Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's First Quarter 2025 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. 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 the 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 $14.6 billion, EPS of $5.07 on revenue of $46 billion with an ROTCE of 21%. These results included a First Republic related gain of $588 million, which was previously disclosed in the 10-K. On Page 2, we have more on our first quarter results. The firm reported revenue of $46 billion, up $3.5 billion or 8% year-on-year. NII ex. Markets was down $430 million or 2%, driven by the impact of lower rates and deposit margin compression as well as lower deposit balances in CCB. This was predominantly offset by higher card revolving balances, the impact of securities activity, including from prior quarters, as well as higher wholesale deposits. NIR ex. Markets was up $2.2 billion or 20%, and excluding the significant item I just mentioned was up 14%, largely on higher asset management fees, lower net investment securities losses and higher investment banking fees. And Markets revenue was up $1.7 billion or 21%. Expenses of $23.6 billion were up $840 million or 4%, largely driven by compensation, including growth in employees across the front office and technology, higher brokerage and distribution fees, as well as marketing and legal expense. The quarter also reflected a $323 million release of the FDIC special assessment accrual compared with a $725 million increase in the prior quarter. Credit costs were $3.3 billion, with net charge-offs of $2.3 billion and a net reserve build of $973 million. We have more details on the reserve build on Page 3. With this quarter's reserve build, the firm's total allowance for credit losses is $27.6 billion. Let's take a second to add a little bit of context to our thinking surrounding this number in light of the unique environment of the last several weeks. Our first quarter allowance is anchored on the relatively benign central case economic outlook, which was in effect at the end of the quarter. But in light of the significantly elevated risks and uncertainties at the time, we increased the probability weightings associated with the downside scenarios in our CECL framework. As a result, the weighted average unemployment rate embedded in our allowance is 5.8%, up from 5.5% last quarter, driving the $973 million increase in the allowance. So, with that in mind, the consumer build of $441 million was driven by changes in the weighted average macroeconomic outlook. The wholesale build of $549 million was predominantly driven by credit quality changes on certain exposures and net lending activity as well as changes in the outlook. In addition, it's important to note that the increase in the allowance is not, to any meaningful degree, driven by deterioration in the actual credit performance in the portfolio, which remains largely in line with expectations. With that, let's go to balance sheet and capital on Page 4. We ended the quarter with a CET1 ratio of 15.4%, down 30 basis points versus the prior quarter as net income and OCI gains were more than offset by capital distributions and higher RWA. This quarter, the firm distributed $11 billion of capital to shareholders, which reflects $7.1 billion of net common share repurchases and the payment of our common dividend, which has been increased to $1.40 per share. This quarter's higher RWA is primarily driven by overall business growth in Markets and some seasonal effects. Now, let's go to our businesses, starting with CCB on Page 5. Consumers and small businesses remain financially healthy. Despite the recent downtrends in consumer and small business sentiment based on our data, spend, cash buffers, payment to income ratios and credit utilization are all in line with our expectations. Moving to the financial results, CCB reported net income of $4.4 billion on revenue of $18.3 billion, which was up 4% year-on-year. In Banking & Wealth Management, revenue was down 1% year-on-year, driven by lower deposit NII, predominantly offset by growth in Wealth Management revenue. Average deposits were down 2% year-on-year and flat sequentially, while end-of-period deposits were up 2% quarter-on-quarter. Client investment assets were up 7% year-on-year, predominantly driven by market performance and we continue to see strong flows into managed products. In Home Lending, revenue was up 2% year-on-year and originations were up 42% year-on-year off a small base in a slowly growing market. Turning to Card Services & Auto, revenue was up 12% year-on-year, predominantly driven by Card NII and higher revolving balances, as well as higher operating lease income in Auto. Card outstandings were up 10% due to strong account acquisition. And in Auto, originations were $10.7 billion, up 20%, driven by higher lease volume. Expenses of $9.9 billion were up 6% year-on-year, predominantly driven by growth in marketing and technology, higher field compensation, as well as higher auto lease depreciation. Credit costs were $2.6 billion, reflecting net charge-offs of $2.2 billion, up $275 million year-on-year, predominantly driven by the seasoning of recent vintages in Card with delinquencies and losses in line with expectations. The net reserve build was $475 million, of which $400 million was in Card. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.9 billion on revenue of $19.7 billion, which is up 12% year-on-year. IB fees were up 12% year-on-year and we ranked #1 with wallet share of 9%. In advisory, fees were up 16%, benefiting from the closing of deals announced in 2024. Debt underwriting fees were up 16%, primarily driven by elevated refinancing activity, particularly in leveraged finance. In equity underwriting, fees were down 9% year-on-year, reflecting challenging market conditions. In light of market conditions, we are adopting a cautious stance on the investment banking outlook. While client engagement and dialogue is quite elevated, both the conversion of the existing pipeline and origination of new activity will require a reduction in the current levels of uncertainty. Payments revenue was up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, predominantly offset by deposit margin compression. Lending revenue was up 11% year-on-year, driven by lower losses on hedges, partially offset by lower balances. Moving to Markets, total revenue was up 21% year-on-year, reflecting record performance in equities. Fixed Income was up 8% with better performance in rates and commodities against a relatively weak prior-year quarter. Equities was up 48% as the business performed well during a period of elevated volatility supported by higher client activity and strong monetization of flows, particularly in derivatives. Securities Services revenue was up 7% year-on-year, driven by fee growth and higher deposit balances, partially offset by deposit margin compression. Expenses of $9.8 billion were up 13% year-on-year, predominantly driven by higher compensation, legal and brokerage expense. Average Banking & Payments loans were down 3% year-on-year and down 1% sequentially as we continue to observe payoff activity and limited demand for new loans across client segments. Average client deposits were up 11% year-on-year and up 2% sequentially, reflecting increased activity across Payments and Securities Services. Finally, credit costs were $705 million, largely driven by the net reserve build. Then, to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.6 billion, with pre-tax margin of 35%. Revenue of $5.7 billion was up 12% year-on-year, predominantly driven by growth in management fees on strong net inflows and higher average market levels, as well as higher brokerage activity and higher deposit balances. Expenses of $3.7 billion were up 7% year-on-year, largely driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $54 billion for the quarter, primarily driven by equity and fixed income. In liquidity, we saw net inflows of $36 billion. AUM of $4.1 trillion and client assets of $6 trillion were both up 15% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 5% year-on-year and flat quarter-on-quarter, and deposits were up 7% year-on-year and down 2% sequentially. Turning to Corporate on Page 8. Corporate reported net income of $1.7 billion. Revenue of $2.3 billion was up $102 million year-on-year. NII of $1.7 billion was down $826 million year-on-year. NIR was a net gain of $653 million compared with a net loss of $275 million in the prior year. Current quarter included the significant item I mentioned upfront, while the prior-year quarter included net securities losses of $336 million. Expenses of $185 million were down $1.1 billion year-on-year, driven by the changes to the FDIC special assessment accruals I mentioned upfront. To finish up, let's turn to the full year outlook on Page 9. We continue to expect NII ex. Markets to be approximately $90 billion. The firm-wide NII outlook has increased to about $94.5 billion, reflecting an increase in Markets NII, which you should think of as being primarily offset in NIR. Our adjusted expense outlook continues to be about $95 billion. And on Credit, we expect the card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, to wrap up, we're pleased with another quarter of strong operating performance, but of course, the focus right now is on the future, which is obviously unusually uncertain. But no matter what outcomes eventually materialize, we are eager to do our part to continue to support our clients, the markets and the broader economy, and we believe the banking system will be a source of strength in this dynamic environment. And with that, let's open the line for Q&A.

Thank you. Please standby. Our first question comes from Ken Usdin with Autonomous. You may proceed.

Good morning, Jeremy. Wondering if you could start by just amplifying the macro commentary that you started off on. And given the uncertainty in the world that you referenced, just how are you seeing the activity change across the customer base from consumers to wholesale? And can you just talk through how that's also informing any changes in your growth and reserving expectations? Thanks.

Sure, Ken. So, I mean, at a high level, I would say that, obviously, some of the salient news flow is quite recent. So, we've done some soundings and some checking both on the consumer side and on the wholesale side. I think on the consumer side, the thing to check is the spending data. And to be honest, the main thing that we see there is what would appear to be a certain amount of front-loading of spending ahead of people expecting price increases from tariffs. So, ironically, that's actually somewhat supportive all else equal. But I think what it sort of highlights is that during this transitional period and this elevated uncertainty, you might see some distortions in the data that make it hard to draw larger conclusions. In terms of our corporate clients, obviously, they've been reacting to the changes in tariff policy. And at the margin that shifts their focus away from more strategic priorities with obvious implications for the Investment Banking pipeline outlook towards more short-term work, optimizing supply chains and trying to figure out how they're going to respond to the current environment. So, as a result, I think we would characterize what we're hearing from our corporate clients is a little bit of a wait-and-see attitude. I do think you see obvious differences across sectors. Some sectors are going to be much more exposed than others and have more complicated problems to solve, and also across the size of the clients, I think, smaller clients, small business, and smaller corporates are probably a little bit more challenged. I think the larger corporates have a bit more experience dealing with these things and more resources to manage. So, that's a little bit of our read of the situation right now, but certainly a bit of a wait-and-see attitude. It's hard to make long-term decisions right now. And so, we'll see how that plays out.

Yeah. And just one question on the NII ex. Markets holding at $90 billion. Can you just walk us through the puts and takes of just what's the new curve you're using, which also is subject to change every day? And what might have been some of the positive offsets to if you put in more expected cuts than you had before? Thanks.

Yeah, that's a good question, Ken, and you're right. So, if you remember, last quarter, we said that we had one cut in the curve. I think latest curve has something like three cuts. And so, we've talked a lot, obviously, about how we're asset-sensitive. You now see our EaR disclosed in the supplement and probably our empirical EaR is a little bit higher than our modeled EaR as a result of the relatively lower-than-modeled rates paid in consumer. So, when you put that together, all else equal, the drop in the weighted average IORB, which is about 22 basis points, should produce a notable headwind in our NII ex. Markets.

In the curve basically.

That's essentially just flowing mechanically through the curve. To address your question about why we're not revising down, the answer is that despite some variances, our number is only slightly lower. It's not significant enough to change our outlook, but we do have some favorable offsets. For instance, we have seen higher wholesale deposit balances and positive beta performance in several areas, including CDs and wholesale. Additionally, we've removed the placeholder in our NII outlook for the potential impact of the card late fee rule, which provides another offset. This explains how we remain unchanged, even though, all else being equal, the lower expected front-end rates pose a headwind.

Thank you. Our next question comes from Erika Najarian with UBS. You may proceed.

Yes, good morning. This question is for Jamie. Jamie, you were in the media today discussing potential economic turbulence, but Jeremy mentioned that the banking system should be a source of strength during this turbulence. The equity market often perceives banks as weaker, trading their stocks based on sentiment and fear rather than on their ability to handle provisions if the economy slows down. So, my question is how do you think this will impact the economy going forward? Also, can you elaborate on Jeremy's statement regarding the banking system being a source of strength?

I just want to make one brief comment before Jamie answers that, which is that the banking system being a source of strength means just that. It refers to banks fulfilling their role in supporting the economy. This isn't a comment on bank equity performance or how cyclical banks may be. Clearly, in a recession, as I've often mentioned, all else being equal, it's detrimental for banks from an equity perspective. We're focusing on the financial strength of banks' balance sheets and our ability to help our clients during challenging times.

Everyone trades stocks in different ways. Sentiment plays a role, but banks are just a small part of the overall economy. If the economy deteriorates, credit losses will rise, volume may shift, and the yield curve could change, though we aren't making predictions on all these factors. I spoke with our economist, Michael Feroli, this morning to get insight into their current forecast. They currently see about a 50% chance of a recession. If that happens, credit losses will increase and several other factors will also shift. In addition to what Jeremy mentioned, I typically don’t focus much on anecdotes, but this time I am noticing a trend. Analysts have already lowered their earnings estimates for the S&P by 5%, so it's now looking at a 5% increase instead of 10%. I anticipate that this figure could drop to zero or even negative 5% in the next month. Following that, many companies will report and provide their guidance, and I expect many will adjust their forecasts downward. They will discuss the potential impact on their customers, earnings, costs, and tariffs, which differ among companies. There is a noticeable hesitation in the market as many are choosing to hold off on decisions related to mergers, acquisitions, hiring, and similar matters. People are adapting to this new environment, and the repercussions will be evident soon. I want to emphasize that this conversation is meant to provide reassurance. For context, when COVID struck, we saw unemployment spike from around 4% to 15% rapidly, requiring us to bolster reserves by $15 billion in just two months. Absurdly, we then reduced that same amount over the next three months, highlighting the severity of a downturn. If we experience a mild recession, losses will likely be less severe than that; a major recession could mean more. Regardless, we are equipped to handle it and serve our clients. Although earnings may not be strong and stock prices may dip, I see this as a chance to repurchase more stock.

Understood. I have a follow-up question. I agree with your perspective on the equity market performance of bank stocks, but the mindset of portfolio managers often tends to revert to a fundamental performance baseline rather than considering resilience. Regarding your earlier comment, Jeremy, you stated the weighted average unemployment rate is 5.8%. This seems higher than what economists project even in a recession scenario. How should we interpret any potential further increases in reserves from this point onward? While it’s clear we may see a decline in outlook, what additional factors will influence your decisions about increasing reserves?

Yeah, Erika, it's a good question, but the truth is there's just a little bit too much uncertainty right now for me to sort of give an outlook for reserves, which is generally not a thing that we do anyway. As I mentioned in my prepared remarks, the accident forecast at the end of the quarter was the sort of bog-standard, no landing, barely any increase in unemployment. Given that we knew at the time that there were some big pending announcements and there was quite a bit of elevated uncertainty around that, it felt like the forecasts were kind of lagging because people were just waiting to actually get the information. And so, it felt appropriate to add a little bit of downside skew to our probability assessment, which is what led to the increase and what led to the build. We use this weighted average unemployment thing as a useful way to help explain what's going on inside the reserve, but obviously, the actual mechanisms are quite complex, the depth of any potential recession, the timing of it, distribution of outcomes, which sectors it hits, idiosyncratic stuff and wholesale, there's a lot. I think on the consumer, as Jamie mentioned, it is worth remembering that by far the most important variable is unemployment. So, if the labor market remains very strong, consumer credit will probably be fine. If it doesn't, then you're going to see it play through the way it always does.

Thank you.

Thank you. Our next question comes from John McDonald with Truist Securities. You may proceed.

Hi, good morning. Jeremy, on that same topic, no change to the full year credit card net charge-off forecast. How do we square that with the rising recession risk? Is it because you already have a couple of months of delinquencies kind of baked in the cake and this is more an issue for next year, or just too early to call?

We should not have given you that forecast. We don't know what the number is going to be. I would say it's a short-term number, and based on what's happening today, there's a wide range of potential outcomes.

Yeah, okay. Okay, yeah, that's what we're kind of thinking.

But mechanically, John, though, as you alluded to, there are some mechanical elements to the way card charge-offs work. That means that it's pretty baked, pretty far out of time...

At least a couple of quarters, yeah.

So, sort of echoing Jamie's point, it just doesn't necessarily tell you that much about what might actually happen through the end of the year. Even if unemployment were to increase significantly, it probably wouldn't flow through the charge-offs until later.

Okay, got it. And then, just on capital, how does this type of macro uncertainty impact your thinking around conserving capital as opposed to deploying it through your investment agenda and buybacks as the stock gets cheaper? Just are you still looking to arrest the increase or does this kind of change it?

The investment we make in banks, branches, technology, and AI will continue regardless of the environment. Depending on the developments related to Basel III, CCAR, and G-SIFI, we have between $30 billion and $60 billion in excess capital. I addressed our perspective on this in the Chairman's letter, and due to the current environment and turbulence, I appreciate having excess capital. We are ready for any situation, and our primary aim is to serve our clients. This is not for any other purpose. We have ample capital and liquidity to navigate any challenges that may arise.

Okay. Thank you.

Thanks, John.

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

Good morning. Just want to drill down on the credit card spend. Any comments in terms of changing patterns on the consumer card spend? There's been headlines and travel kind of going down. Just talk about some of the puts and takes in that up 7% year-over-year.

It's a good question, and we're noticing similar trends. Regarding travel, we've observed airlines mentioning specific challenges they are facing in that area, and our data on card spending reflects that. However, we don't necessarily view this as an indicator of broader trends. There are several possible reasons for the slight decline in airline spending. Additionally, based on our April data, there's indications that some consumers are preemptively spending on items that may see price increases due to tariffs. This suggests rational spending behavior, as evidenced by companies promoting their pre-tariff inventory. It's not surprising to see this reflected in the spending data. Another point of interest relates to income levels; we've heard retailers express concerns about weaker performance in the lower-income segment. Our data shows that while cash buffers in this segment are indeed lower and spending patterns have shifted with spending being somewhat weaker than during peak periods, we are still seeing increases in spending from the lower-income segment. Overall, there are no signs of distress in that group.

Okay. That's helpful color. And then, just separately, if we look at the delinquencies for the home lending, they increased both Q2 and year-over-year. Is that just some of the noise from the First Republic deal as you take the marks upfront and then those portfolios essentially receding from an accounting point of view, or is there something else going on there?

Sorry, I actually didn't hear which fees...

The delinquencies in the home lending.

I find that intriguing. I haven't reviewed that yet. We'll need to follow up with you about it. Whatever the situation is, it didn't seem significant enough to bring up. So...

It could be the First Republic accounting, yes.

Okay. Thank you.

Thank you. Our next question comes from Steven Chubak with Wolfe Research. You may proceed.

Hi, good morning, and thanks for taking my questions. Wanted to start off with one on the proposed SLR changes and just the impact of rate volatility. The treasury is committed to providing relief to the banks under the SLR just to help mitigate some of the volatility in the 10-year. But given the geopolitical concerns, weakening global demand for treasuries, how does it inform your appetite just for purchasing US treasuries if those reforms are implemented? And just how you're managing rate risk maybe more holistically across the firm just in light of some of the recent volatility?

SLR changes alone won't significantly impact us; the changes might affect others. We need comprehensive reform across SLR, G-SIFI, CCAR, Basel III, and LCR, which all have significant shortcomings, to see a real difference. It's important to note that these changes would provide relief to the markets, not just to banks. JPMorgan can manage with or without an SLR change. The objective of altering these regulations is to enable large market makers to engage more in the markets. If they do, spreads will narrow, leading to more active trading; if they don't, the Fed will have to step in, which I believe is poor policy. The Fed often gets involved during market turmoil, making it crucial to implement these changes. The rationale behind this is that when the markets are volatile and liquidity in treasuries is low, it impacts all other capital markets. This isn't about doing favors for banks. Additionally, we don't increase our interest rate exposure in any way. Our position remains unchanged. We facilitate market activities and assist clients as needed. If banks were able to take on larger positions, they would simply expand their dealer roles without significantly increasing interest rate exposure. Our team performed remarkably well in trading this quarter.

And Steve, all I would add to that is that it is, of course, true and we all remember the moment a few years ago when intermediaries were in fact bound by us alone as a result of the expansion of the deposit base and extraordinary actions needed to be taken to address that. So, we've seen when it is binding and it works not as designed, which is why we do very much agree that it should be fixed. I think our point is a little bit, as Jamie said in his Chairman's letter, that it's not the only thing that needs to be fixed and there are interactions among all these things, and we as a bank are not particularly bound by it. There is some interesting nuance too in terms of the potential TLAC issuance impact there, which is quite sensitive to which particular fix gets put in. So that will be an interesting thing to watch.

Thank you both for that perspective. And just for my follow-up, did want to ask on the Markets outlook. So, admittedly less surprising to hear some of the cautious IB commentary in light of the uncertainty, but was hoping you could just speak to the Markets businesses, which have been performing extraordinarily well of late. And just given the combination of elevated volatility, but also some indications that clients are taking down risk, how you expect that business to perform over the coming quarters?

Yeah. It's a good question. As you know, Steve, we're obviously not going to give Markets guidance. Your guess is as good as ours at some level, but the ingredients are the right ingredients. I mean, we've often discussed about how this business, all else equal, benefits from a volatile environment if markets are operating relatively normally, which they more or less have been. Of course, it's not guaranteed. We need to do a good job managing the risk. And yeah, there are states of the world where if our clients are struggling or deleveraging or taking down risk that could be a headwind for us. So, we're going to just do what we always do and try to manage the risk well and serve our clients, but we're certainly happy to see the performance this quarter.

That's great. Thank you both for taking my questions.

Thank you. Our next question comes from Gerard Cassidy with RBC Capital Markets. You may proceed.

Thank you. Hi, Jeremy. Hi, Jamie. Can you guys share with us, if you take a look at the non-traditional lenders, private credit lenders, they've been very active in grabbing market share from the traditional commercial banks over the last two or three years, particularly since the initial Basel III endgame proposal came out in July of '23, which is no longer applicable. But are you guys seeing any opportunities where the customers may re-intermediate back into the banks like your bank because of this volatility?

It's difficult to say for certain, Gerard. I believe it's still early to draw conclusions. However, I think your question reflects what we’ve been discussing about the market for some time. Our goal is to remain product agnostic and provide our clients with the best options tailored to their current needs. Whether that involves a traditional syndicated lending solution or something resembling a unitranche direct lending structure, we are open to all possibilities. When we refer to the banking system as a source of strength in this environment, we mean our commitment and readiness to lend throughout various market cycles, just as we have in the past. We possess the underwriting capability, capital, liquidity, and experience necessary to be dependable lenders and support our clients regardless of the market conditions. If this situation allows us to compete even more effectively, that would be beneficial.

Very good. Thank you. And then, as a follow-up, you both just talked about the potential changes to the different regulatory outcomes for you and your peers, whether it's SLR or the G-SIB buffer, et cetera. Can you opine for us your views? Are you more confident with the new administration, the new personnel, whether it's Treasury Secretary Bessent or others, the nominees for different regulatory heads, that there will be a better chance of real regulatory reform they see it the way you guys do versus the prior administration?

Yeah. I mean, Gerard, we always say this and it's true, which is that we work with all administrations and every administration as constructively as possible to express our opinions and advocate for the things that we think are right for the banking system and for the economy as a whole. And that was true before and it's true now with this administration as well. Clearly, the administration has been quite vocal about wanting more pro-growth policies at the margin and for wanting to make it easier for banks to participate more constructively in the economy. And as we see the various folks and the various agencies go through the confirmation process, it will be helpful to have people in seats and get to work on some of the things that we want to get done. So, let's see how that plays out, but we're looking forward to continuing to engage constructively.

I believe there is a strong awareness of the shortcomings in the system, and fortunately, there will be an opportunity to examine it closely.

Very good. Thank you.

Thanks, Gerard.

Thank you. Our next question comes from Ebrahim Poonawala with Bank of America. You may proceed.

Thank you. Good morning. I guess just wanted to follow up on the macro uncertainty. I think when you talk to investors, we've gone from enthusiasm for a pro-business administration to a lot of headwinds. And I think Jamie mentioned you will have companies take down guidance, et cetera, potentially over the coming weeks. I'm just wondering what is it you think we need to see before this uncertainty abates? Are the 90-day pause that we saw with some of the other countries on tariffs, is that enough? Or I'm just wondering when you talk to clients, corporate CEOs, what are they looking for from the administration that would inject confidence to get back anywhere close to where we were maybe 60 or 90 days ago?

Some of the issues that have been raised existed prior to the new administration, such as the geopolitical climate, large fiscal deficits, and inadequate regulations. It's clear that policies supporting growth, business, and deregulation are beneficial. I believe the best course of action is for the Secretary of Treasury and his team to expedite the necessary agreements concerning tariffs and our trade relationships. While these agreements will not be extensive trade agreements, they will outline principles. This approach seems to be the most effective at this time, though it is possible some impacts will still occur regardless.

Got it. And I guess, as a follow-up, I think there's a lot of concern also in the treasury markets. We've seen the 10-year move from 3.99% to 4.50% in a matter of week. Just your comfort level in terms of the functioning of the treasury market? Do you see the Fed stepping in, pausing QT, maybe even initiating some treasury purchases? Any color would be great.

We are experiencing persistent inflation, which I believe is unlikely to disappear anytime soon. The US dollar remains the reserve currency, a status that is not expected to change, despite varying opinions on the matter. The Federal Reserve has maintained its stance; we can anticipate disturbances in the treasury markets due to various regulations. This has occurred during past events, including COVID-19, and it will happen again. The Fed will intervene when necessary, though we are not at that point yet. The timing of any future action is uncertain. It is a misconception that the 10-year treasury yield must decline. Historically, similar situations occurred in the 1960s and 1970s, with significant global deficits. Economists suggest that current tariffs could add approximately 0.5% inflation. We will have to monitor the situation and respond accordingly.

Thank you.

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

Good morning. Jeremy, regarding the three to four cuts mostly planned for the latter half of the year, how do you view the trajectory of net interest income this year? Is there likely to be increased pressure towards the end of the year into 2026? I'm trying to consider the trajectory and the starting point for next year.

Yeah, it's interesting, Jim. I was asked during the press call why we aren't suspending guidance, and I explained that we do our best to provide guidance, which depends on various external factors. We always base our guidance on those considerations.

The yield curve you're using, which we know will not happen.

The nuance we discussed last quarter about the various factors influencing the NII outlook, including the expected path of deposit growth across different businesses and how these factors interact, indicates potential fluctuations at different times. Given the current circumstances, we will probably hold off until next quarter to provide further details on this. The back-loaded cuts, all else being equal, present some headwinds for the exit rate heading into next year, and we'll need to monitor how the balances evolve over the next three quarters.

Right. Regarding volumes and deposits, this type of volatility often leads corporates and investors to move towards cash, which tends to increase deposits. Did you observe that trend in March and especially in April? What are the current trends on the deposit side?

It's a little hard to tell, to be honest. It is true that wholesale deposits this quarter outperformed for us relative to our expectations. I don't think I can say with any confidence that that's a result of the environment that we're in. So, I think next quarter will probably be a better time to assess that.

I'll just also say that it may not be deposits, it may be treasury bills or various other things. And what you've seen, which is different, is not the risk-off trade in the 10-year. That is fundamentally different this time.

Right. Okay. Thanks for taking my questions.

Thanks.

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

Thanks. Good morning, Jamie. Good morning, Jeremy. Two questions, one for Jamie to kick off. Jamie, you've been through many cycles. And I think we're all interested in understanding how you think this next cycle is likely to progress. And I'm wondering, is there anything that you've seen in the past that looks like this or that you would suggest if any slowdown coming forward, is it more likely to be similar to what kind of prior cycle you've seen?

It's nearly impossible to provide a clear answer. We consider all the cycles and prepare for a wide range of outcomes. Personally, I’m not a fan of predicting the future, but I’ve repeatedly mentioned that there are many issues at play. Some of these issues will likely resolve, for better or worse, in the next four months. So perhaps during our call next quarter, we won’t be speculating; we’ll actually have a clearer understanding of the impacts with some level of predictability. However, the outcome for a bank tends to be similar: volatile markets lead to increased credit losses, a more conservative approach, and reduced investments. This gives the impression of a recession. Whether it’s mild or severe is uncertain. I remain quite cautious, as reflected in our capital, liquidity, position, and balance sheet. We are prepared, ensuring we can serve our clients in any situation. We’re not speculating about the future. Clearly, our numbers show we have the margins and ability to navigate through almost anything.

Excellent. Okay. No, thank you for that. And then...

Betsy, this situation is unique. This is about the global economy, and I urge you to read my Chairman's letter. The most critical aspect for me is that the Western world remains united economically and militarily as we navigate these challenges, ensuring a safe and free environment for democracy. That's what truly matters. I'm not overly concerned about the economy's performance in the coming two quarters; that isn't a major concern for me. We've experienced recessions before, and we will get through this one as well. What we need to focus on is the ultimate outcome and how we achieve it. The issue with China is significant, and its resolution remains uncertain. We must comply with the law, but this represents a substantial change that we've never encountered before.

Okay. Thank you so much for that. And yes, looking forward to the next four months and clarity coming. So, then, one for Jeremy. Question on the wholesale loans. I'm going into this because I noticed your average loan growth, I think it was running at about 2% year-on-year, and then end-of-period loans was up 5% and wholesale loans was up 7%. So, I'm just wondering if there was some line drawdowns at quarter-end. And it's a broader question on just liquidity, do you see your customers looking for more liquidity? Are they drawing down lines? And maybe if you could speak to liquidity in the front end of the market that'd be helpful too. Thank you.

That's a good question, Betsy. During times of peak uncertainty, our wholesale clients expressed a desire to focus on enhancing liquidity. I asked recently whether we were observing significant draws from clients, and the response was no, at least not yet. This might indicate that there isn't a high level of anxiety, and clients are more focused on resolving their supply chain issues. Regarding wholesale loans, there isn't much else to note. We are seeing slightly more growth in Markets loans compared to traditional C&I loans at this time, although that's another challenge. You also inquired about liquidity in the front end of the yield curve.

Yeah, just in money markets, fed funds, the front-end seem to suggest...

Yeah. What we've heard from our markets colleagues is that that's actually functioning quite smoothly.

Okay. Thank you.

Thanks.

Thank you. Our next question comes from Mike Mayo with Wells Fargo Securities. You may proceed.

Hey Jamie, you mentioned earlier that there is a strong awareness of issues within the new regulatory framework. Can you or Jeremy elaborate on what an ideal scenario would look like? If we maintain the safety and stability of the system while minimizing red tape and bureaucracy, how much could expenses potentially decrease? I assume some of those savings would be passed on to customers, while some would be retained, with regulators also benefiting financially. Can you provide more details on the specific savings that deregulation could bring? Also, regarding the concerns you mentioned in the press release and the Chairman's letter about trade wars, Jamie, your perspective has shifted from 'get over it' to 'do something' this week. Can you share what your initial expectations were regarding the tariffs and how that has changed? Do you believe that the next earnings call will see a resolution to most of this uncertainty? Thanks.

I don't believe we'll completely move past all the uncertainty, but you will have a clearer understanding. My comment about 'getting over it' was specifically about tariffs related to national security, which is extremely important and should take precedence over other issues. Tariffs might be necessary to address certain national security concerns, which are only a small aspect of trade. This includes rare earths, medical ingredients, and semiconductors, which I referenced earlier. My views haven't changed; I still hope to see the administration work on trade agreements, as this would benefit everyone involved. They have mentioned engaging with 70 or 80 different parties, which indicates interest. If regulators adjust their regulations, it could free up capital and liquidity within the system. I don't anticipate a significant reduction in expenses, although there could be some impact on a few hundred people. However, this wouldn't be passed onto consumers, and it could ultimately lower the overall cost of liquidity, loans, and mortgages if executed properly. In my Chairman's letter this year, I highlighted that if these reforms are implemented, mortgage costs could decrease by as much as 70 basis points. If I were in their position, I would focus on this issue immediately.

No. And you also mentioned hundreds of billions of dollars of extra lending if you reduce the CET1 ratio, I guess, back down by one-fifth. So...

If you need to address LCR, G-SIFI, CCAR, and SLR, it could potentially free up hundreds of billions of dollars for JPMorgan each year across various lending categories, including markets and middle market loans. Currently, the loans to deposits ratio for the banking system is at 70%, down from the previous 100%. This decline is not solely due to capital requirements; LCR and G-SIFIs also play a significant role. You should consider whether it’s possible to maintain a safe system while increasing lending capacity, enhancing liquidity, and preventing bank runs, as seen in recent events with First Republic and Silicon Valley. This can be achieved through logical and thoughtful regulations, which is what I hope to see happen. The existing system is already among the best globally, but it has been gradually hindered. If we aim to adopt rules similar to those in Europe, we should be prepared for the consequences.

One short follow-up. Just first quarter, you mentioned good credit, good trading, good EPSB. I'm not sure anyone cares. They're worried more about the things we're talking about here. But in terms of the risk of being an international company, an international US company during trade wars, and I know JPMorgan is a firm that likes to partner with countries as well as communities and customers, so how do you think about that risk? How should we think about that risk? And hopefully, your voice is being heard to speed things along to whatever can be done getting it done because you could be in the crosshairs at some point.

Yeah. I honestly add that to the list of worries. We will be in the crosshairs. That's what's going to happen. And it's okay. We're deeply embedded in these other countries, people like us, but I do think some clients or some countries will feel differently about American banks, and we'll just have to deal with that.

Thank you. Our next question comes from Glenn Schorr with Evercore. Your line is open.

Hi. I just wanted to follow up on the topic of risk management and regulation. I understand and agree that the regulatory system has its flaws which could use improvement. We've seen significant volatility, yet the market infrastructure has managed to hold up reasonably well, and your trading results have been impressive. Has there been a change? Are the systems now more capable of handling volatility due to better risk management, your team, and the diversity of your platform? Or are there still situations where not all volatility is beneficial? I'm interested in hearing your overall perspective. Thank you.

I think your points are valid and not mutually exclusive. We are continuously improving our operations and have made significant investments across our businesses, including Markets. We aim to be more comprehensive by investing in technology and collaborating more closely with our clients. I believe we are more effective now than we were five years ago, as is likely the case for others in the industry. However, I don't think you can directly link this progress to our current performance. We are currently benefiting from very favorable conditions, which we have managed successfully. In response to your question about whether there are still forms of volatility that could negatively impact the Markets franchise, the answer is definitely yes. Situations with significant volatility and low trading volume can create paralysis among clients and make it difficult for active managers, and those are challenging environments. While some may joke about the good volatility versus bad volatility concept, it is a reality we must acknowledge. Ultimately, we need to manage risks and serve our clients effectively, and we are pleased with our current situation.

I agree with Jeremy and would like to add that volatility can lead to wider bid/ask spreads, which is generally favorable when other factors are constant. It can also sometimes result in increased trading volumes, as seen with high activity in FX, interest rate swaps, and treasuries. However, as Jeremy noted, certain types of volatility can lead to decreased volumes, like what we're experiencing in DCM right now due to a lack of bond deals and reduced trading. It's difficult to predict how all of this will play out, but our team works diligently to support our clients. We recognize that trading volumes and spreads can fluctuate significantly, which can be concerning. However, the underlying infrastructure performed well during COVID and has withstand various crises, so we remain vigilant to ensure it continues to function effectively.

And I do think that the fact that the revenue performance in this quarter is good shouldn't make us lose focus on the importance of the larger fixes around financial resource deployment by regulated banks to supporting the capital markets ecosystem. Everything Jamie has been talking about SLR, LCR, ILST, G-SIB, Basel thing, MRWA, the whole panoply of items, which interacts as we've often talked about and is miscalibrated. It will, at the margin, make it harder for banks to serve a stabilizing function in a difficult moment. So that remains quite important as a policy priority.

That's a great point. Thanks for that. Appreciate it.

Thanks, Glenn.

Thank you. And our final question will go to the line of Saul Martinez with HSBC. You may proceed.

Good morning, and thank you for taking my question. Most of my inquiries have been addressed, but I would like to discuss costs since it hasn’t come up yet. How should we view the cost structure and any cost optimization initiatives? If there is a slowdown in revenue, though not necessarily a serious decline, your guidance of $95 billion suggests that you have substantial growth planned for investments in bankers, branches, technology, and marketing. Under what circumstances would it make sense for you to reduce these investments, or do you believe that would be short-sighted unless we experience a significant economic downturn?

Yeah. So, you've slightly answered your own question there, Saul, but it is nonetheless a good question. So, let me unpack it a little bit. So, the way I think about it is, there are some elements of the expense base, which automatically reset as a function of the business environment. So, we talk about those as volume and revenue-related expense. And so, you will see those come down as a function of the environment. It's also true that there are conceivably certain investment business cases, which depending on how the environment changes, could no longer make sense analyzed in the same way that we analyzed them originally, i.e., through the lens of their ability to generate long-term shareholder value through a long investment cycle. And so, if, for whatever reason, the environment changes in such a way as to make certain of those investments less compelling, we would obviously adjust. Of course, the thing that we're not going to do is stop investing in things that we still think are very compelling through our traditional long-term investment lens simply for the purposes of achieving a cosmetic reduction in expenses in an environment where you may or may not have a reduction in revenues for unrelated reasons. As you well know, that's just not how we run the company. This quarter, as it happens, a question you might have is, how are you managing to keep your guidance the same with what you're saying about, for example, the Investment Banking outlook. But it's worth noting that Investment Banking performance this quarter was actually fine. As you know, markets performance was very strong. And there are also some ups and downs in there, I should note, including the fact that there is some sensitivity to the expense base to the strength of the dollar or weakness in this case. And while some of that is offset in revenue, it's a little noisy. So that's a factor as well. It's small, but I'm just highlighting that there's some slightly non-obvious things that are non-strategic of...

As you mentioned, management is essential, and I often discuss the distinction between good expenses and bad expenses. Good expenses are those related to bankers and branches that we believe will yield returns. However, there are also bad expenses, which pertain to bureaucracy, inefficiency, and unnecessary activities. Reflecting on my Chairman's letter, I noted that companies that fail over time often struggle with bureaucracy, complacency, arrogance, and a lack of attention to detail. I regret not addressing this sooner, especially after COVID, with the increase in headcount and regulations, and the remote work situation. We believe there is room for greater efficiency. Mike Mayo pointed out regulatory issues, and he is correct; there will be cost reductions as some rules and regulations are eased. For instance, resolution recovery is excessively lengthy at 80,000 pages and is inefficient. Similarly, CCAR is another time-consuming process at 20,000 pages. We provide around a trillion data points daily to various regulators, leading to significant built-up costs that we hope to eliminate to lower system expenses. Our focus is on streamlining operations, and Jenn Piepszak is leading efforts in this area. We are already achieving considerable savings and finding enjoyment in the process. It feels like a necessary task, akin to exercising and maintaining a healthy diet, and I apologize to my shareholders for not having undertaken this sooner.

Okay. That's very clear and very helpful. Thank you.

With that, thank you very much.

Thank you. Talk with 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.