Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's Fourth Quarter 2024 Earnings Call. This call is being recorded. We will now go live to the presentation. The presentation is available on JPMorgan Chase's website, please refer to the disclaimer in the back concerning forward-looking statements. 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.

Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year. I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion, and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up significantly, with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits increased by 9% compared to the previous year and by 5% from the last quarter, primarily due to growth in the client base. Credit costs totaled $61 million, impacted by net downgrade activities and charge-offs, somewhat mitigated by a reserve release following an update to certain loss assumptions. Turning to Asset & Wealth Management, the segment reported a net income of $1.5 billion with a pre-tax margin of 35%. Revenue reached $5.8 billion, up 13% year-on-year, mainly fueled by growth in management fees linked to higher average market levels and strong net inflows, along with increased performance fees. Expenses amounted to $3.8 billion, an 11% rise year-on-year, primarily due to higher compensation, including performance-related pay, and the expansion of our private banking advisor teams, as well as increased distribution fees. Long-term net inflows totaled $76 billion for the quarter, positive across all asset categories. In terms of liquidity, we experienced net inflows of $94 billion for the quarter and $140 billion for the full year. Client asset net inflows reached $468 billion for the year. Assets Under Management of $4 trillion and client assets of $5.9 trillion both increased by 18% year-on-year, bolstered by ongoing net inflows and heightened market levels. Finally, loans grew by 2% quarter-on-quarter and deposits increased by 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024, as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. For completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. Finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. Taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles; while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.

Good morning, everybody. I just want to point out that Daniel Pinto is not leaving the company yet. So, it's premature what I'm about to say, guys. I just wanted to say I'd be remiss not to say, here's a young man who joined the company at 20 years old in Argentina. He ran trading in Argentina, then he ran trading for Latin America, then he ran global emerging markets trading, then he ran fixed-income trading, and then became Co-Head of the Investment Bank and the sole Head of the Investment Bank for 10 years. Over that time, he helped build one of the great investment banks in the world. Also, he was President for five years or more, a great partner of mine, trusted by everyone at the company. So we're thrilled to have his skills and talents going forward, but I just wanted to recognize the contributions he made.

Great. All right. So let's go to questions.

Thank you. Please standby. Our first question comes from John McDonald with Truist Securities. You may proceed.

Hi, good morning. Jeremy, I wanted to ask about capital, and I know you get this question a lot about the kind of high-class dilemma of your growing capital base and your perspective of that as earnings in store. So I guess what's the framework for thinking about the opportunity cost of sitting on the growing base of capital and how high you might let that go versus your patience in waiting for more attractive deployment opportunities?

Yes, good question, John, and welcome back, by the way. So you've noted all the points that we always make, so I won't repeat them. I think the way we're thinking about it right now is that we feel very comfortable with the notion that it makes sense for us to have a nice store of extra capital in light of the current environment. We believe there's a good chance that there will be a moment where we get to deploy it at better levels than the current opportunities would suggest. That feels like a correct kind of strategic and financial decision for us. Having said that, we have concluded that we do have enough excess. Given that, we would like to not have the excess grow from here. So when you think about the implications of that, given the amount of organic capital generation that we're producing, it means that unless we find near-term opportunities for organic deployment, it means more capital return through buybacks, all else being equal in order to arrest the growth of excess. That is our current plan, although I'll give you the caveat that, as you know, is in our disclosure, we don't want to get in the business of guiding on buybacks and we reserve the right to change the trajectory at any time for any reason, but that is our current thinking.

Okay. Thanks, Jeremy. And then just as a follow-up, when we think about the investment spend agenda this year. How does it differ from, say, last year or the last couple of years across lines of business in this kind of certainty of return spectrum you've talked about? And then what kind of efficiencies are baked into the outlook as well? Thanks.

Sure. The truth is, and I guess this is a good thing that the themes are remarkably consistent. We are seeing the results of our kind of high-certainty investment choices across all the categories that you know very well and that we highlighted on the outlook page for expenses. Those continue to be the main areas of focus. The execution gets tweaked at the margin as we pursue different opportunities, in the CIB, we continue drilling down and analyzing into the relative pockets of weakness that you might see at lower levels below the significantly strong share positions. Daniel always talked about the reds and ambers that are behind the greens, and that's embedded in the culture of the company. We do that everywhere and continue analyzing and iterating and we throw resources against that stuff as we do that. Broadly, the themes were very consistent. In terms of efficiency, a couple of things to say, which you know well. One is, when we think about efficiency and how we've generated at this company, it's organic, BAU, evergreen; it happens every day in all the teams everywhere. That's part of the bottoms-up culture, and that remains the case. We do have a few top-down areas of focus. For example, we're putting a lot of effort into improving the ability of our software engineers to be productive in development and there's been a focus on the development environment for them to enable them to be more productive, which generates a little efficiency. We also have a lot of focus on the efficiency of our hardware utilization and that’s embedded in there as well. If you look at the headcount trajectory of the company over the last few years, we've grown a lot and it has contributed to our growth and our ability to run the company efficiently, but anytime you have that rate of headcount growth, you have to believe there has been some amount of inefficiency introduced. This year, as we went through the budget cycle, we asked people to try to support the growth of the company while living within their means on headcount, running things on roughly flat headcount that leads to internal efficiencies. The obvious exceptions are ongoing areas of high-certainty investment. So that's how we're thinking about efficiency.

Very helpful. Thank you.

Thank you. Next, we will go to the line of Mike Mayo from Wells Fargo Securities. You may proceed.

Hi. I have a simple question and a more complex one. Jamie, who will succeed you? My second question is related to what I asked at Investor Day: why not remain as CEO a bit longer? It seems like investors are indicating they want you to continue. Given that you’re finally achieving what you aimed for over 15 years concerning the regulatory landscape and the unpredictability of capital requirements, why not stick around a little longer if that’s what investors desire? What would you do instead? You don’t play golf, and you aren’t pursuing a role as Treasury Secretary. It appears that your work is your passion, so how much longer do you envision staying?

I do love what I do and answering the second question first. Look, we're on a path. The path is not just about me; it's about the other senior people in the company, it's about the Board. If I'm here for several more years, and I may or may not be Chairman, that's going to be up to the Board, does it really fit the new CEO? Now you're targeting potentially four, five years or more. I'm 60; I'll be 69 in March. I think it's a rational thing to do. I've had a couple of health problems. I just think it makes a lot of sense. What's your first question you began?

Who is your successor?

I mean this is an unfortunate thing for any big company like this where these people have to be in the spotlight all the time. We have several exceptional people. You guys know most of them. There's maybe one or two you don't know. The Board reviews and meets with them all the time. I think it's wonderful that Jen Piepszak, who does not want to be the CEO, will be here as Chief Operating Officer and stay after that. So obviously, she's willing to work for those people, which I think is great for a company that's having continuity of management and leadership. We're not going to tell the press, but it's not determined yet. Of course, at the last minute, a couple of years from now, people get sick, they change their mind, they have family circumstances. So even if you thought you knew today, you couldn't be completely sure.

So, you will stay around maybe for a few more years based case right now?

Yes. Basic case, yes.

Thank you. Our next question comes from Jim Mitchell with Seaport Global Securities. You may proceed.

Hi, good morning. Maybe just on regulation, we have a new administration coming in. We have a soon-to-be new Head of Regulation at the Fed. So maybe just talk about what areas of the regulatory structure, if it were to change, would be most impactful for you, and are there any areas where you think capital requirements could actually go down, or is this more of a story of requirements simply stopping going up? Thanks.

Hi, Jim. It's obviously something we're thinking about a lot, but I could go down some pretty deep rabbit holes speculating on all the different parts of the framework and how they could evolve. I just don't really think that's productive right now. Let me make some attempt to answer your question. Backing off a second, if you read Jamie's quotes, they're very consistent with what we've been saying as a company for a long time, which is that all we want is a coherent, rational, holistically assessed regulatory framework that allows banks to do their job supporting the economy that isn't reflexively anti-bank. It doesn't default to the answer to every question being more of everything, more capital, more liquidity. It uses data and it balances the obvious goal that we all share of a safe and sound banking system with recognizing that banks play a critical role in supporting growth. The hope is that we got some of that, and while we're at it, some aspects of the supervisory framework get a little bit less bureaucratic and adversarial, and a little more substantive so that at the margin, management can focus its time on the things that matter the most. So whether capital goes up, down, stays flat is really so complicated because it's not just Basel III endgame, it's also G-SIB and a number of other factors. That's why we keep hammering away on the importance of doing all of this holistically, properly with the right analysis. If that takes time, so be it.

I'll just add. Jeremy gave it all. Let me add three quick things. Liquidity is also equally important. There's been a lot of recognition regarding more accounts of liquidity and discount windows, and how LCR has done. I think is very important. The second is competition. All of these things should be done in light of looking at what kind of public markets you want, what kind of private markets you want, what do you want in the banking system, what do you want out of the banking system? The third is, I think most people realize there is a huge need to take a step back and look at the business team vulcanized system we've built, which has negatives. Even the regulators will tell you that. One point, just take a deep breath as Jeremy said, do the right thing, and continue to have the best financial system in the world.

Yes, that makes sense. As a follow-up on loan growth, have you noticed any changes in lending demand since the election, given the increase in CEO and business confidence? Any insights on this would be appreciated.

It's a good question. Given the significant improvement in business sentiment and the general optimism out there, you might have expected some pickup in loan growth. We are not really seeing that. I don't think that's a negative. It's probably explained by a combination of wide-open capital markets. Many of the larger corporates are accessing the capital markets and healthy balance sheets in small businesses and maybe some residual caution. There are some pockets in some industries where certain aspects of the policy uncertainty are making them a little bit more cautious than they otherwise would be about what they're executing in the near term. We'll see what the New Year brings as the current optimism starts getting tested with reality. If it materializes into tangible improvements, you may see that come through C&I loan growth in particular.

Thank you. Next, we will go to the line of Erika Najarian from UBS. Your line is open.

Good morning. I wanted to follow up on the capital questions and ask about some of the dynamics regarding the denominator. Looking at the third quarter regulatory data for your G-SIB surcharge score, it suggests that your score would place you in the 5% range for G-SIB. If this score is maintained by the end of the year, your G-SIB surcharge could increase to 5% or by 50 basis points in two years and one day. Additionally, around the holidays, we received a press release from the Federal Reserve and a related lawsuit from the banks. It appears that transparency may improve as soon as this year's stress test. Considering the definition of excess, the 15.7% figure is quite significant. As we evaluate your future returns, it's important to recognize that the definition of excess is also evolving. How should we interpret these dynamics, particularly regarding your G-SIB surcharge and stress capital buffer?

Erika, you're bringing up a lot of complex topics that we need to cover. I'll keep it brief. Regarding the G-SIB, the third quarter figures were indeed high, but we experienced normal seasonal trends. We estimate that we ended up comfortably in the 5% category due to these seasonal effects. December was relatively calm, which often helps alleviate year-end pressures. Historically, under the current proposed G-SIB regulations, it wouldn't have made a significant difference. For now, we're adhering to the current rules, and normal seasonality brought us back under five. About the lawsuit, we welcome the Fed's recognition that there are several areas we've highlighted for improvement regarding transparency and the bureaucratic burdens associated with the CCAR process. If we take a step back, your core question seems to be about our perspective, particularly in relation to capital needs. We’re considering various scenarios about whether we need to increase our capital requirements, projecting growth based on different assumptions for the numerator. With a capital ratio of 15.7% and a numerator around $275 billion, we see that we have a substantial excess, which is why we believe there's no need for further growth.

And just a follow-up question. Follow-up to John's line of questioning, as a placeholder, as we think about what you said, trying to arrest the growth of CET1, should we just assume that anything that you don't need for organic growth and your dividend obligations in terms of that 15.7% will be bought back by the company as we think about? I know you don't want to predict the buyback, but is that sort of just a placeholder for now as we think about what can return back to shareholders in the form of repurchase?

Yes. I mean, you've quoted our capital hierarchy and your conclusion flows naturally from my statement that we do want to arrest the growth of the excess.

We are never going to tell the market what we're going to do. I mean, you all know that everybody is out there modeling these things and trading against these things. So steady, consistent buyers in the marketplace who are predictable are making a mistake.

Does that conclude your question, Erika?

You go to the next question. Thanks.

Thank you. Our next question comes from Matt O'Connor with Deutsche Bank. Your line is open.

Good morning. It seems like you guys have backed off the view that you're materially over-earning on net interest income. Is this all because of the higher-rate environment that's expected now or is it also partly a different view on deposit pricing, specifically on the consumer side, which I think you had assumed it would reprice a bit more than we've seen?

Yes, it's a good question, Matt. Let me frame that from a couple of perspectives. You're right; if you look at the NII guidance we're giving you, including the notion that subject to the yield curve panning out in line with the forwards, we might return to sequential growth in the back half of the year, again based on all of our current assumptions. You could draw the conclusion that means the over-earning narrative is no longer applicable. By historical standards, the difference between the policy rate and the weighted-average rate paid on consumer deposits remains quite elevated. For various reasons, and subject to the fact that in the end, deposit pricing is always going to be a response to the competitive environment, the current structure of the yield curve is such that for now, anyway. When we do the math, that's what we see. Do we think that's truly sustainable through the cycle? Unclear, but we'll cross that bridge when we come to it. For now, this is the outlook for the coming year.

We've gotten closer to normalized NII and normalized credit.

It is worth noting that NII ex-market is down year-on-year, so there's some normalization there.

Okay. And then just separately, a strategic question, there's been some reports about you further expanding the consumer banking business globally, and I guess I just want to push on that where we really haven't seen other banks do it in a successful way. Obviously, your approach is kind of coming from a position of strength, leading digitally, but I guess I'm just wondering like, is it worth it? Is there enough upside to justify some of the increased regulatory and execution risks of dealing with global consumer banking?

Yes. I think you kind of answered your own question in the sense that we talked about this a lot when we first launched the initiative. The comparison to other players is not apt in the current moment. That's not to say that we're special; it's just that the strategy is very different and it's a very different moment. It's a new initiative; it's obviously not risk-free, but it's going pretty well. If we didn't think it was worth it, we wouldn't be doing it. We have considered all of the risks and opportunities associated with the decision, and that's one of our strategic initiatives that get scrutinized aggressively through all of our management processes.

Okay. Thank you.

Thank you. Our next question comes from Betsy Graseck from Morgan Stanley. You may proceed.

Hi, good morning. This has been a great call, and congratulations on a strong quarter. There are many solid questions here. My question is regarding the net interest income outlook, particularly with the pressure on net interest margin. While loan balances are increasing, could you clarify the key drivers? Is it the end of quantitative tightening, increasing deposits, or a shift into securities? Is loan growth expected to change? Are there specific areas within the organization where you anticipate loan growth opportunities this year? Additionally, regarding your comments about market share, could you explain where the less favorable areas are? Are these issues spread across all business segments, or do certain segments face more challenges and thus have more potential for improvement? Is this related more to the balance sheet or to fee generation? That’s what I would like to discuss if you have a moment. Thank you.

Sure, let me address that, Betsy. Looking at loan growth and potential areas for increase, the most significant factor that could impact the company’s performance is acquisition finance, which has been relatively slow due to the current M&A environment. If that activity increases, we might see more opportunities there. However, these loans typically don’t remain on our balance sheet for long, so whether they contribute to fees or net interest income is a different matter. As noted in our NII outlook presentation, card loan growth and normalization of revolving credit have provided a strong boost. While this will also contribute to growth in 2025, our current expectations suggest a slight deceleration, although it will still be above trend, indicating the strength of our franchise. The major tailwinds from normalization have diminished. We are all aware of the current mortgage market conditions considering interest rates, which also pose challenges for areas like our multifamily lending. A more favorable growth environment and increased optimism could lead to some loan growth in business banking and commercial and industrial lending. The most significant opportunity lies within the affluent segment of the wealth management sector, where we are considerably underrepresented compared to the number of households we serve in the country. This is why we are focusing heavily on this area; we believe we can capture more market share and enhance our franchise.

Thank you.

Thank you, Betsy.

Thank you. Next, we will go to the line of Ebrahim Poonawala with Bank of America Merrill Lynch. Your line is open.

Hi, good morning. I guess just two questions. In terms of areas of vulnerability, so I heard you, Jeremy, on the lending side, but lots of cross currents. If we anchor to the fact that you have an administration that's taking place and you’ll take office with a focus on domestic CapEx. Even if we don't get any rate cuts, when you look through your customer base, where do you see areas of vulnerability? Be it because of tariffs, or just lack of relief from the Fed? I'd love to hear just from a credit quality perspective, what no rate cuts might mean.

I understand your question; please give me a moment. Wholesale credit is quite difficult to forecast. It tends to be very specific to individual cases. We have just emerged from a period of over ten years with an exceptionally low charge-off rate, and at some point, this will need to return to a more typical level, as Jamie mentioned. Certain factors have not yet fully normalized, and wholesale credit might be one of them. We conduct thorough stress tests to analyze the portfolio's sensitivity to rate changes. Much of our underwriting approach is aimed at safeguarding us against these risks. You can be assured that we are performing the necessary analyses, but I'm not inclined to delve into specifics regarding any particular sector. Jamie, would you like to add anything?

I would just point out that the biggest driver of credit has been and always will be unemployment, both on the consumer side and it bleeds into the corporate side. It bleeds into mortgages, subprime, credit card. It’s your forecast of unemployment, which you have to make your own. The second thing you said was vulnerabilities; the worst case would be stagflation, higher rates with higher unemployment drive higher credit losses across the board. We're not predicting that, but you asked where the vulnerabilities are.

Okay. And I guess, thanks for that. Just sticking with that, as far as QT is concerned, when you talk to experts, no one knows where the right level for the Fed to end is. I'm just wondering if you have thoughts on when the Fed should end the pressure on the system and what it may imply for deposit growth?

Yes. The conventional wisdom on QT, and I'm not pretending to add to the conventional wisdom, is that the tapering should complete. We might see an end sometime in the middle of the year. Of course, they may change that, but that seems to be the current market consensus. When we sort of take a step back and look at the H.8 data and our flow of funds models, when you look at RFP and evolution of QT expectations for economy-wide loan growth and what the impact of that might be on the growth of system-wide deposits; it's consistent with the story we're telling about our NII outlook, plus or minus what happens with the policy rate stabilizing and growing deposit balances through the second half of the year.

Thank you. Our final question comes from Gerard Cassidy from RBC Capital Markets. Your line is open.

Hi, Jeremy. Hi, Jamie. Jeremy, you mentioned that overall firm-wide deposits have stabilized, and you noted potential growth in various areas, particularly consumer checking deposits. We observed from industry data provided by regulators that household checking deposits were approximately $1 trillion before the pandemic but have remained high at around $4 trillion post-pandemic. Based on your observations of your customer base, what do you believe is driving the strength in these consumer checking account deposits?

That's fascinating, Gerard. I'll have to take a look at that data. I don't recognize those numbers. I can speak for ourselves, which is that when we look at the encouraging growth we see in our checking franchise; it's due to a couple of factors. Of course, there was some excess and yield-seeking behavior. So, you did see people moving money out of checking into higher-yielding alternatives over the past couple of years. It feels like we're in the final innings of that. We're not seeing nearly as much yield-seeking pressure. Meanwhile, we are aggressively engaging with clients and acquiring a lot of new clients as part of our branch expansion strategy. So, the combination of the tail end of yield-seeking flows and success in the organic build-out of that franchise is showing up in checking account growth, which we see as a very healthy indicator for the franchise.

Very good. And then as a follow-up, circling back about the capital levels, you guys have been clear about where you want them to be. Can you share with us the pros and cons from JPMorgan's perspective, not so much from an investor, but we understand, of course, you can do a share repurchase. Obviously, you can do non-depository acquisitions with the excess capital. But what are the pros and cons of a special dividend to reduce that excess capital? If you continue with these incredible profitability levels of 20% return on tangible common equity, you're growing your income and capital every year. But what are those pros and cons from JPMorgan's perspective?

Yes. We made some public comments on this at a conference. So, he wants to go.

Sorry, Jeremy, go ahead. We're not going to do one. We've looked at it. If you all have any insights for us, let us know, but most people don't want it. It doesn't have shareholder value. I’ve never thought having cash in your pocket is a bad thing. I think it's a mistake to believe that you have to deploy capital. We want to be very patient. Special dividends, at least from history, they really don't work.

If anyone has a different opinion, I'd be interested.

Sounds good. Thank you, gentlemen.

Thanks, Gerard.

Thank you. And we have no further questions at this time.

Thanks very much.

Thanks very much. See you next quarter.

Thank you all for participating in today's conference. You may disconnect at this time and have a great rest of your day.