JPMorgan Chase & Co Q3 2024 Earnings Call Transcript

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

Question: Jim Mitchell - Seaport Global Securities - Analyst : Hey, good morning. So Jeremy, as you highlighted full year NII guidance implies sizable drop in Q4 NII ex markets about 6%. So can you just maybe discuss what are the largest drivers of the sequential decline, including any initial thoughts on deposit behavior and pricing since the 50 basis point cut. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 12:30PM, JPM.N - Q3 2024 JPMorgan Chase & Co Earnings Call And since it's related, I'll just throw out my follow up question. I realized the forward curve is moving around a lot, but since Dan brought it up a month ago, can you frame how you're thinking about the NII trajectory for '25? Thanks.

Question: Jim Mitchell - Seaport Global Securities - Analyst : All right, thanks a lot.

Question: Steven Chubak - Wolfe Research - Analyst : Hi, good morning. So Jeremy, hi, how are you? So I did want to ask on expenses just in light of some of the comments that Daniel had made recently, just noting that consensus expense forecast for next year looked a little bit too light, I believe at the time it was just below $94 billion. If we adjust for the one timers this year, that would suggest a core expense base, that's just below $90 billion. So a pretty healthy step up in expenses. I know you've always had a strong commitment, discipline around investment. Just wanted to better understand where those incremental dollars are being deployed. And just which investments are being prioritized in particular looking out to next year.

Question: Steven Chubak - Wolfe Research - Analyst : No, thank you both for the color. Just a quick follow up for me. Just drilling down into NII, it appears you redeployed a fair amount of cash or excess reserves at the Fed into securities. We saw the yield expand which is encouraging despite the pressure at both the long end, and SOFR contraction in the quarter. I was hoping you could just speak to your appetite to extend duration, this environment. I know that you've had some aversion to that in the past. But do you anticipate redeploying additional excess liquidity just amid the expectation for deeper rate cuts?

Question: Steven Chubak - Wolfe Research - Analyst : Well said, well thank you so much for taking my questions. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 12:30PM, JPM.N - Q3 2024 JPMorgan Chase & Co Earnings Call

Question: Erika Najarian - UBS - Analyst : My first question and thank you very much for answering all the NII questions so far, Jeremy. It's just -- I guess another follow up as you can imagine once Daniel said what he said on stage in September, everyone's trying to figure out the over under for net interest income next year. So maybe a two part first question. The second being inspired by what Jamie just said, number one, NII is expected to be down 6% sequentially in fourth quarter. I think year over year in '25, consensus has it down 4% from your new level. So it sounds like consensus still has room to come down. And based on the forward curve, Jeremy, it could be a little bit worse year over year than the fourth quarter sequential rate. But that being said, as Jamie noted, like we have no idea what the curve is going to look like, right? I mean, it's gyrated so much. And so as we think about the curve, is it better for JPMorgan to have more cuts in the short end, but steepness, or less cuts, but a little bit of a flatter curve,

Question: Erika Najarian - UBS - Analyst : And if I can ask my second question. And Jamie, I completely understand your frustration. And to be fair, your long term shareholders really don't care about whether it's [$87 billion] or [$85 billion] right? They care about your return on equity. To that end, I mean, it's insane how much capital you generate each quarter, 70 -- 72 basis points this quarter. And so beyond the standard boilerplate questions you're going to get on buyback and organic growth, yada, yada, dividend increases, how should we think about JPMorgan in deploying this capital? I mean, the world is generally your oyster, right? You're dominant already and you could use this capital to further enhance your business. And again, beyond that boilerplate conversation that you always get every quarter, how should your shareholders think about how you're thinking about the opportunities to deploy this capital.

Question: Erika Najarian - UBS - Analyst : Thank you.

Question: Glenn Schorr - Evercore ISI - Analyst : Hi. Thanks very much. I'm so glad Jamie, didn't say what he was about to say because that's the answer to this question. So we've seen a couple more banks entering partnerships with alternative managers. We've seen limited loan growth for a few years now. Market related also limited flows into fixed income funds, yet plenty of growth in private credit in general. And you're one of the best asset managers on the planet, but in my view less dominant in, in all things private credit. So maybe you could talk about what things you're working on and why that's too narrow of a view of your ability to serve all parts of clients lending needs, not just the, you know, the public markets and public lending side. Thanks.

Question: Glenn Schorr - Evercore ISI - Analyst : All right. Thanks for all of that.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Good morning, Jeremy and good morning, Jamie. Jeremy, when you guys look at your current capital ratios, they're obviously very healthy. Can you guys give us some color on the new basel three? We, we don't know what the specifics are. But as vice chair, Bar touched on some of the specifics, it looks like capital requirements for yourself and your peers will come down a fair amount from the original proposal. How are you guys thinking about that? You have any insights on how much it may fall from, you know, the original proposal to where you are today? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 12:30PM, JPM.N - Q3 2024 JPMorgan Chase & Co Earnings Call

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Very good. And then as a follow up in, in view of this excess capital in your comments a moment ago about, you know, direct lending, you look at your current cash and marketable securities on a risk weighted asset basis. You, you put it in your presentation of course, $1.5 trillion average loan is $1.3 trillion. When everything, when the dust at, you know what your capital requirements are. Can you frame out for us? Can you levering up the excess capital with more loans? Is that a path that might be considered over the next two or three years relative to where you are on a mix basis? I know you're going to grow your loans, but I'm talking about--

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Very good. Appreciate the color and candor as always. Thank you.

Question: Matt O'Connor - Deutsche Bank - Analyst : Good morning. So lower rates was supposed to draw a pickup in loan growth and conversion of some of these investment banking pipelines. And obviously we just had one cut it early, but any beginning signs of this in terms of the interest in borrowing more and, and a conversion of the banking pipeline?

Question: Matt O'Connor - Deutsche Bank - Analyst : And then specifically in the debit and credit card spend that you guys break out, you know, you had nice growth year over year, up 6% flat 2Q know there's a lot of seasonality, 2Q to 3Q I think last year it was up about 1%. But are you seeing any kind of changes in the consumer spend? Either the mix or some signs of a slowdown later in the quarter? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 12:30PM, JPM.N - Q3 2024 JPMorgan Chase & Co Earnings Call

Question: Matt O'Connor - Deutsche Bank - Analyst : Got it. Thank you.

Question: Mike Mayo - Wells Fargo - Analyst : Hey, Jamie, I think I've seen you comment on government this year more than any other time in your career. And August 2, op-ed Washington, Post Davos, you're talking about government. I think it was this week or last week on Bloomberg, you're talking saying bank merger should be allowed. Your bus tour in August, you were asked, which is my question. Now, under what circumstances would you leave for government service? And your answer then was I love what I do. We get it. You love what you do, but under what circumstances would you consider government service? It seems like you'd be more likely to go now than in the past. Just based on the numerous comments that you've made, is that right or wrong? What you're thinking?

Question: Mike Mayo - Wells Fargo - Analyst : So if you were asked by the next administration to serve the country. Would you be open to considering it?

Question: Mike Mayo - Wells Fargo - Analyst : Let me take the flip side of that question for those who are worried about you leaving the other side of the question is we're on these calls the last couple of years. You're saying the stock is overvalued. And I think part, I think that's what you're saying. You're saying the stock market is overvalued and therefore all stocks are overvalued. And you know, on the one hand, you guys -- you highlight on this call, AI tech market share gains high returns, high capital. So do you think in some ways when you think about the value of your price and your ability to buy back, you're thinking more about an old school model for valuing your stock as opposed to a new school model that might put you in the category of more tech oriented, you know, firms, especially as it relates to, you know, your progress with AI.

Question: Ebrahim Poonawala - Bank of America - Analyst : Hey, good morning, I guess. Just wanted to follow up. You talked about private credit and the disruption to bank lending. Another area I would appreciate if you can address is we've been hearing a lot about the likes of Jane Street and other market makers potentially disrupting fixed income trading. Is that a real risk? And is there an opportunity for a form like JP Morgan to actually compete on the private venue site on market making beyond traditional sort of fake activity? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 12:30PM, JPM.N - Q3 2024 JPMorgan Chase & Co Earnings Call

Question: Ebrahim Poonawala - Bank of America - Analyst : Got it, and just one quick one and Jeremy, you mentioned QT stopping at some point, we saw the repo sort of market spike at the end of September. Can you give us your perspective on just the risk of market liquidity shock as we move into year end. How and do you have a view on how quickly fed should recalibrate QT or actually stop QT to prevent some point? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 12:30PM, JPM.N - Q3 2024 JPMorgan Chase & Co Earnings Call

Question: Ebrahim Poonawala - Bank of America - Analyst : Got it. Thank you both.

Question: Betsy Graseck - Morgan Stanley - Analyst : Hi, good morning. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 12:30PM, JPM.N - Q3 2024 JPMorgan Chase & Co Earnings Call

Question: Betsy Graseck - Morgan Stanley - Analyst : Can you hear me? Hello?

Question: Betsy Graseck - Morgan Stanley - Analyst : Oh, Yeah. Thank you. So one for Jeremy, one for Jamie. Jeremy and Jamie. Sorry about the NII question I'm going to have but it is more than half your revenue. So I kind of care about it. But when I'm thinking about the, you know, the trough and then the build-up, QT ending deposit growth. I mean, that's, you know, part of the calculation for improvement as we go into, you know, 2025. Right? I should embed that outlook. Is that right? And that's embedded in how you're thinking about it. I know we don't have a number from you for an I for 2025 but it is in there. Right.

Question: Betsy Graseck - Morgan Stanley - Analyst : And so Daniel's comments in September were on NII in total or NIR X markets. Could you just that-- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 12:30PM, JPM.N - Q3 2024 JPMorgan Chase & Co Earnings Call

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. And then one for Jamie, Jamie, we did talk already quite a bit about the capital that you have capital in store. Just wanted to understand how you're thinking about that opportunity set that's in front of you with regard to using it for, you know, potentially portfolio acquisitions. I realize that depositories are not on the docket, but we all know there's, you know, portfolios out there that might be looking for a home. And could you give us a sense as to how interested you might be in acquiring assets at this stage?

Question: Betsy Graseck - Morgan Stanley - Analyst : What about?--

Question: Betsy Graseck - Morgan Stanley - Analyst : I'm just wondering about, you know, private label credit card, for example, is that something that would help clients?

Question: Betsy Graseck - Morgan Stanley - Analyst : Thank you so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 12:30PM, JPM.N - Q3 2024 JPMorgan Chase & Co Earnings Call

Question: Saul Martinez - HSBC - Analyst : Hey, good morning. I'm not going to ask about a specific NII in '25 but I did want to delve into the how to think about your deposit margin in volume dynamics in the CCB over the next few years. You have seen, you know, decent amount of pressure in the deposit margin '26 down about 30 basis points. You know, deposit balances have come down. So it put some pressure on deposit and NII, but deposit margins are still, you know, well above where they were, when rates were at levels that are consistent with where the forward curve is now has been going. So I guess, you know, how do we think about both volumes and margin dynamics if rates do come down, say the level that, you know, are consistent with the forward curve, I know the forward curve, you know, likely going to be wrong, but that's the reference point we have and conversely, you know, volume offsets. You mentioned Jeremy retail deposits becoming a tailwind and I guess how much of a tail could they be? You know, especially as you are, you know, expecting to, to you know, to gain quite a bit of market share in retail deposits. So just, you know, just give us a sense of sort of the push and pull the dynamics that, you know, really help drive the deposit, you know, the value of the deposit franchise.

Question: Saul Martinez - HSBC - Analyst : Okay, so that's helpful. So it sounds like you're a little bit above that, but you know, there's still some pressure but you're you know, you're not dramatically above those levels.

Question: Saul Martinez - HSBC - Analyst : Got it. Okay. That's helpful. Thanks a lot. That's all I got.