Good morning ladies and gentlemen. Welcome to JPMorgan Chase's Second Quarter 2024 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. The presentation is available on JPMorgan Chase's website and please refer to the disclaimer in the back concerning forward-looking statements. Please stand by. At this time I would like to turn the call over to JPMorgan Chase's Chief Financial Officer Jeremy Barnum. Mr. Barnum, please go ahead.

Thank you and good morning everyone. Starting on Page one, the firm reported net income of $18.1 billion, EPS of $6.12 on revenue of $51 billion with an ROTCE of 28%. These results included the $7.9 billion net gain related to Visa shares and the $1 billion foundation contribution of the appreciated Visa stock. Also included is $546 million of net investment securities losses in corporate. Excluding these items, the firm had net income of $13.1 billion, EPS of $4.40, and an ROTCE of 20%. Touching on a couple of highlights, in the CIB, IB fees were up 50% year-on-year and 17% quarter-on-quarter, and market revenue was up 10% year-on-year. In CCB, we had a record number of first-time investors and strong customer acquisition across checking accounts and card, and we've continued to see strong net inflows across AWM. Now before I get more detail on the results I just want to mention that starting this quarter we are no longer explicitly calling out the First Republic contribution in the presentation. Going forward, we'll only specifically call it out if it is a meaningful driver in the year-on-year comparison. As a reminder, we acquired First Republic in May of last year, so the prior year quarter only has two months of First Republic results compared to the full three months this quarter. Also in the prior year quarter most of the expenses were in corporate whereas now they are primarily in the relevant line-of-business. Now turning to Page 2 for the firm-wide results. The firm reported revenue of $51 billion, up $8.6 billion, or 20% year-on-year. Excluding both the Visa gain that I mentioned earlier, as well as last year's First Republic bargain purchase gain of $2.7 billion, revenue of $43.1 billion was up $3.4 billion or 9%. NII ex-Markets was up $568 million or 3%, driven by the impact of balance sheet mix and higher rates, higher revolving balances in card, and the additional month of First Republic related NII, partially offset by deposit margin compression and lower deposit balances. NIR ex-Markets was up $7.3 billion or 56%. Excluding the items I just mentioned, it was up $2.1 billion or 21%, largely driven by higher investment banking revenue and asset management fees. Both periods included net investment securities losses. And markets revenue was up $731 million or 10% year-on-year. Expenses of $23.7 billion were up $2.9 billion or 14% year-on-year. Excluding the foundation contribution I previously mentioned, expenses were up 9% primarily driven by compensation including revenue related compensation and growth in employees. And credit costs were $3.1 billion reflecting net charge-offs of $2.2 billion and a net reserve build of $821 million. Net charge-offs were up $820 million year-on-year, predominantly driven by Card. The net reserve build included $609 million in consumer and $189 million in wholesale. Onto balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15.3% up 30 basis points versus the prior quarter, primarily driven by net income, largely offset by capital distributions and higher RWA. As you know, we completed CCAR a couple of weeks ago and have already disclosed a number of the key points. Let me summarize them again here. Our preliminary SCB is 3.3%, although the final SCB could be higher. The preliminary SCB, which is up from the current requirement of 2.9%, results in a 12.3% standardized CET1 ratio requirement, which goes into effect in the fourth quarter of 2024. And finally the firm announced that the Board intends to increase the quarterly common stock dividend from $1.15 to $1.25 per share in the third quarter of 2024. Now, let's go to our businesses, starting with CCB on Page 4. CCB reported net income of $4.2 billion on revenue of $17.7 billion, which was up 3% year-on-year. In banking and wealth management, revenue was down 5% year-on-year, reflecting lower deposits and deposit margin compression, partially offset by growth in wealth management revenue. Average deposits were down 7% year-on-year and 1% quarter-on-quarter. Client investment assets were up 14% year-on-year, predominantly driven by market performance. In home lending, revenue of $1.3 billion was up 31% year-on-year, predominantly driven by higher NII, including one additional month of the First Republic portfolio. Turning to Card services and Auto, revenue was up 14% year-on-year, predominantly driven by higher Card NII and higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10.8 billion, down 10% coming off strong originations from a year ago, while continuing to maintain healthy margins. Expenses of $9.4 billion were up 13% year-on-year, predominantly driven by First Republic expenses now reflected in the lines-of-business, as I mentioned earlier, as well as field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $2.6 billion reflecting net charge-offs of $2.1 billion up $813 million year-on-year, predominantly driven by Card, as newer vintages season and credit normalization continues. The net reserve build was $579 million, also driven by Card, due to loan growth and updates to certain macroeconomic variables. Next, the Commercial and Investment Bank on Page 5. Our new Commercial and Investment Bank reported net income of $5.9 billion on revenue of $17.9 billion. You'll note that we are disclosing revenue by business, as well as breaking down the banking and payments revenue by client coverage segment in order to best highlight the relevant trends in both important dimensions of the wholesale franchise. This quarter, IB fees were up 50% year-on-year, and we ranked Number 1 with year-to-date wallet share of 9.5%. And advisory, fees were up 45%, primarily driven by the closing of a few large deals in the week prior year quarter. Underwriting fees were up meaningfully with equity up 56% and debt up 51%, benefiting from favorable market conditions. In terms of the outlook, we're pleased with both the year-on-year and sequential improvement in the quarter. We remain cautiously optimistic about the pipeline, although many of the same headwinds are still in effect. It's also worth noting that pull-forward refinancing activity was a meaningful contributor to the strong performance in the first half of the year. Payments revenue was $4.5 billion, down 4% year-on-year, as deposit margin compression and higher deposit related client credits were largely offset by fee growth. Moving to markets, total revenue was $7.8 billion, up 10% year-on-year. Fixed income was up 5% with continued strength in securitized products. And equity markets was up 21%, with equity derivatives up on improved client activity. We saw record revenue in Prime on growth and client balances amid supportive equity market levels. Security services revenue of $1.3 billion was up 3% year-on-year, driven by higher volumes and market levels, largely offset by deposit margin compression. Expenses of $9.2 billion were up 12% year-on-year, largely driven by higher revenue related compensation, legal expense, and volume related non-compensation expense. In banking and payments, average loans were up 2% year-on-year due to the impact of the First Republic acquisition and flat sequentially. Demand for new loans remains muted as middle market and large corporate clients remain somewhat cautious due to the economic environment, and revolver utilization continues to be below pre-pandemic levels. Also, capital markets are open and are providing an alternative to traditional bank lending for these clients. In CRE, higher rates continue to suppress both loan origination and payoff activity. Average client deposits were up 2% year-on-year and relatively flat sequentially. Finally, credit costs were $384 million. The net reserve build of $220 million was primarily driven by incorporating the First Republic portfolio in the firm's modeled approach. Net charge-offs were $164 million, of which about half was in office. Then to complete our lines-of-business, AWM on Page 6. Asset and wealth management reported net income of $1.3 billion with a pre-tax margin of 32%. Revenue of $5.3 billion was up 6% year-on-year, driven by growth in management fees on higher average market levels and strong net inflows, as well as higher brokerage activity, largely offset by deposit margin compression. Expenses of $3.5 billion were up 12% year-on-year, largely driven by higher compensation, primarily revenue-related compensation, and continued growth in our private banking advisor teams. For the quarter, long-term net inflows were $52 billion, led by equities and fixed income. And in liquidity, we saw net inflows of $16 billion. AUM of $3.7 trillion was up 15% year-on-year. And client assets of $5.4 trillion were up 18% year-on-year, driven by higher market levels and continued net inflows. And finally, loans and deposits were both flat quarter-on-quarter. Turning to corporate on Page 7. Corporate reported net income of $6.8 billion on revenue of $10.1 billion. Excluding this quarter's Visa-related gain and the First Republic bargain purchase gain in the prior year, NIR was up approximately $450 million year-on-year. NII was up $626 million year-on-year, driven by the impact of balance sheet mix and higher rates. Expenses of $1.6 billion were up $427 million year-on-year, excluding foundation contribution expenses were down $573 million year-on-year, largely as a result of moving First Republic related expense out of corporate into the relevant segments. To finish up, we have the outlook on Page 8. Our 2024 guidance, including the drivers, remains unchanged from what we said at Investor Day. We continue to expect NII and NII ex-markets of approximately $91 billion, adjusted expense of about $92 billion, and on credit, Card net charge-off rate of approximately 3.4%. So to wrap up, the reported performance for the quarter was exceptional and actually represents record revenue and net income. But more importantly, after excluding the significant items, the underlying performance continues to be quite strong. And as always, we remain focused on continuing to execute with discipline. And with that, let's open the line for Q&A.

For our first question, we'll go to the line of Steven Chubak from Wolfe Research. Please go ahead.

Hi. Good morning, Jeremy.

Good morning Steve.

So, I wanted to start off with a question on capital. Just given some indications that the Fed is considering favorable revisions to both Basel III endgame and the GSIB surcharge calculations, which I know you've been pushing for some time. As you evaluate just different capital scenarios, are these revisions material enough where they could support a higher normalized ROTCE at the Firm versus a 17% target? And if so, just how that might impact or inform your appetite for buybacks going forward?

Thanks, Steve. Before I answer your question, I want to mention that Jamie is unable to join us today due to a travel conflict overseas, so it will just be me. Regarding the ROTCE question, my answer is no. I find it difficult to envision a situation where the potential capital outcomes would lead to an increase in ROTCE. As we have stated previously, before the Basel III endgame proposal, we set a 17% through-cycle target, and most of the possible outcomes would involve expansions of the denominator. While we are still considering changes to the perimeter and repricing, those would primarily serve as mitigants rather than factors that would actually raise ROTCE. This perspective hasn't changed. Moving on, we've been following the same press coverage as you, and while it’s interesting to speculate about potential outcomes, we lack reliable information about the press coverage itself. Therefore, in terms of our overall capital return and buyback strategy, not much has shifted from what I explained at Investor Day or what Jamie discussed afterward at an industry conference. To summarize our viewpoint, we acknowledge that our current capital return and buyback practices do lead to an increasing CET1 ratio. However, we will manage the company over the cycle to maintain a reasonable CET1 ratio with adequate buffers. Once the uncertainties are resolved, the question of capital deployment becomes a timing issue rather than a matter of if. Regarding our capital hierarchy, this remains unchanged; we prioritize organic and inorganic growth, a sustainable dividend—which includes the Board's intention to raise it to $1.25, reflecting a 19% increase from last year as a sign of our performance—and finally buybacks. This hierarchy does not obligate us to return 100% of capital generation in any quarter. Currently, considering the opportunity cost of not deploying capital versus external deployment opportunities, it is challenging to envision a scenario that argues more strongly for immediate action. In conclusion, I apologize for the lengthy answer, but we feel comfortable with our current level of excess capital, and as Jamie mentioned, we continue to view this as earnings in store.

No need to apologize, Jeremy. That was a really helpful perspective. Maybe just for my follow-up on NII. You've been very consistent just in flagging the risk related to NII over earning, especially in light of potential deposit attrition, as well as repricing headwinds. In the second quarter, we did see at least some moderation in repricing pressures. Deposit balances were also more resilient in what's a seasonally weak quarter for deposit growth. So just given the evidence that some deposit pressures appear to be abating. Do you see the potential for NII normalizing higher? And where do you think that level could ultimately be in terms of stabilization?

Yes. Interesting question, Steve. So let's talk about deposit balances. So yes I see your point about how balance pressures are slightly abating. When you look at the system as a whole, just to go through it, Q2 is still a bit of a headwind. Loan growth is modest and not enough to offset that. And RRP seems to have settled in roughly at its current levels, and there are reasons to believe that it might not go down that much more, although that could always change and that could supply extra reserves into the system. But on balance, net across all those various effects, we still think that there are net headwinds to deposit balances. So when we think of our balance outlook, we see it as flat to slightly down maybe, with our sort of market share and growth ambitions offsetting those system-wide headwinds. So in terms of normalizing higher, I guess it depends on relative to what. But I think it is definitely too early to be sort of calling the end of the over earning narrative or the normalization narrative. Clearly, the main difference in our current guidance relative to what we had earlier in the year, which implied a lot more sequential decline, is just the change in the Fed outlook. So two cuts versus six cuts is the main difference there. But obviously, based on the latest completion data and so on, you could usually get back to a situation with a lot more cuts in the yield curve. So we'll see how it goes. And in the end, we are kind of focused on just running the place, recognizing and trying not to be distracted by what remains some amount of over earning, whatever it is.

Understood, Jeremy. Thanks so much for taking my questions.

Thanks Steve.

Next, we'll go to the line of Saul Martinez from HSBC. Please go ahead.

Hi, good morning. Thanks for taking my question. Jeremy, can you give an update on the stress capital buffer? You noted, obviously, that you think there is an error in the Fed’s calculation due to OCI. Can you just give us a sense of what the dialogue with the Fed looks like? Is there a process to modify the SCB higher? And if you could give us a sense of what that process looks like.

I'm not going to comment on any conversations with the Fed, and I won't confirm or deny their existence as that information is private. Regarding the timing, the stress capital buffer that was released at 3.3% is a preliminary figure. The Fed is required to release it by August 31, but it could come sooner. You mentioned an error in the calculation, but we haven't characterized it that way. What we believe is that the amount of OCI gain in the Fed’s disclosed results appeared to be unusually high. If adjusted in ways we consider reasonable, it could result in a slightly higher stress capital buffer. Whether the Fed agrees to make that change is up to them, and we will see how it unfolds. Looking at the industry overall, there is significant volatility in the year-on-year changes in the stress capital buffer for many firms. This underscores what we have said repeatedly over the years: the process is volatile and lacks transparency, making it challenging to manage a bank's capital. It leads to excessively high management buffers, and we believe this approach is not effective.

Okay, that’s helpful. I’m following up on capital returns related to Steve's question. You indicated that it's a matter of timing rather than feasibility. Although Jamie isn't present, it seems there hasn't been much enthusiasm for a special dividend or buybacks given current valuations. Can you share your thoughts on the available options? Do you have any update on the special dividend? Is it possible to consider a significant increase in your dividend payout, potentially as a step function increase, while keeping it flat and gradually growing into that? Could you provide some insight into how you envision deploying that capital?

Yes, I would recommend looking at Jamie's comments from the industry conference you attended the week after Investor Day. He provided a good amount of detail on this topic, specifically mentioning that a special dividend isn't really a preference for us. Many of our investors do not find it particularly appealing, and he indicated that it wouldn't be our first choice. The main point is that there are several options available to us, which are part of our capital hierarchy. Our primary focus is on deploying capital for organic or inorganic growth. Regarding the dividend, we aim to keep it sustainable, even in stress conditions, which continues to guide our thinking. After that, we consider buybacks. Jamie has consistently highlighted the importance of price, buybacks, and valuation in his messages to shareholders over the past decade. So, those are the various options we are considering.

Okay, great. Thanks a lot.

Thanks Saul.

Next, we'll go to the line of Ken Usdin from Jefferies. Please go ahead.

Thanks a lot. Good morning Jeremy. Jeremy, great to see the progress on investment banking fees, up sequentially and 50% year-over-year. And I saw you on the tape earlier just talking about still regulatory concerns a little bit in the advisory space. And we clearly didn't see the debt pull-forward play through, because DCM was great again. I'm just wondering just where you feel the environment is relative to the potential. And just where the dialogue is across the three main bucket areas in terms of like how does this feel in terms of current environment versus a potential environment that we could still see ahead? Thanks.

Yes. Thanks, Ken. It's progress, right? I mean we are happy to see the progress. People have been talking about depressed banking fee wallet for some time, and it's nice to see not only the year-on-year pop on the low base, but also a nice sequential improvement. So that's the first thing to say. In terms of dialogue and engagement, it's definitely elevated. So as the dialogue on ECM is elevated and the dialogue on M&A is quite robust as well. So all of those are good things that encourage us and make us hopeful that we could be seeing sort of a better trend in this space. But there are some important caveats. So on the DCM side, yes, we made pull-forward comments in the first quarter, but we still feel that this second quarter still reflects a bunch of pull forward, and therefore we are reasonably cautious about the second half of the year. Importantly, a lot of the activity is refinancing activity as opposed to for example, acquisition finance. So the fact that M&A remains still relatively muted in terms of actual deals has knock-on effects on DCM as well. And when a higher percentage of the wallet is refi, then the pull-forward risk becomes a little bit higher. On ECM, if you look at it kind of at remove, you might ask the question, given the performance of the overall indices, you would think it would be a really booming environment for IPOs, for example. And while it's improving, it's not quite as good as you would otherwise expect. And that's driven by a variety of factors, including the fact that as has been widely discussed, that extent to which the performance of the large industries is driven by like a few stocks, the sort of mid-cap tech growth space and other spaces that would typically be driving IPOs have had much more muted performance. Also, a lot of the private capital that was raised a couple of years ago was raised at pretty high valuations. And so in some cases, people looking at IPOs could be looking at down rounds, that's an issue. And while secondary market performance of IPOs has improved meaningfully, in some cases, people still have concerns about that. So those are a little bit of overhang on that space. I think we can hope that, over time that fades away and the trend gets a bit more robust. And yes, on the advisory side, the regulatory overhang is there, remains there. And so we'll just have to see how that plays out.

Thank you, Jeremy. I have a question about the consumer segment. Are you seeing any trends regarding consumers who have been waiting for stabilization in credit card delinquency? Your loss rates are in line with expectations, and we noticed that 30-day delinquencies remained flat while 90-day delinquencies decreased slightly. Is this a seasonal trend, or does it indicate a positive change? I appreciate your thoughts on this. Thank you.

I believe that regarding credit card charge-offs and delinquencies, there isn’t much to report. It’s more a case of normalization rather than deterioration, and it aligns with our expectations. We analyze the cohorts closely, especially the income segments. When examining spending patterns, we notice some evidence of slight weaknesses in the lower income groups, as they shift spending from discretionary to non-discretionary purchases. However, these effects are quite subtle and generally consistent with the current economic conditions. Although the economy is robust and stronger than many predicted given the tight monetary conditions we’ve experienced over the past couple of years, we are observing slightly higher unemployment and moderating GDP growth. Therefore, it’s not entirely unexpected to see a small amount of weakness in certain spending areas. Overall, the situation is rather uneventful.

Thank you.

Thanks Ken.

Next, we'll go to the line of Glenn Schorr from Evercore ISI. Please go ahead.

Hi, thanks very much. So Jeremy, the discussions so far around private credit and you all, your recent comments have been the ability to add on balance sheet and compete when you need to compete on the private credit front. I do think that most of the discussion has been about the direct-lending component. So I'm curious if you are showing more progress and activity on that front. And then very importantly, do you see the same trend happening on the asset-backed finance side, because that's a bigger part of the world, and it is a bigger part of your business? So I'd appreciate your thoughts there. Thanks.

Thank you, Glenn. Regarding private credit, there's not much new to report. The environment is changing slightly, as many funds have been raised in private credit seeking opportunities. Currently, there's a lot of capital competing for a limited number of deals, making the market a bit quieter than it has been. It's also noteworthy that certain lender protections traditionally found in syndicated lending are starting to appear in the private market, indicating that even there, these safeguards are becoming important. This aligns with our belief in the convergence of direct lending and syndicated lending, which supports our strategy of providing top-notch service across the spectrum, including in secondary market trading. While we remain optimistic about our offerings, the current quieter environment may not be ideal for assessing our increased activity in this space. Regarding asset-backed financing, you previously asked about this trend, and I noted I hadn’t seen much change; that remains true. However, there may be aspects I am overlooking, so I can look into this further, and perhaps we can discuss it.

That's good for you if you're not hearing much about it, so we can leave it at that. Perhaps just one quick follow-up regarding your overall approach. You were patient and strategic when rates were low and waited to deploy, which turned out well. We know that story. Now it appears you have a lot of excess liquidity and are being patient while rates are high. I'm interested in how you determine what triggers you are looking for in the market to decide if and when you would extend duration.

We have actually increased our duration slightly over the past few quarters, though more so last quarter than this one. I would advise against reading too much into our reported cash balances and balance sheet and concluding that there is much we need to change about our duration strategy. It’s clear that we have been very sensitive to asset changes during this rate hike cycle, resulting in significant excess net interest income in the short term. When assessing the fund's overall sensitivity to rates, we consider various factors, including EAR type metrics, short-term net interest rate sensitivity, and different scenario analyses, especially regarding capital impacts from rising rates. As Jamie has mentioned several times, we aim to maintain a balanced approach. With the inverted yield curve, extending duration from current levels doesn’t equate to walking into a 5.5% rate. In fact, the forward rates aren’t particularly attractive considering our views on structural upward pressures on inflation and other factors. Therefore, at this moment, a significant change in our duration strategy is not top of mind for us.

Super, helpful. Thanks so much for that.

Thanks Glenn.

Next, we'll go to the line of Matt O'Connor from Deutsche Bank. Please go ahead.

Good morning. I was just wondering if you can elaborate on essentially the math behind the ROTCE being too high at 20% and normalized at 17%. Obviously, you've pointed to over-earning NII. And I guess the question is, is that all of it to go from 20% to 17%? And if so, is that all consumer deposit costs? Or are there a few other components that you could help frame for us?

Sure. Good question, Matt. I think of it in a couple of ways. Our returns are somewhat seasonal, so when you create a full year forecast and consider the fourth quarter, it's essential to evaluate returns on an annual basis rather than focusing solely on quarterly numbers, while also removing any one-time items. In that sense, the figure for this year will still be above 17%. One reason for the headwinds is the normalization of the net interest income, primarily due to expected higher deposit costs, which we've discussed. Additionally, there are yield curve effects, and some adjustments will occur there over time. Generally, if you develop a comprehensive model for the company, you would see expenses growing and revenues increasing at a rate close to organic GDP growth—possibly a bit higher—with expenses rising at a slightly lower rate, leading to a relatively stable overhead ratio. However, even if the normalization of net interest income turns out to be lower than we had previously anticipated, we still need to normalize the overhead ratio. Despite our stringent expense management discipline, inflation is still present, and we are making necessary investments. Consequently, there will be higher expenses in a slightly flatter revenue environment due to the normalization of net interest income. Lastly, regardless of the final decisions on Basel III and other aspects, we should expect some degree of expansion of the denominator based on current knowledge. Any of these elements could vary, but this is the reasoning behind our 17%. The various scenarios presented in my Investor Day presentation illustrate these dynamics and how much the outcomes could fluctuate based on the economic environment and other factors.

Yes. That was a really helpful chart. Just one follow-up. On the yield curve effects, I guess, what do you mean by that? Because right now, the yield curve is inverted, maybe you're still leaving any impact of that. But kind of longer-term, you'd expect a little bit of steepness of the curve, which I would think would help. But what does you mean by that? Thank you.

Yes. I mean we’ve discussed this before. I don’t really agree with the idea that the steepness of the yield curve, beyond what’s priced in by the forwards, serves as a source of structural net interest income or net interest margin for banks. Different people have varying opinions on the term premium. In this period of an inverted curve and changing treasury supply dynamics, those views may be shifting. However, we observed that when rates were at zero and the 10-year note was below 2%, many individuals were tempted to attempt to obtain extra net interest margin and net interest income by significantly extending duration. But when the steepness of the curve is influenced by expectations of aggressive Fed tightening, it becomes more of a timing issue and could lead to challenges from a capital perspective and others. There are intriguing questions about whether fiscal dynamics could eventually create a structurally steeper yield curve and if earning the term premium could be a source of net interest income, but I find that a bit speculative at this stage.

Got it. Okay, thank you for the details.

Thanks Matt.

Next, we'll go to the line of Mike Mayo from Wells Fargo Securities. Please go ahead.

Hi. Jeremy, you said it's too early to end the over earning narrative, and you highlighted higher deposit costs and the impact of lower rates and lower NII and DCM pull-forward and credit cost going higher. Anything I'm missing on that list? And what would cause you to end the over earning narrative?

No. Actually, I think that is the right list Mike. I mean, frankly, I think one thing that would end to be over earning narrative is if our annual returns were closer to 17%. I mean to the extent that, that is the through-the-cycle number that we believe and that we are currently producing more than that, that's one very simple way to look at that. But the pieces of that or the pieces that you talked about and the single most important piece is the deposit margin. Our deposit margins are well above historical norms, and that is a big part of the reason that we still are emphasizing the over earning narrative.

You're 17% through-the-cycle ROTCE kind of expectation, what is the CET1 ratio that you assumed for that?

I mean we would generally assume requirements plus a reasonable buffer, which depending on the shape of rules, could be a little bit smaller or a little bit bigger. And the small part as a function of the volatility of those pools, which goes back to my prior comments on SCB and CCAR. But obviously, as you well know, what actually matters is less the ratio and more of the dollars. And at this point, the dollars are very much a function of where rules land and where the RWA lands, and obviously things like GSIB recalibration and so on. So we've done a bunch of scenario analysis along the lines of what I did at Investor Day that informs those numbers, but that is obviously one big element of uncertainty behind that 17%. Which is why at Investor Day, when we talked about it, both Daniel and I were quite specific about saying that we thought 17% was still achievable, assuming a reasonable outcome on the Basel III endgame.

Let me just zoom out for one more question on the return target. I mean when I asked Jamie at the 2013 Investor Day would it make sense to have 13.5% capital, he was basically telling you take a hike, right? And now you have 15.3% capital and you're saying, well, we might want to have a lot more capital here. I mean at some point, if you're spending $17 billion a year to improve the company, if you're gaining share with digital banking, if you're automating the back office, if you're moving ahead with AI, if you're doing all these things that I think you say others aren't doing, why wouldn't those returns go higher over time? Or do you just assume you'll be competing those benefits away? Thanks.

Yes. I mean, I think in short, Mike, and we've talked about this a lot and Jamie has talked about this a lot, it is a very, very, very competitive market. And we are very happy with our performance. We are very happy with the share we've taken. And 17% is like an amazing number actually. And like to be able to do that, given how robust the competition is from banks, from non-banks, from US banks, from foreign banks and all of the different businesses that we compete in, is something that we're really proud of. So the number has a range around it, obviously. So it's not a promise, it's not a guarantee and it can fluctuate. But we are very proud to be in the ballpark of being able to think that we can deliver it, again assuming a reasonable outcome on Basel III endgame. But it's a very, very, very competitive market across all of our products and services and regions.

All right. Thank you.

Next, we'll go to the line of Betsy Graseck from Morgan Stanley. Please go ahead.

Hi, Jeremy.

Hi, Betsy.

So I did want to ask one drill-down question on 2Q, and it is related to the dollar amount of buybacks that you did do. I think in the press release, right and the slide deck, it's $4.9 billion common stock net repurchases. So the question here is what's the governor for you on how much to do every quarter? And I mean I understand it is a function of okay, how much do we organically grow. But even with that, so you get the organic growth which you had some nice movement there. But you do the organic growth and then is it how much do we earn and we want to buy back our earnings? Or how should we be thinking about what that repurchase volume should be looking like over time? And I remember at Investor Day, the whole debate around I don't want to buy back my stock, but we are right? So I get this question from investors quite a bit of how should we be thinking about how you think about what the right amount is to be doing here?

That's a great question, Betsy. Let me break it down as best as I can. First, we have been clear in various communications, including our recent 10-Qs, that we won't provide guidance on buybacks. We'll buy back shares when it makes sense to us, and we reserve the right to change our approach at any time. While not everyone may agree with this, it's a philosophical stance I want to emphasize. Now, regarding your question about frameworks and guidelines, we believe it generally doesn't make sense to exit the market completely unless the circumstances are quite different from what they are now. If we need to build capital quickly for any reason, we've done that before, and we are always open to suspending buybacks entirely. However, we think a moderate level of buybacks is reasonable when generating the kind of capital we have. While we've been discussing a $2 billion pace, we are trying to move away from that concept, but that's where the idea originated. You mentioned the $4.9 million figure, which may seem random, but it stems from our significant item gains from Visa. With the acceptance of the exchange offer, we hold a substantial long position in Visa, a liquid large-cap financial stock that is closely linked to our own stock. Given that connection, we wondered why we should carry that position instead of buying back JPMorgan stock. Jamie spoke about using the proceeds from liquidating Visa to invest in JPMorgan, and that explains this quarter's higher figure. This aligns with my comments at our Investor Day about slightly increasing buybacks. Additionally, in response to Steve's question regarding buying back earnings, when we're generating substantial earnings with significant organic capital and in the absence of suitable deployment opportunities, while maintaining a sustainable dividend, we must consider returning capital. Otherwise, our CET1 ratio will continue to grow to levels that are unreasonably high and unnecessary, which we will need to address eventually. However, we don't feel that now is the appropriate time to do so.

Great. Thank you Jeremy. Appreciate it.

Thanks Betsy.

Next, we'll go to the line of Gerard Cassidy from RBC Capital Markets. Please go ahead.

Hi, Jeremy, how are you?

Hi, Gerard.

Jeremy, I know you mentioned deposits earlier in the call in response to a question. I noticed that the average balances for non-interest bearing deposits remained stable from quarter to quarter, unlike previous quarters where they had consistently declined. This is an area that investors are particularly interested in when it comes to the future of the net interest margin for you and your peers. Can you provide more insight into what you are observing with the non-interest-bearing deposit accounts? I understand this reflects averages and not period-end data, as the period-end figure may be lower. What trends are you seeing here?

Yes. Good question, Gerard. I have to be honest, I haven't focused on that particular sequential explain i.e., quarter-on-quarter change and average non-interest-bearing deposits. But I think the more important question is the big picture question, which is what do we expect? I mean how are we thinking about ongoing migration of non-interest-bearing into interest-bearing in the current environment, and how that affects our NII outlook and our expectation for weighted average rate paid on deposits. And the answer to that question is that we do continue to expect that migration to happen. So if you think about it in the wholesale space, you have a bunch of clients with some balances in non-interest-bearing accounts, and over time for a variety of reasons, we do see them moving those balances into interest-bearing. So we do continue to expect that migration to happen, and therefore, that will be a source of headwinds. And that migration sometimes happens internally, i.e., out of non-interest-bearing into interest-bearing or into CDs. Sometimes it goes into money markets or into investments, which is what we see happening in our Wealth Management business. And some of it does leave the company. But one of the things that we are encouraged by is the extent to which we are actually capturing a large portion of that yield-seeking flow through CDs and money market offerings, et cetera, across our various franchises. So big picture. I do think that migration out of non-interest-bearing into interest-bearing will continue to be a thing, and that is a contributor to the modest headwinds that we expect for NII right now. But yes I'll leave it at that, I guess.

Very good. As a follow-up, you've clearly discussed the charge-offs and delinquency levels in consumer credit cards. We all know about the commercial real estate office situation, and you've mentioned the over-earning in net interest income. One of the notable credit quality stories is the strength of the C&I portfolio, especially in this high-rate environment. Although your numbers remain quite low, in the Corporate and Investment Bank, there was a $500 million increase in non-accrual loans. Can you share what you're observing in the C&I sector? Are there any signs of weakness? I know your figures are still positive, but I’m trying to gauge what might happen over the next 12 months.

Yes, it's a good question. The short answer is no, we are not really seeing any early signs of issues in the C&I sector. I agree that the C&I charge-off rate has been very low for a long time. If I recall correctly, we highlighted this at last year's Investor Day. The C&I charge-off rate over the past 10 years has been nearly zero, which is clearly low by historical standards. We take pride in that figure as it reflects the discipline in our underwriting process and the strength of our credit culture across our bankers and risk team. However, we do not operate under a zero loss expectation, so some upward pressure on that rate is to be expected. Additionally, C&I numbers can be quite variable from quarter to quarter and specific to situations, so I do not believe the current quarter's results indicate anything broader, and I have not heard anyone internally suggest otherwise.

Great, appreciate the insights as always. Thank you.

Thanks Gerard.

Next, we'll go to the line of Erika Najarian from UBS. Please go ahead.

Hi, good morning. I just had one cleanup question, Jeremy. The consensus provision for 2024 is $10.7 billion. Could you maybe clarify for once and for all sort of Jamie's comments at an industry conference earlier and try to sort of triangulate if that $10.7 billion provision is appropriate for the growth level that you are planning for in Card?

Yes. Happy to clarify that. So Jamie's comments were that the allowance to build and the Card allowance, so we are talking about Card specifically, we expected something like $2 billion for the full year. As I sit here today, our expectation for that number is actually slightly higher, but it is in the ballpark. And I think in terms of what that means for the consensus on the overall allowance change for the year, last time I checked, it still looked a little low on that front. So who knows what it will actually wind up being, but that remains our view. One question that we've gotten is how to reconcile that build to the 12% growth in OS that we've talked about because it seems like a little bit high relative to what you would have otherwise assumed if you apply some sort of a standard coverage ratio to that growth. But the reason that's the case is essentially a combination of higher revolving mix as we continue to see some normalization revolve in that 12%, as well as seasoning of earlier vintages, which comes with slightly higher allowance per unit of OS growth.

Great. Thank you.

Thanks Erika.

And for our final question, we'll go to the line of Jim Mitchell from Seaport Global Securities. Please go ahead.

Hi, good morning. Maybe just one last question on sort of deploying excess capital. It seems like the two primary ways to do that organically would be through the trading book or the loan book. So maybe two questions there. One, trading assets were up 20% year-over-year. Is that you leaning into it or just a function of demand? And is there further opportunities to grow that? And then secondly outside of Cards, loan demand has been quite weak. And any thoughts from you on if you're seeing any change in demand or how you're thinking about loan demand going forward? Thanks.

Thanks, Jim. That's a good question. Yes, trading assets have increased. This is primarily due to client activity related to secured financing and similar transactions, which significantly impacts the balance sheet but carries low risk and low risk-weighted assets. While we're pleased to provide this financing to our clients and it reflects our commitment to serving them, it doesn't require much risk-weighted asset or capital. In regard to loan demand, unfortunately, I don’t have much new information. Loan demand is still quite low except in the Card segment. Our Card business isn't facing capital constraints, so we can pursue growth there in line with our customer base and risk appetite. We're more than willing to deploy capital there. However, we won't stretch ourselves in other lending sectors that don't fit our risk appetite or credit criteria, especially given the current environment with compressed spreads and pressured terms. There's always a need to balance capital deployment with a rational assessment of economic risk. This situation highlights the broader challenges we are facing. If there was ever a time to weigh the opportunity cost of not deploying capital against the attractiveness of external opportunities, it would be now, emphasizing the need for patience. This is an example of what I meant.

All right. Okay, great. Thanks.

Thanks Jim.

And we have no further questions.

Very good. Thank you, everyone. See you next quarter.

Thank you all for participating in today's conference. You may disconnect your line and enjoy the rest of your day.