JP Morgan at Merrill Lynch Conference Notes

Douglas B. Petno – Commercial Banking CEO

Good to get certainty on election, but health of economy is industry by industry

” I think it’s more of an industry story where you sit in the economy, where you sit geographically. Sentiment is impacted by a combination of factors and you can sort of see the election effect on sort of management confidence and board’s confidence sort of once you get certainty around something like a big outstanding event like that. But depending on where you are in the country, the story is a little different and it’s not so much a size issue, more the industry specific dynamics that we see amongst our client base.’

There is a lot of pent up demand out there

“There is definitely pent-up demand. I mean, I think we have seen a big recovery in the U.S. consumer. That story has not been as robust for small business and it really gets to like lack of management confidence, lack of Board confidence, lots of uncertainty, they face the Affordable Care Act, they face an onslaught of regulation across all industry categories. And so I think the election, the beginning of the election is just behind us and there is an outcome regardless of the winter. And now I think the big thing is, it looks like there’s going to be an orderly transition of power and then the [indiscernible] in the details in terms of what the new President’s policies look like, but anything that brings certainty brings confidence and there is a lot of dry powder. Revolver utilization has been essentially flat for us, about 30%, since the financial crisis. And there is a tremendous cash build across corporate America and I think there is a lot of appetite to invest in R&D, Company expansion, M&A, and I think the other thing that’s outstanding and on the minds of a lot of our clients is sort of local fiscal uncertainty put aside the federal situation and tax climate and fiscal climate in Washington is one thing, but a lot of these businesses are more impacted by what’s happening in their towns and in their states. And so if that stuff can get resolved, you’ll see an even bigger catalyst behind these businesses, but there is definitely a lot of pent-up appetite.”

Invest adequately ad be ready to self disrupt

“No, when I go in front of Jamie, it’s more of a conversation about like what’s not in your [investment] [ph] that should be in there and tell me why you took it out, and I think our point of view is that self-disruption innovation is all about bringing more value to our client. We have the financial wherewithal to do it. Now is the time to seize the opportunity. The landscape is shifting dramatically. These are not discretionary investments in many respects. A lot of it is for cyber, better control on your operations and product offering. A lot of the innovation will drive dramatic efficiency across our operations. So, his point of view is, if you’re taking it out to dress up your P&L, you are borrowing from your future and you better be explaining to me why you’re doing it, and those are not the easiest conversations to have because you obviously are mindful of near term performance, but as I said, it’s very often the case that you’re going to borrow from your future if you under-invest today.”

There’s no question we are in the later stages of the real estate cycle

” Look, there’s no question, we are at later stages of the real estate cycle. I mean we watch it very, very carefully. We look at every component of every geography, we look at rental rates, vacancies, supply, permitting, every metric that you could possibly study, we study it at very granular level and there are parts of the United States where there’s been a tremendous amount of new construction. I think multifamily specifically, I think what you should be most worried about is construction financing for high-end luxury condos. That is not what our multifamily lending business is. And just to remind everybody, for stabilized properties, the average loan is about $2 million. We’re substantially in markets where supply constraint rent by necessity, markets where construction costs are prohibitively expensive. So what that means is, if you’re going to build a new apartment building, because the construction costs are so high and the land costs are so high and there is such scarcity of land, you’re going to have to build a high-end offering, otherwise the economics don’t work. That is not what we are financing.”

Having branches certainly helps

“Having branches certainly helps. As I mentioned before, over half our clients use the branches. Just having a physical branch shows community presence and commitment. It matters a lot. It may not be intuitive to you sitting in the room but our clients care if you are there in the community and if you have a physical retail presence. “

JP Morgan 3Q16 Earnings Call Notes

JPMorgan Chase (JPM) Q3 2016 Results

Marianne Lake – CFO

Card originations up 35%

“Card new account originations were up 35% with strong demand for Sapphire Reserve and Freedom Unlimited and with more than three quarters of new accounts being opened through digital channels. Card sales volume was up double-digit this quarter and we expect share gains to accelerate.”

Markets revenue up 33%

“Markets revenue of $5.7 billion was up 33% year-on-year. Clients were active and risk management conditions were favorable. Fixed income revenue was up 48% compared to a weaker third quarter last year. Rates was a standout in terms of performance this quarter as markets stayed active post Brexit with good client flow, as well as anticipation of an uncertainty around central bank actions. Currencies in emerging markets matched a very strong third quarter last year but was slowed down slightly. And credit and securitized products came back from a weak prior period with a recovery in the energy sector and central bank actions motivating clients to put money to work, producing a much more constructive market making and new issuance environment resulting in a particularly strong quarter.”

Credit performance remains strong. Reserve releases for oil and gas

“credit performance remains strong with a net charge-off rate of 10 basis points, roughly half of which was driven by oil and gas. In addition, you see further reserve releases for oil and gas here as I mentioned earlier. Outside of energy, credit quality is good and the commercial real estate portfolio had no net charge-offs during the quarter.”

Moving more into the near prime space in credit cards and higher delinquencies are to be expected

“ over the course of the last couple of years, we have been changing the mix of our originations a bit to the prime, near prime space and still completely within our credit risk appetite and at risk-adjusted margins that are better than the portfolio average. So, we’re getting paid for that. So, we are doing it within our risk appetite doing it judiciously. But as a result, as those vintages become a higher percentage of our overall population, they will have a gentle upward pressure on the charge-off rate. So, what we’re seeing in terms of the delinquency uptick and the charge-off gradual increases completely in line with how we underwrote those loans and our expectations.

LIBOR hasn’t actually had a large consequence on P&L

“generally speaking with respect to our rate sensitivity, as I think you know we are most sensitive to the front end of the curve but to IOER and prime. So, we do have LIBOR based assets but also liabilities. Good examples would be commercial loans on the asset side or long-term debt on the liability side but our notational mismatch is not particularly big. And so, as a consequence, impact of LIBOR curve move has been not very significant on our P&L, we wouldn’t expect it to be. I will say that the LIBOR moves were one of the features that our rate business had a perspective around and they got good client flow in and around that trade. “

We should be able to generate growth next year even if interest rates are flat

“So, if we ended up in a situation right now where rates are flat throughout all of 2017 which for what it’s worth I don’t think is pretty much anyone’s central expectations right now. But if we were rate flat, you’ve seen us grow our core loans and our loan balances pretty strongly, pretty consistently across businesses. And while we may not be able to replicate $0.15 core loan growth forever, certainly we can continue to grow our loans. So on that stuff, mix shift away from securities over time, we should be able to deliver $1.5 billion of incremental NII next year rate flat. You know that if rates are — if we’re fortunate enough for the right reasons that we see a hike this year, at the end of this year and get the full benefit of that next year it will be higher than that. “

We’re aware of the CRE cycle but we are sticking to our knitting

“ we’re aware obviously of the riskier types of CRE lending, the types of lending that attract scrutiny and for reasonable reasons considering how they performed in past cycles. We are also mindful of where we are in the cycle and take that into consideration in our underwriting. So, we have and continue to avoid and what I would characterize as the riskier segments and those segments that performed poorly in previous cycles. So, we really stick to our knitting”

Our businesses were firing on all cylinders

“all of our businesses did really quite well this quarter. So, not to overuse the phrase, firing on all cylinders but it really was pretty consistent. And normally you might see pockets of more strength or less strength. So, I think it would be hard to imagine replicating this kind of strength through time consistently. But the fourth quarter is seasonally low; we have no reason to expect that it would not be.”

JP Morgan (JPM) Q3 2016 Earnings Call

JP Morgan (JPM) CFO Marianne Lake said the credit worthiness of their oil & gas clients is improving 

“Dealing with oil and gas here, we’re encouraged by how quickly investor sentiment and risk appetite for the sector returned as the outlook for both oil and gas prices continued to improve. Capital market opened more broadly to these clients and we experienced lower draws against our facilities than previously anticipated.  So, a combination of pay downs opportunistic loan sales and select upgrades more than offset the impact of downgrades. If the environment remains broadly consistent with today, we would not expect further significant builds in the fourth quarter for energy.”

Growing deposit growth faster than competitors 

“We continued to experience record deposit growth more than twice the industry average, up 11% year-on-year. More than half of that growth is from existing customers. And based on the FDIC survey for 2016, we were number one in absolute growth and grew share in each of our top 30 markets.”

The bank benefitted from a large fluctuation in global rates as clients transacted in order to take advantage of low interest rates

“In terms of outlook, given the strength this quarter, we expect IB fees to be down in the fourth quarter sequentially but relatively flat year-on-year. Markets revenue of $5.7 billion was up 33% year-on-year. Clients were active and risk management conditions were favorable. Fixed income revenue was up 48% compared to a weaker third quarter last year. Rates was a standout in terms of performance this quarter as markets stayed active post Brexit with good client flow, as well as anticipation of an uncertainty around central bank actions.”

JP Morgan (JPM) CFO Marianne Lake talked about their incentives of how they incentivize their sales team and how it differs from that of Wells Fargo

“We’ve been very, very focused on investing in customer experience broadly defined and have made great progress I think in doing that. And also we had talked about the fact that what we are looking for very, very clearly is deep customer relationship engaged customers who want to be primary bank, we want to gather a deeper share of wallet, so balances not necessarily products. And so again, remember saying cross-sell is an outcome, it’s not an objective. And that’s certainly the philosophy with which we have designed our compensation and performance structures for the branches. And we review them regularly, at least annually to make sure that they continue to be aligned with our objectives and again objectives about the engaged relationship with customers, good customer experience in the right product, all the right reasons the right way.”

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.”

JP Morgan (JPM) CEO Jamie Dimon Interview

JP Morgan (JPM) CEO Jamie Dimon believes a breakup of the entire Eurozone is possible

“YOU KNOW, UNFORTUNATELY THAT COULD BE ONE OF THE FAT TAIL OUTCOMES OF A BREXIT. BECAUSE WHEN YOU GO TO EUROPE, AND I WAS IN ITALY RECENTLY, NETHERLANDS IS GOING TO HAVE A VOTE, ITALY HAS A VERY IMPORTANT REFERENDUM, GERMANY’S GOING TO HAVE A VOTE, YOU HAVE NEW LEADERSHIP IN BRITAIN, THOSE THINGS JUST CAUSE A LOT OF UNCERTAINTY ABOUT WHAT DO PEOPLE WANT. NETHERLANDS THEY ARE TALKING ABOUT HAVING A REFERENDUM LIKE BREXIT. AND YOU DON’T KNOW HOW IT IS GOING TO FALL OUT. AND SO, THAT TO ME IS ONE OF THOSE THINGS OUT THERE THAT COULD POSSIBLY HAPPEN. IT MAY TAKE MORE THAN FIVE YEARS, BUT IT MAY VERY WELL HAPPEN.”

JP Morgan (JPM) CEO Jamie Dimon thinks U.S. GDP would be able to grow at 4% in under different political leadership

“WHAT I WOULD WORRY ABOUT MORE IS THE NEXT PRESIDENT, WHOEVER IT IS, FOCUSES ON THE RIGHT THINGS. I THINK WE CAN GO TO 4%. OK AND THOSE RIGHT THINGS ARE PROPER IMMIGRATION REFORM, PROPER INFRASTRUCTURE SPENDING. DEMOCRATS SAY SPEND A LOT OF MONEY, I KIND OF AGREE WITH THAT. REPUBLICANS SAY IT SHOULDN’T BE BRIDGES TO NOWHERE AND BIG PORK BARREL, I AGREE WITH THAT TOO. SO PROPER INFRASTRUCTURE SPENDING ON ROADS, BRIDGES, TUNNELS, HOSPITALS, SCHOOLS, AIRPORTS WOULD BE GREAT FOR THE UNITED STATES. YOU KNOW, WE NEED CORPORATE TAX REFORM. I WOULD ALSO EXPAND THINGS LIKE THE EARNED INCOME TAX CREDIT TO HELP THE LOWER PAY. SO I THINK THERE ARE A LOT OF WAYS, EDUCATION, THAT WE CAN MAKE THIS COUNTRY BOOM. AND I THINK THAT’S WHAT WE SHOULD BE FOCUSING ON AND NOT JUST POINTING FINGERS AT EACH OTHER AND GETTING MAD ALL THE TIME.”

JP Morgan (JPM) CEO Jamie Dimon doesn’t think that buying 10 year US treasuries at these prices will yield strong returns

“I’M NOT A BUYER OF TEN-YEAR BONDS. I WOULD BE A LITTLE WORRIED ABOUT DRASTIC ACTIONS IN THE TEN-YEAR BOND. THE MORE IMPORTANT THING, AND THE FED TALKS ABOUT IT, IS IF WE HAVE PROPER GROWTH IN THE UNITED STATES, IT WILL START TO NORMALIZE INTEREST RATES. SO THINK OF THE SHORT END, AND YOU KNOW, 25 BASIS POINTS DOESN’T MATTER THAT MUCH, BUT THE FACT IS IF WE START TO NORMALIZE, I PERSONALLY THINK IT’S A GOOD THING. AND IF THAT HAPPENS, MY VIEW IS YOU START TO SEE THE TEN-YEAR GO UP TO A MORE NORMAL PRICE. WE DON’T LOOK AT TODAY’S PRICES IN NORMAL PRICE. ”

 

 

Source: CNBC Video Interview http://video.cnbc.com/gallery/?video=3000539508

JP Morgan (JPM) Q2 2016 Earnings

JP Morgan (JPM) CEO Jamie Dimon on the implications of the Brexit

“So number one, we do think it will reduce the GDP of the U.K. and the EU a little bit. Obviously, that’s not going to affect our business plans. That will affect the economies a little bit. Number two, we know that it is going to create uncertainty for an extended time period. So we don’t think we can answer or make certain all these things you want to know, because there a lot of parties involved. We are hoping that political leaders are very sensible. It makes sense for both the EU and for Britain to think through the process to make it sensible whatever changes they make in order to give businesses time, I am talking about years, time to adjust to the new reality which we don’t know what it is.”

JP Morgan (JPM) CFO Marianne Lake on how they are viewing the Brexit

“Uncertainty running up to the British referendum led to a risk off environment and following the decision, the markets were quite volatile as expected and volumes were materially higher in the immediate aftermath. The market functioned quite well absorbing the volatility and despite significant increases in volumes our systems were stable and we continue to support client activity with decent trading performance. With respect to next steps, as you know, the ultimate relationship between the U.K. and the European Union broadly and access to the single market and possible things specifically will likely unfold slowly and over an extended period, depending on when Article 50 is invoked.  We continue to work on plans for the full range of outcomes, but we will be appropriately patient. The most important point is that we remain committed to fully supporting our European and U.K. clients across businesses and we will be fully able to do this. And while executing against certain of these options would be complex, ultimately we will protect the franchise and minimize any friction cost so that they will be manageable for the company.”

JP Morgan (JPM) CFO Marianne Lake on whether they are taking market share from European banks in wake of the Brexit 

“The share thing is going to become clearer with the rearview mirror than it is necessary a moment in time. It does feel like we are doing fairly well competitively not just against European bank, but just generally and not just in Europe, but generally because we, as you say, have continued to be there for clients across products across the globe. So I would say that we feel like we are doing fairly well. We will know whether that is share gains when we are able to actually look at that in the rearview mirror. But there is still plenty of competition out there. And so we are just focused on serving our clients the right way. But it does feel a little bit like we are doing well.”

JP Morgan (JPM) CFO Marianne Lake on the M&A environment

I will tell you that generally speaking uncertainty is not particularly conducive or constructive for M&A. But in this case I think there are some offsets. So I would start with, in terms of the actual strategic dialogue with CEOs and at the Board, cross border, it is as good as it’s ever been. And if you think about just the other factors that would be supportive of M&A, so like cheap financing globally, low organic growth, good multiples, solid economy in the U.S. and globally notwithstanding a bit of the steam taken out in Europe or the U.K., all of that should continue to be supportive for strategic M&A. Yes. So at the end of the day and currency could be supportive at cross-border activity. So there are puts and takes, uncertain that there will be some people who think carefully through the right timing and what to do. But at the end of day, the strategic proposition should ultimately win out in most cases

JP Morgan 2Q16 Earnings Call Notes

JPMorgan Chase’s (JPM) CEO Jamie Dimon on Q2 2016 Result

We do think that Brexit will reduce the GDP of the UK and EU but we are hoping leaders will be sensible

“So number one, we do think it will reduce the GDP of the U.K. and the EU a little bit. Obviously, that’s not going to affect our business plans. That will affect the economies a little bit. Number two, we know that it is going to create uncertainty for an extended time period. So we don’t think we can answer or make certain all these things you want to know, because there a lot of parties involved. We are hoping that political leaders are very sensible. It makes sense for both the EU and for Britain to think through the process to make it sensible whatever changes they make in order to give businesses time, I am talking about years, time to adjust to the new reality which we don’t know what it is. I think the most important thing is that we will continue in every single country to serve our clients, day in and day out and if it costs a little bit extra, so be it. I am not really worried about it. I wish it would be nice if it doesn’t create a huge turmoil. So I am hoping the EU is sensible”

Marianne Lake – Chief Financial Officer

No deterioration in credit outside of energy

“Although the oil and gas sector remains stressed and reserves will continue to be idiosyncratic, overall trends have been somewhat positive with oil prices continuing to stabilize and firming sentiment in the sector improving access to capital markets. In addition, outside of energy, we still have not seen contagion or deterioration in our wholesale or consumer credit portfolios.”

We continue to work on plans for a full range of Brexit outcomes

“as you know, the ultimate relationship between the U.K. and the European Union broadly and access to the single market and possible things specifically will likely unfold slowly and over an extended period, depending on when Article 50 is invoked. We continue to work on plans for the full range of outcomes, but we will be appropriately patient. The most important point is that we remain committed to fully supporting our European and U.K. clients across businesses and we will be fully able to do this.”

It’s too early to say how Brexit will affect us

“Brian, I know that everybody is keenly interested to hear what we have to say but the truth of the matter is, it’s very, very early days as the new government is just forming as we speak. Negotiations need to be given some time to unfold and take shape. And so it’s really too early to hypothesize. But we would hope that we can continue to operate where we are right now. But we will just continue to evaluate the landscape, as I am sure you will, over the coming weeks, months and quarters and plan accordingly. The most important thing is that we intend to continue to support our European franchising clients throughout.”

Loan demand still seems robust

” Our outlook for loan growth for the range of this year is to be at the higher end of our range. We said 10% to 15% core loan growth and at this point, demand still seems robust.”

A lot of the growth is in commercial term lending

“”a lot of that growth is commercial term lending and it is the case that we have the technology and the process that has speed and certainty of execution and competitive funding cost. So it is the case that if the value proposition that we are able to bring to clients that differentiates us, we are able to close in times that are a fraction of what the industry is. And secondarily, we are really concentrated on simplified supply constrained markets, low rent-stabilized. So these are not the same properties that had problems in the past. Since the previous cycle, we have looked carefully at the our underwriting and there are some things and some regions and some products that we either don’t do or do significantly less of. ”

The consumer is still in very good shape

” we obviously have own spend data to look at and it continues, the card spend is up 8% year-on-year, energy continues to be a tailwind for consumers, the labor market continues to be solid and improving and sentiment is still good, housing still improving. So I mean, really just looking at the same things you are looking at and we obviously have a slightly different lens to it, but all other things equal, consumers are in very good shape and demand is there for the products.”

JP Morgan at Bernstein Conference Notes

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.’

JP Morgan (JPM) at Various Conferences Notes

Jamie Dimon at Bernstein Conference

JP Morgan (JPM) CEO Jamin Dimon sounded the alarm bell on the frothiness in the auto loan market

“Auto is clearly a little stretched, in my opinion.  Someone is going to get hurt.  We don’t do much of that.”


Daniel Pinto – CEO of the Corporate & Investment Bank at Deutsche Bank Conference

Our inventories would probably be lower even without Volcker

“Clearly, we’ve been for a number of years very disciplined about margin risk and sizing the size of our positions to whatever is necessary to provide liquidity to our clients, and in an environment where the liquidity in the market is lower, you want to be a little more careful about how you manage your inventories. So even if Volcker would have not existed at all, some of the things that we do today, they’re exactly the same things that we’ve done with or without it.”

People have to trade with whoever is available and there are fewer players now

” I think that, obviously, the clients need to trade wherever they need to trade, and there is less players, they have to trade with whoever is available. So I think that by definition, that will produce a redistribution of that wallet into the bank that is still on a — in that business.”

Less players mean less liquidity mean higher volatility

“I think that less players also means less market liquidity, which is not good considering that the market in itself is at lot of — more liquid that it used to be. Less player means that less market liquidity, it means higher volatility, which really it will affect the overall level of spreads in the system.”

The market is now pricing a Fed hike in July

“I think that the market is now pricing, that the Fed go probably in July and there is a high probability of that, that is being priced in the market and the market is not pricing a lot about the Brexit, so a negative event could really produce some correction in the market. Clearly, in the short-term, it’s always going to be at this level of liquidity quite painful – how sustainable is, in the long-term is hard to see but economies are going so bad, so overall probably you have some volatility, if those haven’t been happened, then the market will recover back.”

Signs of recovery in the IPO market

“I think there is some signs of recovery, if I look at the — month of IPO in the second quarter is larger than the total amount of IPOs in the whole first quarter. So — and when you look at the pipeline that is quite a lot come in, so as market stays stable for a longer period of time, if that happens we are going to see — and valuations have recovered, you’re going to see more activity. When you look at the performance of the IPO, 73% of the IPOs that took place this year are trading above the offer price. Last year, for the whole year, it was 58%. So the fact that there are plenty of IPOs from last year, that they are trading weak is really so hard in some way or the other the possibilities of the follow-on.”

Incorporation of blockchain would allow us to be more efficient, drive down costs

“The other one is, when you look at the processes that we run today in every bank. So they are — some of them, they’re good, some of them, they are quite inefficient. So the incorporation of these technologies will help to make those processes more efficient. So therefore it will have an impact [indiscernible] if they work in the long run. So, I think that it’s quite exciting. So it’s still early days. But important thing here is that you really, as a company, you are very focused on that, and then you really invest, and you’re really disrupting the way that you do things to incorporate your technologies, you’re really at the forefront. Because whoever gets it, it will make all our — whoever gets it right, it will make all of our business more scalable and therefore be able to process a little more with existing infrastructure that is revenues that fall all the way to the bottom line.”

JP Morgan (JPM) CEO Jamie Dimon TV Interview

JP Morgan (JPM) CEO Jamie Dimon said capital markets activity has been much more robust this spring than it was in January and February 

“IT’S VERY HARD TO FORECAST THE FUTURE. WE SEE THERE IS PLENTY OF ACTIVITY NOW. BOND MARKETS SEEM TO BE RATHER WIDE OPEN. THERE IS A LOT OF M&A CHATTER. IT’S OBVIOUSLY FAR BETTER IN APRIL AND MAY THAN IT WAS IN JANUARY AND FEBRUARY. AND I’M HOPING WHOEVER BECOMES PRESIDENT, THE AMERICAN ECONOMY CONTINUES TO DO WELL. I DO THINK IF THE NEXT PRESIDENT DOES THE RIGHT THINGS AROUND IMMIGRATION, CORPORATE AND INDIVIDUAL TAX REFORM, PROPER INFRASTRUCTURE SPENDING, AMERICA WILL BE BOOMING AND THAT BOOM WOULD HELP THE PEOPLE WHO NEED IT MOST. THE PEOPLE AT THE BOTTOM OF THE LADDER.”

JP Morgan (JPM) CEO Jamie Dimon said he focuses day in and day out on doing an outstanding job for their clients 

“I SAY GOOD MANAGEMENT IS ALSO ABOUT THE HEART. IT’S ABOUT PEOPLE TRUSTING YOU AND PEOPLE KNOWING YOU GIVE A DAMN. AND IN OUR BUSINESS, OBVIOUSLY, I WORRY ABOUT WHAT DOES IT MEAN WHEN WE HAVE THESE – THAT WE HAVE TO PROTECT OUR COMPANY, SERVE OUR CLIENTS. SO EVERYDAY WHEN I COME IN, WE SAY TO THE TROOPS, LOOK, WE’RE GOING TO SATISFY THE REGULATORS. OBVIOUSLY, WE’RE GOING TO TAKE A LOT OF HEAT IN THE PRESS, BUT DO A GREAT JOB FOR YOUR CLIENTS. AND WE ARE DOING A GREAT JOB FOR OUR CLIENTS. WE HAVE A GREAT COMPANY AND WE’RE DOING A GREAT JOB FOR OUR CLIENTS AND THAT’S WHAT, AT THE END OF THE DAY, REALLY MATTERS.”

JP Morgan (JPM) CEO Jamie Dimon admires many of the FinTech companies coming into the marketplace to compete with his mega bank

“I AM A GREAT BELIEVER THAT IT IS A WONDERFUL THING IN AMERICA THAT PEOPLE TRY TO COMPETE WITH EACH OTHER. IT’S CALLED CAPITALISM. OF COURSE COMPANIES ARE LOOKING FOR WEAKNESSES IN BANKS AND THINGS THEY CAN DO FASTER. BUSINESS GROWS WHEN THEY CAN DO SOMETHING BETTER, FASTER, QUICKER OR CHEAPER FOR A CUSTOMER. AND IF THEY CAN DO THAT BETTER THAN ME, SO BE IT. I HAVE TO LEARN TO GET BETTER OR I LOSE.