JP Morgan at Barclays Conference Notes

Jamie Dimon – Chief Executive Officer

It’s been a challenging three years

“Certainly lot, it’s been a challenging three years. We’ve had lots of new rules and regulations and all the banks I know has been a tremendous amount of time writing code, getting people in place, pushing down capital liquidity, the products, clients, countries, adjusting their business models et cetera.”

The economy is still tugging along

“The economy itself which is far more important is still tugging along and I don’t know I think anything changed it that much.”

We think this is a speed bump for China

“In regard to China, I think we’ve been fairly consistent. I think we just saw is speed bump in China and not that bigger deal. China, our view of China is in 20 years it will be a large developed nation probably housing 20% to 25% of the global Fortune 2000 or something and that’s where we are keeping our eye on.”

The Fed is a lot of chatter about nothing. This isn’t even a tightening

“It’s a lot of chatter about nothing. I don’t want to add to that chatter. Let the Fed decide when they want to raise rates and wherever I go I ask businesses, consumers, small business, large business, will it affect you if rates go 25 basis points? I haven’t found anyone who says, Oh my god. By the way, if someone says oh my god, I’m in trouble, okay honestly you’re not paying attention, they’re going to go up and when it goes up September, October, November it isn’t it’s a psychological thing, folks. It’s not a economic thing, it’s not really in my opinion tightening. They could raise rates – tightening in the old days meant you’re taking cash out of the system.”

The system doesn’t even work the same way that it used to. They’re not taking money out.

“by the way the system doesn’t work the same anymore. In the old days if they said they want rate of x, they would buy treasuries that would create reserves, presumably banks would lend them out with some kind of money multiplier and they can do rates that way. The reserve banking doesn’t exist anymore because all those reserves bank have – I’m going to call them – they are not required under old reserve requirements, they required an LCR, so that – it won’t work that way, but they can set IOER, which the rate they pay us if rates go immediately there and it’s not necessarily taking money out.”

The American consumer is doing fine

“the American consumer is doing fine, I wish the economy is going faster, but I think it will take good policy have that happen.”

The next issue is not going to come from credit

“I don’t think it’s going to be credit. I mean if you look at the credit, it’s being written out mortgage, it’s pristine.”

But I do expect credit to get worse

“I don’t see something out a horizon credit that’s terrible. But I do expect it will get worse. So don’t misread this as being good for this long. Never seen it stay this good for 20 years. I will be this good and then it’s going to charges will go up and the economy will change obviously.”

We don’t run the business with expense initiatives

“We don’t run the business that way and they are not expense initiatives. We run the business that you think the way you want to do, you invest what you got to invest, you built the systems you need, you open the branches you need.”

I would love to acquire into new markets but we’re not allowed

“we are legally not permitted to buy banks in the United States. We are at the 10% FDIC limit. So, if I could buy 50 branches I’d go do that, but we have to build them instead. So, it is a lower return way then – I mean you would buy the branches if you could, if it was even at reasonable premium you buy them, it would be more effective way to go to market.”

There is nothing like what happened in the last cycle going on in banks today

“The last crisis obviously the heart of it, the nucleus, was mortgages in the banking system, outside the banking system, mortgages, and Fannie Mae and Freddie Mac; it was mortgages; that was the corruption that caused the whole crisis. I don’t see anything like that in banks, zero, nada, nothing, zilch.”

Non banks are not big enough to pose a systemic issue

“Non-banks, they are not big enough to pose a systemic issue. Now there might be a systemic issue five or seven years from now, so don’t quote me today if there’s been a change.’

The one thing I worry about a little is treasuries, because so many people in this business have never seen interest rates go up and the biggest buyers are reversing course

“the one thing I do worry about a little bit by the way is treasuries. I mean, there has been – interest rate has been so low for so long, there is an oracle, a paper that I kind of wrote it, but it was kind of funny that not only that the traders have they never seen interest rates go up, but their bosses have never seen interest rate go up. Anyone into this business since 2006 has never seen interest rates go up, they saw a little bit of a crisis here, but they never seen interest rates go up”

“And the biggest buyers of treasuries were central banks, foreign exchange managers effectively and banks. And all three of those are going to reverse. So I wouldn’t be shocked to see 10-year treasuries, when rates are going up, people change their mind, they change direction, that they will be vitally volatile and go up much faster than people think. I’m not predicting that, I’m simply saying in the back of mind, I think that’s a possibility and we will be prepared for that.”

I’m not afraid about leverage lending business for banks at all

“I’m not afraid at all about the leverage lending business, zero.”…

Leverage in the middle market is coming from non-banks

“If you go to middle market lending, all the leverage – and not all, but a big chuck of leverage lending in the middle market is now non-banks. Now one of the issues again with that is, we will lend to our clients in bad markets, markets will not lend their clients in bad markets and all hedge funds. So if you are a client, if you are the middle market client who bought hedge fund or private equity in making that loan they will not be there; in bad time, they can’t. So that’s the market to market right away and that will be a huge hit. You can’t make a loan and then have an immediate 20% loss.”

I don’t want to retire

“I don’t want to retire. So I don’t know, I mean as long as the board wants me and I could still do the job and I have my other stuff like that and I want to work hard.”