Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's First Quarter 2022 Earnings Call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. Please standby. At this time, I would like to turn the call over to JPMorgan Chase's Chairman and CEO, Jamie Dimon; and Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead.

Thanks, operator. Good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on Page 1. The firm reported net income of $8.3 billion, EPS of $2.63 on revenue of $31.6 billion and delivered an ROTCE of 16%. These results include approximately $900 million of credit reserve builds, which I'll cover in more detail shortly, as well as $500 million of losses in Credit Adjustments & Other in CIB. Regarding loan growth, we're continuing to see positive trends with loans up 8% year-on-year and 1% quarter-on-quarter ex PPP, with the sequential growth driven by a continued pickup in demand in our Wholesale businesses, including ongoing strength in AWM. On Page 2, we have some more detail on our results. Revenue of $31.6 billion was down $1.5 billion or 5% year-on-year. NII ex Markets was up $1 billion or 9% on balance sheet growth and higher rates, partially offset by lower NII from PPP loans. NIR ex Markets was down $2.2 billion or 17%, predominantly driven by lower IB fees, lower Home Lending production revenue, losses in Credit Adjustments & Other in CIB as well as investment securities losses in corporate. And Markets revenue was down $300 million or 3% against a record first quarter last year. Expenses of $19.2 billion were up approximately $500 million or 2%, predominantly on higher investments and structural expenses, largely offset by lower volume and revenue-related expenses. Credit costs were $1.5 billion for the quarter. We built $902 million in reserves driven by increasing the probability of downside risks due to high inflation and the war in Ukraine as well as builds for Russia-associated exposures in CIB and AWM. Net charge-offs of $582 million were down year-on-year and comparable to last quarter and remain historically low across our portfolios. On to balance sheet and capital on Page 3. Our CET1 ratio ended at 11.9%, down 120 basis points from the prior quarter. As a reminder, we exited the fourth quarter with an elevated buffer to absorb anticipated changes this quarter, the largest being SA-CCR adoption as well as some pickup in seasonal activity. In addition to those anticipated items, there were a couple of other drivers. The rate sell-off led to AOCI drawdowns in our AFS portfolio. But keep in mind, all else equal, these mark-to-market losses accrete back to capital through time and as securities mature. And price increases across commodities resulted in higher counterparty credit and market risk RWA. While, of course, the environment is uncertain, many of these effects are now in the rearview mirror. And as a result, we believe that our current capital and future earnings profile position us well to continue supporting business growth while meeting increasing capital requirements as we look ahead. With that, let's go to our businesses, starting with Consumer & Community Banking on Page 4. CCB reported net income of $2.9 billion on revenue of $12.2 billion, which was down 2% year-on-year. In Consumer & Business Banking, revenue was up 8%, predominantly driven by growth in deposit balances and client investment assets, partially offset by deposit margin compression. Deposits were up 18% year-on-year and 4% quarter-on-quarter, consistent with last quarter. And client investment assets were up 9% year-on-year, largely driven by flows in addition to market performance. In Home Lending, revenue was down 20% year-on-year on lower production revenue from both, lower margins and volumes against a very strong quarter last year, largely offset by higher net servicing revenue. Originations of $24.7 billion declined 37% with the rise in rates. And as a result, mortgage loans were down 3%. Moving to Card & Auto. Revenue was down 8% year-on-year, primarily on strong new card account originations, leading to higher acquisition costs. Card outstandings were up 11%, and revolving balances have continued to grow, ending the quarter above the first quarter of '21 levels. And in Auto, originations were $8.4 billion, down 25% due to the lack of vehicle supply, while loans were up 3%. Touching on consumer spend. Combined credit and debit spend was up 21% year-on-year with growth stronger in credit as we see a continued pickup in travel and dining. And as the quarter progressed, we saw a robust reacceleration of T&E spend, up 64%. Expenses of $7.7 billion were up 7% year-on-year, driven by higher investments and structural expenses, partially offset by lower volume and revenue-related expenses. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.5 billion for the first quarter. Investment Banking revenue of $2.1 billion was down 28% versus the prior year. IB fees were down 31% year-on-year. We maintained our number one rank with a wallet share of 8%. In Advisory, fees were up 18%, and it was the best first quarter ever, benefiting from the closing of deals announced in 2021. Debt underwriting fees were down 20%, primarily driven by leverage finance as issuers contended with market volatility. And in equity underwriting, fees were down 76% on lower issuance activity, particularly in North America and EMEA. Moving to Markets. Total revenue was $8.8 billion, down 3% against a record first quarter last year. Fixed income was relatively flat driven by a decline in securitized products, where rising rates have slowed down the pace of mortgage production, largely offset by growth in currencies and emerging markets and commodities on elevated client activity in a volatile market. Equity markets were down 7% against an all-time record quarter last year. This quarter, however, was our second best with robust client activity across both, derivatives and cash. And prime continued to perform well with client balances hovering around all-time highs. Credit Adjustments & Other was a loss of $524 million, driven by funding spread widening as well as credit valuation adjustments relating to both increases in commodities exposures and markdowns of derivatives receivables from Russia-associated counterparties. Let me take a second here to address the widely reported situation in the nickel market as it relates to our results this quarter. We were hedging positions for clients closely linked to nickel producers, who generally sell forward a portion of the coming year's production. The extreme price movements created margin calls, which we and other banks are helping to address. Because this is counterparty related, not trading, it appears in the Credit Adjustments & Other line, where it contributed about $120 million to the reported loss I just mentioned. It also drove approximately half of the increase in market risk RWA that I noted on the capital slide and was a driver of higher reported VaR, which will also be elevated in our upcoming filings. Payments revenue was $1.9 billion, up 33% year-on-year or up 9% excluding net gains on equity investments, driven by continued growth in fees, deposit balances and higher rates. Securities Services revenue of $1.1 billion was up 2% year-on-year, driven by higher rates and growth in fees. Expenses of $7.3 billion were up 3% year-on-year, mostly due to higher structural expenses and investments, largely offset by lower volume and revenue-related expenses. Moving to Commercial Banking on page 6. Commercial Banking reported net income of $850 million and an ROE of 13%. Revenue of $2.4 billion was flat year-on-year with higher payments revenue and deposit balances, offset by lower Investment Banking revenue. Gross Investment Banking revenue of $729 million was down 35%, driven by both fewer large deals and less flow activity. Expenses of $1.1 billion were up 17% year-on-year, largely driven by investments in volume and revenue-related expenses. Deposits were down 2% quarter-on-quarter as client balances are seasonally highest at year-end. Loans were up 5% year-on-year and up 3% quarter-on-quarter, excluding PPP. C&I loans were up 3% sequentially ex PPP, reflecting higher revolver utilization and originations across Middle Market and Corporate Client Banking. CRE loans were up 3%, driven by strong loan originations and funding across the portfolio. And then, to complete our lines of business, AWM on Page 7. Asset & Wealth Management reported net income of $1 billion with a pretax margin of 30%. Revenue of $4.3 billion was up 6% year-on-year as growth in deposits and loans and higher management fees and performance fees and alternative investments were partially offset by deposit margin compression and the absence of investment valuation gains from the prior year. Expenses of $2.9 billion were up 11% year-on-year, predominantly driven by higher structural expenses and investments as well as higher volume and revenue-related expenses. For the quarter, net long-term inflows of $19 billion were positive across all channels with strength in equities, multi-asset and alternatives. And in liquidity, we saw net outflows of $52 billion. AUM of $3 trillion and overall client assets of $4.1 trillion, up 4% and 8% year-on-year, respectively, were driven by strong net inflows. And finally, loans were up 3% quarter-on-quarter with continued strength in mortgages and securities-based lending, while deposits were up 9%. Turning to Corporate on page 8. Corporate reported a net loss of $856 million. Revenue was a loss of $881 million, down $408 million year-on-year. NII was up $319 million due to the impact of higher rates, and NIR was down $727 million due to losses on legacy equity investments versus gains last year as well as approximately $400 million of net realized losses on investment securities this quarter. Expenses of $184 million were lower by $692 million year-on-year primarily due to the contribution to the firm's foundation in the prior year. Next, the outlook on page 9. We still expect NII ex Markets to be in excess of $53 billion and adjusted expenses to be approximately $77 billion. And we'll update these and give you more color at Investor Day next month. So to wrap up, once again, this quarter, the Company's performance was strong in a particularly volatile and challenging environment. We helped our clients navigate very difficult markets, provided support to relief efforts and implemented economic sanctions of unprecedented complexity with multiple directives from governments around the world. And of course, our thoughts remain with everyone, including our employees affected by Russia's invasion of Ukraine. Looking ahead, the U.S. economy remains robust, but we're watching high inflation, the reversal of QE and rising rates as well as the ongoing effects of the war on the global economy. With that, operator, please open the line for Q&A.

Please standby. And our first question is coming from John McDonald from Autonomous Research. Please go ahead.

Thank you. Good morning, Jeremy. I was wondering about the net interest income outlook. I know it sounds like we'll get more at Investor Day, but it's very similar to what you gave in mid-February. And obviously, rate expectations have advanced since then. Could you give us a little bit of color on what kind of assumptions are underlying the net interest income ex Markets outlook?

Yes. Good morning, John, good question. And yes, look, obviously, given what's happened in terms of Fed hike expectations and what's being questioned into the front of the curve, we would actually expect the access part of in excess of $53 billion to be bigger than it was at Credit Suisse. So, to size that, probably a couple of million dollars. But we don't want to get too precise at this point. We want to run our bottoms-up process. There have been very big moves, and we want to get it right. And so, we'll give more detail about that at Investor Day.

Okay. And as my follow-up, could you give us some thoughts about the Markets-related NII? What things should we think about there, whether it's seasonality or how it's affected by rising rates?

Yes. I guess, I would direct you to my comments, I think, one or two quarters ago on this. But generally speaking, that number is pretty correlated to the short-term rate. So, all else equal, you'll see a headwind in there as the Fed hikes come through, which, in general, in the geography, we would tend to expect that to be offset in NIR. But it's noisy. It can shift as a function of obscure balance sheet composition issues, as I've mentioned in the past. And so, that's why we don't focus too much on that number.

The next question is coming from Ken Usdin from Jefferies. Please go ahead.

Jeremy, I just wanted to follow-up on your comments about capital and being able to provide room for organic growth. With a 5.2% SLR, 11.9% CET1 versus your long-term targets, can you talk about what that means in terms of the buyback potential from here? And do any of the RWA inflation items come back off that you just saw in the first quarter? Thanks.

Yes, thanks. So, let me just give some high-level comments about the CET1 trajectory and so on. So, as you know, we went into the quarter with elevated buffers, knowing that we would have denominator growth as a result of the adoption of SA-CCR. And so, of course, that happened. And we would have expected roughly to be 12.5 right in the middle of the range this quarter. Of course, it was an unusual quarter in a number of ways. And so, we saw RWA inflation from market risk, which we've talked about and the AOCI drawdown and a number of other slightly smaller factors producing the 11.9%. From where we sit here, to your point, a number of these items are, in fact, going to bleed back in relatively quickly, some faster than others. So, we would expect a significant portion of the RWA inflation to bleed out, obviously, to decay out. The AOCI drawdown will obviously come back over time. And probably most importantly, to the prior question, the higher rate outlook is improving the revenue outlook, which will, of course, accrete to capital. So then, if you line that up against the sort of rising minimums, of course, we have the increase in the G-SIB requirement in the first quarter of '23 coming in. And then, there's a question of SCB, where we don't know, obviously, but given the countercyclical nature of the stress and the fact that the unemployment launch point is a lot lower and that the unemployment rate is floored in the Fed scenario, you might expect SCB to be a little bit higher when it's published in June, effective in the fourth quarter. But that gives us time to make any adjustments that we need to make. So, I guess, to summarize, when we put all this together, between improved income generation, some of the denominator decay and the various levers that we have available to pull across the dimension of time as soon information comes into play, we really feel quite good about our capital position from here and the trajectory as we look forward and minimums evolve.

And just a follow-up there, too. Is there anything you need to consider structurally in terms of like adding preferreds to help bridge the gap, or is it just going to be enough to organically build back with possibly just utilizing less buyback to allow things to just grow back?

Yes. I think, in general, we haven't wanted to say a lot publicly about our preferred actions. As you know, some of these instruments are callable. And we have choices to make about whether or not we call them to adjust to different situations. So I think that's an example of the types of levers that we have available to pull as the environment evolves. But from where we sit today with the numbers that I'm looking at, we have a pretty clean trajectory to get to where we want to be.

The next one is coming from Betsy Graseck from Morgan Stanley. Please go ahead.

I had a question for Jamie. In your annual letter, you mentioned how you expect to achieve double-digit market share over time in payments. And what I wanted to understand is if you could unpack that a little bit because when I look at payments, you've got a lot of different sleeves. For example, in consumer credit card, you're at 20%, 25%. In treasury, I think you're at 7%. So, could you give us a sense as to where you think you are in this total payments category you're talking about, what you're expecting in terms of drivers to get to double-digit and what kind of timeframe you're thinking about there? Thanks.

Yes. So yes, Betsy, so that number, the double-digit relating just to Wholesale Payments, not to consumer payments, which obviously, we already have a fairly significant share. And we've gone from 4.5% to something a little bit north of 7% over the last five years. And we're just building out. And I gave some examples and I’d give a lot and then you have Investor Day coming up, we're building all the things we need, real-time payments, certain blockchain-type things. While it's a couple of acquisitions, they're building out our Wholesale capabilities to do a far better job for clients globally around the world and supported by what I'd say very good cyber and risk controls, which clients really need too, by the way. So, it's kind of across the board. It's nothing mystical about it, but it's an area we want to win in.

Okay. And getting to double digits is over the same kind of timeframe with the same pace going from 4% to 7%, or do you think you can accelerate that? Because I see what...

I wasn't meaning to put a timeframe on it, but I would say five years. You'll get more update on this at Investor Day.

Okay. And then, just a follow-up here is on the NII outlook, where you indicated the curve suggests the plus side and is it a couple of billion. And I guess the question I have is historically, you've been looking to reinvest that benefit from rising rates. You did that last cycle as well. What I'm hearing is that maybe you don't want to size it for us right now because you plan on investing it and explaining that at Investor Day. Is that a fair takeaway?

We don't view it that way as a reinvestment of net interest income. We're constantly assessing our investments and allocating significant resources for future growth across various areas. However, that’s not the main point you’re making.

I mean, I think fundamentally, we have had confidence in delivering our 17% ROTCE through the cycle. We talked a little bit over the last couple of quarters about at the time, some short-term headwinds to that, mostly as a function of the rate environment and a couple of other things. The investment plan is a strategic plan that recognizes that sort of confidence in the 17%. The fact that that moment may be getting pulled forward as a result of the Fed's reaction to the economy has no impact on how we think about spending.

The next question is coming from Steve Chubak from Wolfe Research.

So, I wanted to start off with a question on QT. In the past, you've spoken about the linkage between Fed balance sheet reduction and deposit outflow expectation for yourselves in the industry. And with the Fed just outlining a more aggressive glide path per balance sheet reduction, how should we be thinking about deposit outflow risk? Any views on how betas may differ versus last cycle, given a more aggressive pace of Fed timing?

Hey Steve, so this is a fun question. So, let's nerd out a little bit. I'm sure Jamie will jump in. So look, I think we've talked a little bit about what happened in the prior cycle, right? So, you had QE, and then you had a big expansion in bank deposits, system-wide expansion. And at the tail end of that cycle, you had RRP come in, and then RRP has gotten sort of quite big as QE finished. And so now, as you look at potentially kind of running that whole thing in reverse, you might actually expect that the first thing that would happen is that RRP would get drained and only later would bank deposits start to shrink. But I think you correctly point out some of the nuances in the Fed minutes. And when you sort of combine all the effects together, you realize that there's a lot of interacting forces here and is really, I think, very intelligent people differ on their predictions about what's going to happen here. And just to outline a couple of those. So, it's worth noting for starters that in general, industry-wide loan growth outlook is quite robust, and that should be a tailwind for system-wide deposit growth. So, as you noted, yes, QT will start in May in all likelihood for the minutes headwind. Then, you just have to look at what's going to happen in the front end of the curve, particularly in bills. So, the treasury has to make decisions about weighted average maturity and what makes sense there. There's obviously a little bit of shortage of short-dated collateral in the market right now. So, that might argue for wanting more supply there. The Fed has to make decisions about portfolio management. They talked in the minutes about using bill maturities to fill in gaps and so on and so forth. And so, those things are going to interact in various ways. I think, one thing that's worth noting though is that if you wind up in the state of the world where bank deposits drain sooner than people might have otherwise thought, in all likelihood, that's going to be the lower value non-operating-type deposits. So, in any case, we'll see. But to simplify it for a second, our base case remains modest growth in deposits for us as a company. And just pivoting away for a second from the system to us, from a share perspective, we've taken share in retail deposits, and we feel great about that. And in Wholesale, we've had some nice wins and a nice pipeline of deals there. So, that's the current thinking on that topic.

So, the answer is we don't know. Okay? And you guys read reports, but the fact is initially probably won't come out of deposits. Over time, it will come out of Wholesale and then maybe consumer. We're prepared for that. It doesn't actually mean that much to us in the short run. And the beta effectively, we don't expect to be that different than was in the past. There are a lot of pluses and minuses. You can argue a whole bunch of different ways, but the fact it won't be that much different, at least the first 100 basis-point increase.

Just one more topic or a follow-up, I should say. Jamie, just in the shareholder letter, you had spoken about how the market is underestimating the number of Fed hikes that might be needed to curb inflation. And what's your expectation around the level of Fed tightening? I know it's difficult to make such predictions, but maybe if you could just help us understand given your own rate outlook, how that's informing how you're managing excess liquidity, given the significant capacity that you have to redeploy some of those proceeds into higher-yielding securities?

Yes. I believe the implied rate is around 2.5% by the end of the year and possibly 3% by the end of 2023. However, no one can predict this with certainty, and everyone has their own forecasts. I expect it to be higher due to inflation and changes in deposits. We've never experienced quantitative tightening like this before, which makes it a new scenario for the world. I think this is more significant than many realize because the substantial shifts in fund flows will impact investment portfolios. We're confident that we'll support our customers and gain market share. As for JPMorgan Chase, we are in a strong position with ample capital and solid margins, achieving our desired returns. My advice would be to remain cautious, as I anticipate volatile markets. This is manageable for us, and we believe the Fed needs to take steps to navigate the economy towards a soft landing if possible.

And any appetite to deploy the excess liquidity?

No, don't expect that.

The next question is coming from Glenn Schorr from Evercore ISI. Please go ahead.

I wonder if you could talk through the changes in the macro assumptions to capture that downside risk in CECL assumptions, just because what I want to get to is where we came from, where we're at now and then we can impose our thoughts on each quarter.

Yes. I don't want to spend a lot of time on CECL. I think it's a complete waste of time. Basically, all we said is the chance of an adverse or severe adverse event is 10% higher than it was before. That's all we did, very basic.

It really is that...

We don't have a definite answer; it's merely a guess. It's based on probability-weighted, hypothetical, multiyear scenarios. We do our best, but discussing CECL fluctuations in earnings calls isn't productive since it doesn't reflect the core business. Charge-offs are performing exceptionally well, considerably better than expected. For instance, the middle market is at 1 basis point, and credit cards at 1.5. Previously, we would have said the best they could be is 2.5. So, overall, credit conditions are strong but will deteriorate. Net interest income is expected to improve significantly, and we anticipate a return to normalcy. We're still achieving a return of 16% or 17% on tangible equity.

The 10% is what I wanted because your guess is better than my guess. So, I appreciate that.

I don't believe it is.

Okay. So, I think you might have just answered it, but I want to make sure I ask it explicitly. The follow-up I have on credit, and I know it's in much better shape, and it depends on the go forward. But are you seeing any stresses in the levered parts of the debt markets, meaning leveraged loan, high-yield, CLO, private credit, anything in there that makes you like turn a side eye?

Just spread widening, a little bit less liquidity.

I think no one wants to be complacent about this situation. In this environment, everyone is closely monitoring for any risks and trying to anticipate what may happen. However, at this moment, we are not observing any concerning issues in the current metrics.

Maybe the last quickie on credit is just with everybody having a job and there's wage inflation and excess cash, are there any buckets of income that you're seeing early stage delinquencies picking up?

In short, no. It's an interesting question as we consider our customer base, particularly in cards, regarding the debated topics of real income growth and gas prices and their impact on consumer balance sheets. We're monitoring that, especially within the lower and moderate-income segment of our customers. However, at this time, we're not noticing anything that raises concerns.

The next one is coming from Gerard Cassidy from RBC Capital Markets. Please go ahead.

Jeremy, can we follow up on your comments about building up the reserves? I think you said it was $902 million that you guys built up and was due to high inflation and the war in the Ukraine. How much was it due to inflation? And when you made that comment, is it because you're concerned about the lower-end consumer spending more money for fuel and food that might lead to greater delinquencies down the road? And how much was it due to the Ukraine situation?

Yes, Gerard, it's actually more general than that. To clarify, there is a total of 900 related to build-up, with 300 tied to specific names, mainly concerning individuals linked to Russia. The remaining 600 is at the portfolio level. As Jamie mentioned, this increase represents a shift from a very low likelihood to a slightly higher likelihood of a recession, akin to a Volcker-style, Fed-induced recession, in response to current inflation pressures. These inflationary factors are partly due to rising commodity prices, which relate to the ongoing war in Ukraine. However, it's not solely about specific portfolio details, except as our models account for that. It's more of an overall adjustment in terms of probabilities.

One of the things I hated when CECL came out is that we spend a lot of time in every call yapping about CECL. I just think it's a huge mistake for all of us to spend too much time on it.

Understood. And then, as a follow-up, Jeremy, if we look at the AOCI number that you gave us, and you were very clear about it's going to accrete back into the capital as those securities mature. Two things. Is there anything you can do, assuming if the long end of the curve continues to rise and probably giving you maybe a bigger hit on AOCI as we go forward, is there anything you can do to mitigate that, whether to shrink the available-for-sale portfolio, which looks like it was $313 billion at the end of this period, or do you just have to grow the revenue, as you pointed out, as another way of growing your capital?

Yes. I mean, I think that, obviously, we always try to grow revenue sort of independently of anything else. I think the large point here is, yes, there are some things that can be done to mitigate this. But the big picture is that the central case path is one that gets us to where we want to be when we need to be there in terms of CET1 and leverage. And if things don't play out as along the lines of the central case, we have tools and levers available to adjust across a range of dimensions, so.

The next one is coming from Mike Mayo from Wells Fargo Securities. Please go ahead.

Hi. I have a question for both, Jeremy and Jamie. Jeremy, I guess the SLR 5.2% close to the minimum, you explained that. But since quarter end, AOCI probably has gotten worse. And I'm guessing your SLR might be very even close to that minimum. So, I understand your central case, it's fine. Your outlook is good. But at what point do you say you stop buybacks, or do you think you'll buy back maybe half of the $30 billion authorization, or does JPMorgan even put on asset caps, given just the amazing asset growth over the last three months? So, that's my question for Jeremy. But the bigger picture is for you, Jamie, your CEO letter. The takeaway was in the eye of the beholder, like Jamie is really worried about a recession this year. Now he's not. So, the first question certainly ties into the second. So Jeremy, plan for buybacks, stopping at asset cap? And then, Jamie, your view of the broader economies and that feeds into your expectations for capital growth. Thank you.

Okay, Mike. So, let me take this capital one. So first, let's not talk about asset caps. That's just not a meaningful thing. I think that's a distraction, and the terminology is unhelpful. Then, in terms of the leverage ratio, just remember that the denominator of that number is so big that it actually takes pretty big moves to move the ratio. So, 5.20 is actually still pretty far away from 5%. And of course, there are relatively easy to use tools to address that as well as was alluded to earlier. In addition, I do think it's worth just reminding everyone of how the ERI restrictions work now relative to how they were at the beginning of the crisis. Just briefly, remember that based on the redefinition, if you drop into the regulatory buffer zone, you're subject to a 60% restriction, which based on our recent historical net income generation still gives us ample, ample capacity to pay the dividend and so on. So, it's obviously not part of the plan, but it's just worth remembering that the cliff effects that we had in there at the beginning of the pandemic are no longer there. And then, in terms of buybacks, just a reminder that the $30 billion authorization is a nontime-bounded SEC requirement. It's not the old CCAR standard. So, it's just a signal that we want to have that capacity and that flexibility. But it doesn't really say that much about how much we're actually planning to do in the near term.

Can you share what your near-term plans are? If you're currently operating at about half the level of last year, do you think you'll be able to maintain that, or is there a risk of slowing down, or are you not providing guidance?

Yes. Let's talk about buybacks for a second. So in the kind of post-SCB world, we haven't been guiding a lot on the pace of buybacks, mainly because, as you know, they're at the bottom of our capital stack. So, we're focused on investing in the business, providing capital to support growing RWA, acquisitions when they make sense, et cetera, et cetera. And buybacks are an output. As we've discussed, in the current environment, the rate of buybacks is clearly going to be less than it was in the 2021 period as a result of the interaction of all those effects. And that's a good thing. It means that we have better uses for the capital. And if things evolve one way or the other, then the rate of buybacks will be an output, but it's one of the tools in the toolkit.

Mike, I just want to emphasize that our liquidity and capital situation is exceptional. We aim to avoid having unnecessary buffers, so we'll manage this carefully over time. While we have to consider AOCI, earnings, and CECL, we can navigate through these factors. We've made several acquisitions this year and are planning for more capital in light of the anticipated increase in G-SIFI down the line, which will lead to reduced stock buybacks. However, when I assess our liquidity, earnings, and capital, those are the critical elements. Ultimately, our focus is on driving customer satisfaction, as that is our core mission. We don't primarily focus on managing SLR; that is just a byproduct of our activities. By the way, could you please repeat your question regarding the recession?

Yes. I mean, if you read your CEO letter, that's great. You're identifying all the concerns that keep you up at night, which is important. You can interpret it two ways: one suggesting that Jamie and JPMorgan are anticipating a recession this year, and another indicating that while things seem fine, there are some risks to consider. So, do you think, as Glenn mentioned, your perspective is more informed than mine? You have access to more people and resources. Based on everything you know, do you think the U.S. will experience a recession this year?

I don't have a specific forecast, but I want to raise a question. I can't predict the future more than anyone else can. The Fed and others have failed to accurately forecast, and I believe that's a mistake. Our company is focused on serving clients regardless of the circumstances, acknowledging that there will be both good and bad times. We expect fluctuations, but currently, there's strong underlying growth that I highlighted in my letter. This growth is unstoppable; consumers still have money, they've been paying down credit card debt, and while consumer confidence might not be high, they are spending from their savings, which amount to $2 trillion. Businesses are doing well, home prices are increasing, and credit conditions are very favorable. This positive trend is likely to continue into the next quarters. However, it’s difficult to make predictions beyond that point because there are significant opposing factors to consider. One is inflation and the effects of quantitative easing and tightening, which are unprecedented. These factors represent potential challenges that could produce volatility and widespread concerns. The second is the war in Ukraine. Generally, wars do not have immediate global economic impacts, but this situation might be an exception. I’m not viewing this through a static lens. The unpredictability of war, including its consequences, and the current instability in oil markets are significant concerns. I've repeatedly emphasized that these factors can shift dramatically due to various reasons. We're aware of these challenges and ready to face them, but I cannot predict their outcomes. I hope for a soft landing where everything resolves favorably. Our board is committed, but I wouldn't count on it entirely. As a risk manager, we are prepared to navigate these situations, continue serving our clients, and increase our market share while achieving strong returns on capital as we have historically.

Next one is from Matthew O'Connor from Deutsche Bank. Please go ahead.

I was hoping you could comment on the articles regarding nickel exposure and how the losses could have been significant if the trades hadn't been canceled and the actions that were taken. As a follow-up, you've mentioned reevaluating this business and the outsized risks involved; could you provide us with an update on that process?

We've already told you, we're helping our clients get through this. We had a little bit lost this quarter but we manage through it. We’ll do postmortems on both what we think we did wrong and what the LME could do differently later. We're not going to do it now.

And then, I guess, I mean, more broadly speaking, given what we just saw where it was probably a several standard deviation event and kind of, as you mentioned, markets might do more of these unusual things. Like, does it make you step back and look at other portfolios, other businesses and try to...

In my life, I've seen so many 10 standard deviation events. Obviously, we're aware of that all the time in everything we do.

I would like to add to that. I believe it's overly simplistic to label it a 10 standard deviation event. We understand that returns do not follow a normal distribution, and this is recognized by regulators as well. The capital framework accounts for this in various ways, including stress testing. While it is impossible to predict the specific asset class or moment when these extreme events will occur, the framework acknowledges this reality in multiple respects. This is part of how we approach risk management.

We conduct the Comprehensive Capital Analysis and Review annually, but we perform various stress tests every week to account for extreme movements. While there may be unexpected surprises, we remain aware of the associated risks. We analyze all events, including those where we may have misjudged our position. Ultimately, our goal across all our businesses is to serve our clients consistently, which requires us to take rational, thoughtful, and disciplined risks.

And then, just separately, you had mentioned earlier that you weren't looking to deploy large amounts of your liquidity. And I guess, the question is, you might get the rate benefit just from Fed funds going up, but is there an opportunity to accelerate that benefit just by moving some cash into shorter-term treasuries? We've also seen a big move in...

We are considering that interest rates might rise more than 3%. With convexity and AOCI both increasing, there are various reasons to avoid that approach. We won't make changes merely to increase net interest income in the next quarter.

Yes. Matthew, to delve a bit deeper, regarding deployment, as Jamie mentioned, we will always pursue relative value opportunities within the portfolio. With mortgage spreads having widened, there are interesting possibilities to explore. Therefore, we frequently shift cash into various types of spread products that appear more attractive. Concerning the overarching question of acquiring duration, as Jamie pointed out, our balance sheets have extended slightly. However, we didn't plan to do a significant amount of that. Given the timing and anticipated pace of the rate hikes, it increasingly seems less consequential. It's important to keep this perspective in mind.

The next question is coming from Jim Mitchell from Seaport Global Securities. Please go ahead.

Maybe you could just talk about how you're thinking about the trajectory of loan growth from here, where you're seeing the biggest pockets of strength? And specifically in cards, is the significant year-over-year growth driven more by slowing paydowns, or is that increasing demand or a combination of both? Thanks.

Yes, sure. So, you'll remember in the fourth quarter that we talked about the outlook based on sort of high single-digit loan growth for the year. And this quarter, we've roughly seen that. Interestingly, it's a little bit more driven by Wholesale this quarter, which sort of brings us to your question of card. So overall card loan growth is reasonably robust when you adjust for seasonality and so on. And that's really primarily driven by spend, which, as you know, is very robust. The question inside of that is then what's going on with revolve. And I think our core revolve thesis of getting back to the pre-pandemic levels of revolving balances by the end of the year is still in place to a good approximation. At the margin, we probably saw the like takeoff moment delayed by 6 weeks or so because of Omicron. But some of that's reaccelerating now. We see that in some of the March numbers. So, we'll see how it goes. But also just a reminder that there's a very, very close linkage between what we see in revolve and what we see in charge-offs. And so, in the moments where revolve is lagging potentially, certainly that was true throughout the pandemic period relative to what we thought. We also saw exceptionally low charge-offs. So, on a bottom line basis, the run rate performance, there's significant offset there. But the core thesis is still there. Spend is robust. We are seeing spend down some of the cash buffers in the customer segment that tends to revolve. So, more or less as anticipated, I would say.

Okay. Regarding trading, it was clearly a stronger quarter, and it seems to have ended well in March. Can you confirm that? Are you expecting more volatility from the Fed's actions in quantitative tightening? Should we consider that this year might perform better than normal? How are you approaching trading in the future?

Yes. I mean, you know that we're going to be reluctant to like predict the next three quarters of trading performance.

I could try.

Yes, obviously, yes. But just to your point about normalization, right? We've been saying that, of course, we expect some normalization. The question is, if you define normalization as a return to kind of like 2019-type trading run rate levels, we never expected that because there's been a bunch of organic growth in the background, some share gains. And we had said that as we emerge from the pandemic and monetary policy normalized, that was going to add volatility to the markets and that with any luck and good risk management, that would net-net help a little bit mitigate what we might otherwise expect in terms of the drop from the very elevated levels that we saw during the pandemic. So, obviously, there are some particular things that played out this quarter, but one of those was more volatile rate market, and that helps a little bit. So yes, all else equal, the much more dynamic environment right now would mute the normalization you would see otherwise. But our core case is still that the pandemic year period market's performance was is not repeatable.

And I'll just add to that. I cannot foresee any scenario at all where you're not going to have a lot of volatility in markets going forward. We've already spoken about the enormous strength of the economy, QT, inflation, war, commodity prices, there's almost no chance that you want to have volatile markets. That could be good or bad for trading, but some change won't happen. And I think people should be prepared for that.

The next one is from Ebrahim Poonawala from Bank of America Merrill Lynch. Please go ahead.

I guess just one more question on the macro outlook. I guess we can debate whether or not we get into a recession over the next year. But Jamie, would love to hear your thoughts around as we think about just the medium term, do you see a better CapEx cycle for the U.S. economy? We've heard a lot about reshoring, labor productivity, how companies are dealing with it. Just given the lens you have in terms of large corporate middle market customers, do you see some pent-up demand for CapEx spending that's going to be a big driver of growth, maybe not for the next six months, but as we think about the medium term, next few years?

Yes, in general because as people are spending money and you need to produce more goods and all that, yes, and generally see CapEx going up. And I forgot the exact number. You better off looking at our great accounting forecast than asking me. And we see in the borrowing a little bit...

Yes, we do see pretty nice loan growth in the commercial bank. I mean, there are a bunch of different factors there, could be some inventory effects and so on, but we'll see. But yes.

And just on that front, like have you seen any improvement in supply chains? And how big a setback was the Russia war to supply chain improvements?

It's very hard to tell. There was some improvement and then there was Ukraine. And now, it's all mixed again. So, it's hard to tell.

Got it. And just one follow-up around you launched the UK digital bank last month. Any early wins in terms of how that's playing out? Any perspective on what the markets are as we think about how that strategy plays out? I'm sure you're going to talk about that at Investor Day, but just wondering any early thoughts.

We'll leave that to Investor Day.

And the next question is coming from Erika Najarian from UBS. Please go ahead.

Hi. Good morning. My questions have been asked and answered. I'll see you guys at Investor Day.

All right. Thanks, Erika.

And there are no further questions in the queue.

Well, thank you very much.

Thanks very much.

See you, I guess, at Investor Day.

May 23rd.

Okay. Goodbye.

Thank you so much, everyone. That marks the end of our conference call for today. You may now disconnect. Thank you for joining, and you can enjoy the rest of your day.