. Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank And the second one is our share of the client wallet. When you think about like not to backtrack too far, but if you look at our market share growth, while in say fixed income has gone down since 2020 in the peak of the COVID crisis, it's continued to go up on the client side and institutional financial clients. So ultimately, we look at both. We feel very comfortable we can continue to grow the client wallet. It will be a percentage or a direct reflection of the total wallet. But we feel very comfortable that that's the part that we're most focused on growing that really underpins our markets franchise. And then the total wallet is just that wallet plus the trading environment. And that's the part that we think can vary a lot. You have an environment where that's very closely tied to volatility. Volumes are then driven off the back of that. The nature of the moves in the market. I always joke that when Jeremy calls me, our previous CFOs and they ask whether it's good volatility or bad volatility, I would say, well good volatility gets just means we're making money in that volatility means we're losing money. But ultimately, we are correlated to volatility. I think the market in that wallet on the revenue side will stay well above the pre-COVID level. How far it's just really hard to know, is it likely to be above that COVID peak in the short term. But it definitely should remain above the pre-COVID level. How far, it's a bit of a guess.

Question: Betsy Graseck - Morgan Stanley - Analyst : Sure, okay. And the market's been looking for a reduction in volatility as that elusive rate cuts schedule comes out and we get thrown a few curveballs every once in a while, including this morning. So never a dull moment in financial markets. Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank We had Friday where the payrolls outperformed United inflation underperforming. My view is that just a personal view of markets will see who's right is that the Fed is just unlikely to cut. At the rate, the market's pricing, I think that the cuts will continue to get delayed or pushed out on. Obviously, the market is just giving you the probability that cuts are the most likely next move which I think no one would disagree with. And I think the band of possibilities is probably much wider than the market is actually pricing now. This could be good for us.

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. And then the other question I wanted to just dig into a little bit was on the private credit business. And I know that was a topic that was discussed a bit a few weeks ago at Investor Day. But maybe you could help us understand [speed] with which you are leaning in and how you're servicing that thought of that business? Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank I see we only have 11 minutes we can spend like an hour on this topic, it's pretty close to my heart. I joke that when you're a banker in New York City, you get asked two questions at a cocktail party where your kids go to school and what do you think of private credit come so, definitely excited to talk about this one. I think we're just absolutely uniquely positioned. I think that there are potentially other people that will absolutely compete in pockets. But I think very few people can put all the components together in the way we can, and I'm truly excited about it and not just because of the new combination. I've been excited about it for years at JPMorgan. And I think the new combination even makes our potential stronger. We have been lending against private credit portfolios in the financing space for decades , if not the first, we were certainly among the first banks to even do that product. We've expanded it significantly. And I would argue we are on the bank side, the largest lender into the space and we plan to continue to compete there. When you hear other people talking about growing their financing business, often this is what they're talking about. And I feel like we are already there at scale and can continue to grow. And as that market grows, which I think it will continue, that just naturally, we'll grow that business. And so again, real opportunity for us there. Secondly, we've publicly stated that we would put $10 billion of capital to work on our balance sheet in direct loan format to corporate borrowers. And we've put like a significant amount of that to you already. We've also said publicly or Jamie said publicly that -- I mean, there's nothing stopping us from doing more now. I don't think it's really a question of how much we would ultimately do it. It almost doesn't matter whether we do $10 billion to $20 billion or $20 billion to $30 billion, its $1.7 trillion market in growing. Whether we do $10 billion, $20 billion, $50 billion it doesn't matter. If it's very small, that's not going to be the place that we make the biggest impact. The reason we're doing that is to be in the ecosystem of the lenders . And when we're in the ecosystem on the lenders, then we can have the right dialogue with our borrowing clients but also be involved in helping whatever structure or structures develop, whether that's co-lending format, whether that's a distribution format. And we have the best middle markets franchise on the street. We have the best DCM franchise in our view and you combine the two of them and we can go to a corporate client and be truly agnostic to what they want to do. We can say, here's a direct loan; here's a private credit solution; here is a broadly syndicated loan. And our goal is to be able to go to our buyers and with some of our own balance sheet and other distribution partners to be able to say here are your options and be at the center of that ecosystem. And I think we can do that and be a great partner to the people who are also on the lending side. So, we spent a lot of time thinking about this between using our own balance sheet to be deeply involved in the ecosystem, partnering with lenders, having strategic relationships with them being one of the largest financiers in the space, we're just uniquely positioned to be in the middle of all of it. And I think it's going to continue to grow and I think we have a competitive advantage there. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 8:00PM, JPM.N - JPMorgan Chase & Co at Morgan Stanley US Financials, Payments & CRE Conference One thing I'll stop on is I think, a lot of people spent a lot of time saying about how adversarial it is with, like, say, the largest direct lenders versus the banks. The banks want to do this. The direct lenders want to do this. I just don't view it as adversarial like the market is big enough that both sides can succeed. And our strategy is about partnering with both sides. First, it's to our borrowing clients. They're our core client base, but the lenders are also huge clients of ours. And ultimately, while we may compete on a given deal here or there or several deals like we're going to be a place where they can come to source assets. And I think that is ultimately the winning solution.

Question: Betsy Graseck - Morgan Stanley - Analyst : Right. It's important to lean on that issue just a little bit because again, going back to the question, I get a lot from investors, lower vol environment, lower fixed income revenues, but the private credit activity is a counterpoint to that. Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank Correct. I mean, I think financing in general is the counterpoint to that and I we didn't speak specifically about the opportunities in markets. But financing more broadly is one of them to your point, it's the counterpoint to lower volatility.

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. And then you also mentioned at Investor Day opportunities to expand your client franchise and deepen relationships in the commercial real estate space. Could you just find that a little bit? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 8:00PM, JPM.N - JPMorgan Chase & Co at Morgan Stanley US Financials, Payments & CRE Conference Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank Sure. I what we don't mean is suddenly change on our risk appetite in commercial real estate. I think in real estate, the one thing I've learned is that it matters, who your clients are, and client selection is extremely important, and we're quite comfortable that we have the right mix of clients, and there's an opportunity in our view. And when we say commercial real estate. I think everyone thinks about the problematic areas, which generally is office, but there's multifamily, there's data centers, there's cooled storage. There are lots of areas that are very robust in this space. And with the right client selection with the right risk metrics, we feel like there's opportunity to grow without changing our credit box or lowering our standards. So that's one piece of where we all plan to grow. The second piece is we're integrating First Republic and that's been a significant integration effort. There's been opportunity there it's increased the size of our portfolio. And again, like it just proves out our view that without changing our risk appetite, we can continue to grow the core traditional business. And then the last thing I think which is really important is historically, this has been more of a lending product and we can deepen our relationships and grow the wallet we have with these clients by doing on what would be deposits and payments like more traditional like a treasury services business. And we think there's real opportunity to grow that part of the business with this existing client franchise.

Question: Betsy Graseck - Morgan Stanley - Analyst : What happened in the last three weeks? Troy Rohrbaugh - JPMorgan Chase & Co - Co-Chief Executive Officer - Commercial & Investment Bank A significant good news story. Capital markets continues to be extremely robust. The overall franchises improved. So better results than we were expecting on Investor Day, but capital markets has been particularly strong.