JP Morgan at Bernstein Conference Notes

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Jamie Dimon

Consumer is in good space

“Housing values are up, which is – that’s the most important thing to the consumer. So more work and wages are up, housing in short supply. Household formation is going up. We have to construct more homes. And you see them – we see them kind of spending the gas dividend, but a little bit more on T&E, like travel, entertainment, restaurants, home improvement than on maybe traditional stuff.

So consumer is in good space, and the business sector, small, medium, large, credit is good, and markets are wide open. So it looks good, and I think I want it to be more than 2%. It might actually be accelerating a little bit now. I mean, it’s obviously hard to tell, and I’ll leave it to the economists to figure out whether that’s true or not.”

I’m a believer we should be raising rates

“Yeah. I’m a believer we should be raising rates, and I’ll leave it to the Fed about the timetable they do that. They’ve made it clear that they want to raise rates. Kind of they see the white of the eyes, which is growth and some stronger inflation”

Loan growth coming from jumbo mortgages and multifamily lending

” So, there are really two big pieces. One is jumbos, and you saw an article in the paper today. We have a preference to make those loans, to put them in our balance sheet. They’re good loans. We did one securitization, very high quality. So, that continues – that’s growing, but it’s coming from a pretty low base. And the other one is commercial. It is largely real estate and largely what we call CTL, commercial term lending, which is multi-family lending.”

Lending being somewhat driven by regulations, standardization of RWAs

“obviously some of it is being driven by regulations. You now have – if you have standardized RWA and you can do certain things, it’s a very good risk versus some of the alternatives. So, whether standardized or advanced, that will drive whether a bank wants this kind of loan or that kind of loan. And right now, we’re going to be constrained by standardized starting sometime later this year.”

Credit has never been better, so it’s going to get worse

“Credit honestly has never been better. And so it’s going to get worse. That’s not saying credit cards get bad. It’s not going to get bad. It’s just going to get a little bit worse. ”

Someone will probably get hurt in auto but auto isn’t that large

“Auto is clearly a little stressed in my opinion both on the LTV and the leasing side in some cases and the terms of the agreement. Someone is going to get hurt. It won’t be us. We have very little subprime. We’re very careful. We do leasing but we’re quite careful in how we structure our leasing transaction, but someone will get hurt. Now, remember it’s not a systemic issue because all auto – all of these, I could almost say, $1 trillion, give or take, remember mortgage is close to $9 trillion or $10 trillion. So if the subprime gets bad in auto then someone gets hurt. The subprime will be $300 billion of that number. So, I will say not that big of deal. ”

You’re still going to see bankruptcies at $50 oil but there’s more security in the collateral than people think

“oil seems to be stabilizing about 50. You’re still going to see bankruptcies. You’re still going to see reserves go up. I still believe a lot of those reserves will never be needed, that there’s more security in collateral behind some of those loans than people think.”

Debt markets have come back so has equity but not quite where it was

“Debt, absolutely; equity, quite a bit, but not quite to where it was, if you look IPOs for example and M&A bounces around. But we have sort of chatter in M&A, it’s still pretty good. There’s still a lot of deal activity out there, a lot of cross-border activity.”

We analyze all the fintech companies

“we analyze all the Fintech companies. A lot of things they do, we can do. A lot of things they do, we don’t want to do and, of course, you could be competitors. And they’re also very good by the way at looking for pain points, right? Like what seems really dumb and I see banks – we create pain points sometimes. So, we have to do straight to a process. We’ve got to digitize a lot of trading. We have to make sure we serve people in mobile phone and we’re good at it.”

The branch is still important

“The branching is [indiscernible] important. Okay. They’re still – the facts are the facts. People still visit branches. It is true finally – these ATMs which can – you can deposit checks, get all different types of cash out and you can deposit checks on your phone. Finally, teller transactions at the branch are going down. But our view and this is – while the branch will get smaller and the head count may drop a little bit, what will happen is the operational part of the branch will drop but the advisory part of the branch may grow a little bit.”

I’m not a great believer in cost of capital

“I remind a lot of people because this is a think about market ROE and cost of capital, all that, and I’m not a great believer in cost of capital. There are businesses that have been built over time where there is no E.”

Blockchain is a technology, it may work

“Yeah. It’s a technology. It may work. We’ve already tested – we kind of dry runs, not real, but test runs I guess – I think on CDS swaps and on repo and maybe on loan. It will work for some – if it’s secure. I keep on insisting about security. Has it been broken into? How did it get broken into? Why did it get broken into? Obviously, if you have a single ledger as opposed to reselling your stock and you keeping records and we keeping records, the treasurers are keeping records and the custodian is keeping records, it is one record, at the same time it has the data, the clearance and the settlement, well, of course, you can make it cheap for everybody. So I’m – if it works, it works. We’d be happy to use it. But, again, it’s one of the long line of technology that’s made things cheaper for us.’