JPMorgan Chase’s (JPM) at Morgan Stanley Financials Conference

Gordon Smith – Chief Executive Officer of Consumer & Community Banking

Growth in credit across the ranges

“…everything that we read in the numbers we feel comfortable that we will get paid for taking that extra risk. We are going to sub-prime lending, but we are seeing growth actually across all segments and I think it is actually quite encouraging when we look at the economy…I think the economy actually looks very good and we’re seeing that growth as I say across all the credit range. ”

Reserves are being rebuilt in credit cards

“…we are now in a cycle where reserves are being rebuilt, they are not being released in credit card, I guess across most players – across most players in the industry, but going back, we have guided that we’ve typically have underwritten the newer vintages towards plus or minus 4.5. It will take us a while to get there, but we will see, we and the industry will see a rise in losses and the reserve builds to go with rise in losses and with rising loan growth…people still seem to be surprised that we are at the end of that cycle that we have never seen in the 50 years of lending money on credit cards, I was not there the whole 50 years, but we have never seen losses this low, and then I will begin to migrate back up to more the historical averages over time and it will take a while to get there.”

They are harnessing the power of big data

“we have an organization called Intelligent Solutions, which just brings the enormous power of all the data that we have to help target who are the right customers for the products that we have. That has significant financial returns because we are able to invest their marketing dollars in the right way. So the power of big data is really clear for us.”

JP Morgan Chase (JPM) at Deutsche Bank Conference

Marianne Lake – CFO

Don´t give up on reforms

“…we still remain very hopeful that there will be policy and reform on the agenda. I think it’s hard because everybody was super enthusiastic out of the gate, but the reality is all of these things is they’re extraordinarily hard and there are reasons why tax reform hasn’t been successful over the course of the last several decades…I don’t think it’s time to give up the belief….there’s significant reasons to be optimistic and in any case, as we’ve said many times before, just pausing in and of itself is a positive thing.”

But the status quo remains for now

“The flipside to that…is that nothing has actually changed and so when we come into work every day right now, we still need to work hard to comply with the rules as they currently stand to uplift our environment to the degree that we’ve been asked to do that, to continue to get ready to comply with rules that will be coming down the pipe, and so we can’t sort of take our foot off the pedal or eye off the ball in that sense. So in that sense, it’s sort of hurry up and wait.”

Optimism has faded a bit

“The levels of optimism are still high, they’re still higher than pre-election. They may be off slightly from their peak, but I think generally people are still feeling that the pro-growth agenda is real. How exactly it ends up being manifested in reform and policy action over the course of the next six, 12 months is still an unknown.”

A subdued trading environment

“I would say as a sweeping generalization, but it’s pretty broadly true, low rates, a more cautious outlook on rates, low volatility with very small bouts of increased volatility but then returning back to low levels, have led to low client flow and a generally quite subdued and challenging trading environment for the flow businesses.”

Q2 revenues likely to be down

“I will tell you that quarter to date across our markets businesses, we are down about 15% year-on-year. That’s pretty normal seasonal declines in the first quarter and second quarter…That’s fixed income down more and equities up slightly, and as I look to June, I would say I don’t see any particular reason for that to change, particularly given the strength of our June last year.”

Consumers in good shape

“…consumers are in very good shape. Their balance sheets are repaired, they’re pretty liquid, their debt to income ratios are pretty low, debt service burdens are pretty well insulated from interest rate hikes because interest rates have been low forever, and they’ve been able to refi debt at–term out at low rates….So generally speaking, consumers feel very well insulated from rate hikes, particularly if they’re gradual….the central case is gradual improvement in rates or normalization of rates, consumers are able to in large part withstand that very well. “

Collection of Quotes from week to 11th November 2016

 

JPMorgan CEO Jamie Dimon in a memo to employees

There is deep frustration around that needs a listening ear

“We are going through a period of profound political and economic change around the world, and American citizens showed that deep desire for change in voting to elect Donald Trump as the 45th President of the United States. We have heard through democratic processes in both Europe and the United States the frustration that so many people have with the lack of economic opportunity and the challenges they face. We need to listen to those voices.”

A pledge for unity

“We have just been through one of the most contentious elections in memory, which can make it even harder to put our differences aside. But that makes it more important than ever to bind the wounds of our nation and to bring together Americans from all walks of life. Recognizing that our diversity is a core strength of our nation, we must all come together as fellow patriots to solve our most serious challenges.”

 

Starbucks CEO Howard Schultz in a letter to employees

He is stunned

“Last night, like so many of you, I watched the election returns with family and friends. And like so many of our fellow Americans – both Democrats and Republicans – I am stunned.”

The impact is yet to be known

“We cannot know what the precise impact will be on our country and the rest of the world. I am hopeful that we will overcome the vitriol and division of this unprecedented election season.”

 

Starbucks CEO Howard Schultz in a

We have heard through democratic processes in both Europe and the United States the frustration that so many people have with the lack of economic opportunity and the challenges they face. We need to listen to those voices.

 

Ewald Nowotny, ECB Governing Council member at the ECB conference

ECB at the ready

“We are definitely prepared to intervene in an emergency. What that will really look like, we must wait and see.”

 

Peter Praet, ECB’s chief economist at the ECB conference

Calmness Needed

“I think we have to be calm – calmer than the markets certainly. It’s too early to react to such events and we are closely monitoring the situation. I think all communication on monetary policy has not changed and will not change as a result.”

JPMorgan Chase (JPM) at Barclays Global Financial Services Conference Notes

Millennials are the single largest population in the United States at 76-78 million

I said I’d talk a little bit about millennials and their importance to the Company. And I think actually they’re important to all companies at this juncture…  between 76 million and 78 million but the most important takeaway is that they’re now the largest single population in the United States. Gordon Smith – CEO Chase, Consumer & Community Bank

 

Millenials spend much more time and money than other populations on travel, entertainment, and dining

Again consistent with some of the things that you will have read, they tend to spend much more time or much more money and obviously time on experiences and we see a little bit in our own data. So this is both credit and debit card data from Chase for 2015 and just simply compares the millennials against all of the other populations and you will see in the travel, entertainment and dining categories that they outspend. Gordon Smith – CEO Chase, Consumer & Community Bank

 

Gordon Smith points to employment and housing market as indicators of a strong economy

The general points that I would make on the economy overall is I think if we look at the employment situation which looks very strong and we look at the strength of the housing market, still take the economy as we move towards the back quarter of the year is looking particularly strong I think right now and there are different points of view out there. Gordon Smith – CEO Chase, Consumer & Community Bank

 

JPM has renewed credit card cobrand relationships with United, Southwest, and Amazon for an undisclosed period of years

And you can see from terrific brands like United, Southwest, and Amazon, we’ve had those businesses partnerships for 15 to 25 years and have recently renewed them for an undisclosed duration. That means don’t ask. Gordon Smith – CEO Chase, Consumer & Community Bank

 

Digital wallets have not yet significantly impacted consumer spending

And you can see here in terms of just on the left hand side of the page we took kind of Apple, Android and Samsung Pay and look for kind of away and it is in usage and again it just reiterates that yes customers are aware of it, but it hasn’t yet grown to be a meaningful component of consumer spending. But that does not mean that it will not be. Gordon Smith – CEO Chase, Consumer & Community Bank

 

Auto loan portfolio has improved since JPM decided to reduce subprime lending for auto finance; yet, 21% of originations have a loan to value ratio greater than 120.

Auto origination, so the percent of originations with FICO of less than 680, in 2008, we were at about 31%. The first half of 2016 we’re at 19% against the industry, which is at roughly 50%. So, in I think the first quarter of 2013 we made the decision that we would substantially pull out of the subprime lending space here for auto finance… you see a percentage of originations with a loan to value of greater than 120 and with very consistent with where we’ve been and substantially less than the industry at 21%. Gordon Smith – CEO Chase, Consumer & Community Bank


SK Additions:

Gordon Smith – CEO Chase, Consumer & Community Bank

Millenials start families much later

“They also tend to kind of start you know from research we’ve done, they tend to start families much later, they start owning a home later than certainly the baby boomers do. So there are some you know very real differences which are important as you think about kind of product design and targeting but some real differences that we see in our data.”

Credit card and auto delinquencies migrating slightly higher but not cause for concern

“Term repeat to credit trends, I know that’s an area that’s all of your focused on and we’re too and always have been, credit card net charge off rate and the 30 plus delinquency rate migrating very slightly higher, but nothing in any of the delinquencies that I see as a concern at this stage. We said that we would target plus or minus 4.25 on a net charge-off basis for credit cards. Everything looks to be consistent with all the expectations that we set and as loans continue to grow and we continue to penetrate with more acquisition we would expect to see the lost numbers begin to slowly rise overtime. Auto migrating a little faster back to more pre-recessionary rates if you like, but still looks very strong entirely consistent with our expectations and our expectations are consistent with all the return targets that we have set for you overtime”

Added 1m new credit card accounts with Freedom unlimited card

“If we go now to Page 21, we recently launched Freedom Unlimited, well I guess we launched it at the end of the first quarter now, so reasonably recently. But from the first quarter through the end of August, we acquired more than a 1 million new customers with the new product. So, we had originally slated this particular release for later in 2016 we could see there was a gap in the market and in our product lineup, so we accelerated it. And as we say have added 1 million new accounts since its launch.”

We feel confident in the business that we’re bringing in

“So, why aren’t we scared, we take those numbers apart in intense detail. So, we take every single vintage that we have and we look at this every quarter and other people look at it almost on a daily basis. But I think each vintage every quarter we break each vintage into deciles. We look at the performance of the worst deciles particularly the bottom two or three deciles and compare those to prior vintages and all of that data suggests that we’re bringing in really good quality customers. So if any of that was to change, I’d be here telling you that we were not growing as quickly as we are, but we feel confident with the quality of the business that we’re building.”