Jpmorgan Chase & Co Q2 FY2026 Earnings Call

The JPMorgan Chase earnings call will begin shortly. will begin shortly. The JPMorgan Chase earnings call will begin shortly. The JPMorgan Chase earnings call will begin shortly. The JPMorgan Chase...

Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's second quarter, 2026 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. Information concerning forward-looking statements and non-GAAP financial measures included in this presentation can be found in JPMorgan Chase's earnings press release, an investor presentation posted on the Investor Relations website. Please stand by. At this time, I would like to turn the call over to JPMorgan Chase's Chairman and CEO, Jamie Dimon, and Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead.

Thanks, Amanda, and good morning, everyone. Including the significant items noted on the page, The firm delivered net income of $16.9 billion, EPS of $6.14, and an ROTC of 23%. Excluding the significant items, revenue was up 15% year-on-year, predominantly driven by markets revenue, higher asset management fees in AWM and CCB, higher investment banking revenue, and higher deposit and loan balances, partially offset by the impact of lower rates. Expenses of $27.3 billion were up 15% year-on-year, largely driven by volume and revenue-related expense, as well as growth in front office hiring and labor inflation. And credit costs were $2.5 billion, with net charge-offs of $2.4 billion and a net reserve build of $149 million. And in terms of the balance sheet, we ended the quarter with a standardized CT1 ratio of 14.1%, down 20 basis points versus the prior quarter, as net income was more than offset by higher RWA and capital distributions. This quarter's standardized RWA increase of approximately $103 billion is largely driven by increases in financing across our markets business, as well as growth in traditional As you saw in our SECAR press release in June, the board intends to increase the quarterly dividend to $1.65 per pair, effective in the third quarter. Now, moving to our businesses. CCB reported net income of $5.3 billion. Revenue of $20.3 billion was up 8% year-on-year, predominantly driven by higher card NII, largely on higher revolving balances, as well as higher operating lease income and auto and asset management fees and wealth management. A few points to highlight. Consumers and small businesses continue to show resilience despite elevated gas prices and inflation, with higher tax refunds and a solid labor market contributing to strong spend growth. In banking and wealth management, average deposits were up 3% year-on-year and 2% quarter-on-quarter, driven by strong net new checking account growth of over 500,000 accounts this quarter. Client investment assets were up 21% year-on-year, driven by market performance along with strong close. In card services, we refreshed the Sapphire Preferred card in June following the successful refresh of several other products over the last 12 months. Next, the CIB reported net income of $9.7 billion. Revenue of $24.9 billion was up 27% year-on-year, driven by strong performance across the businesses. IV fees were up 30% year-on-year, reflecting double-digit growth across all products with particularly strong performance in equity underwriting. While this quarter's performance was supported by both some large ECM deals and the acceleration of the closure of some M&A transactions, the pipeline remains quite robust and the current activity levels seem to be encouraging more activity. As a result, while conversion will obviously be dependent on market conditions, we expect activity levels to remain healthy. In markets, fixed income was up 6% year-on-year, with solid performance in credit, currencies in emerging markets, and rates partially offset by lower revenue and commodities. The equities business delivered an exceptionally strong quarter, with revenue up 86% year-on-year, reflecting the highly dynamic market conditions. We saw strength across products and regions. Flows were strong, and trading was favorable in both derivatives and cash, and Prime benefited from higher client activity and balances. Turning to asset and wealth management, AWM reported net income of $2 billion with pre-tax margin of 38%. Revenue of $6.9 billion was up 19% year-on-year, driven by growth and management fees on higher average market levels and strong net inflows, as well as investment valuation gains, higher loan balances, and higher brokerage activity. Long-term net inflows were $50 billion with continued strength across fixed income and equity. AUM of $5.1 trillion was up 18% year-on-year, and client assets of $7.7 trillion were up 19% year-on-year, driven by higher market levels and continued net inflows. And before turning to the outlook, corporate reported net income of $4.2 billion on revenue of $6 billion, which includes the significant items noted in the presentation. In terms of the full-year 2026 outlook, we now expect NIIX markets to be about $96.5 billion and total NII to be approximately $105.5 billion as a function of markets NII increasing to about $9 billion. And the new adjusted expense outlook is about $107.5 billion with the increase primarily due to higher volume and revenue-related expenses, driven by the activity levels and associated revenue of performance. Finally, we now expect card net charge-off rate to be approximately 3.2%, reflecting better-than-expected consumer credit performance. With that, we're now happy to take your questions, so let's open the line for Q&A.

Thank you. For participants dialed in on the analyst side of today's conference call, if you would like to ask a question please press star one to be entered into the queue. We kindly request that you ask one question and only one related follow-up. If you would like to ask an additional question please press star one to be re-entered into the queue. For our first question we will go to the line of Ken Houston with Autonomous Research. Your line is open.

Thanks hi good morning. Jamie I was just wondering if you could start by just evaluating on the recent management changes in elevation of Doug and Troy to co-presidents, and just anything we should be thinking about in terms of the ongoing development of the leadership team and anything it may mean in terms of your tenor as a CEO from the board's perspective. Thanks.

No, it's exactly, I think we try to be totally clear in the press release, which is, you know, Marianne is an exceptional individual as a human being, as a leader, and is obviously an executive, but, you know, the board made a decision to go ahead with making two co-presidents, you know, which will be preparing them to do far more at the company, be prepared, hasn't changed the timetable or anything, and obviously wish Marianne the best. As a result, she decided when she knew about the plans that she'd rather retire than stay here, so that's it. No mystery. Okay, very good.

And then just on the, Jeremy, on your follow-up to the strength that you're seeing across investment banking and markets. Just, you know, I know it depends on conversion opportunities and just the environment, but this is clearly, you know, far higher level of activity than anyone would have expected. How do you judge the sustainability and how do you judge just, you know, how risk on are we, you know, across the various businesses?

Yeah, good question, Ken. So I would actually bifurcate that a little bit between investment banking and markets. in the sense that by historical standards, investment banking fees were fine, but they weren't at sort of super peak level. So they had some room to come up a little bit. And so one of the things we looked at is like, okay, how much like cannibalization of the future pipeline might've happened through the acceleration of this quarter and, or to what extent would this quarter's results like particularly elevated as a result of some of the large high profile IPOs and other capital raisings in particular. And I think, you know, clearly there was some pull forward and clearly, you know, the large deals contributed meaningfully to this quarter of results. But at the same time, the pipeline is actually quite robust. And to some degree, it feels a little bit, I mean, we're guessing here obviously, but it feels a little bit as if, you know, the high-profile nature of the activity this quarter and just the generally robust environment is itself we're getting more activity um so you know i obviously don't want to get into like guiding you and in any case we're just guessing but you know that's maybe just a little bit of context about how we're thinking about the trade-off between you know the robustness of the pipeline and the fact that there there was some pull forward and some kind of exceptional events this quarter on the market side you know i would probably separate between fixed income and equities i mean all the normal caveats like we don't know anything can happen and clearly markets revenues in general have been quite elevated and strong for some time although as we pointed out that also is associated with much more financial resource deployment and support of our clients but you know I think the particular set of things that happened in equities this quarter so little bit hard to imagine that being repeated but you know the background environment is quite supportive so we'll see we'll see what happens but in the end you know we're just trying to serve the clients and manage the risk and get our fair share of the business and and uh you know overall obviously the environment feels pretty good i guess you did say something about risk on and you said how risk on are we and not to be pedantic but i think the question that the we matters right so the market is clearly extremely risk on um and we're kind of takers of that and And we're, you know, trying to strike the right balance between supporting all our clients and being appropriately cautious in an environment that, you know, has some complicated dynamics in it.

Does that conclude your question?

All set. Thank you.

Thank you. Our next question comes from Chris McGrady with KBW. Your line is open.

Good morning. Thanks for the question. On deposits, what stuck out was slide four to me, the growth in CCB in the quarter. interested in kind of the progression towards that 15% retail market share that you've talked about in the past, you know, and really how higher for longer may impact the pace of market share gains over time. Thanks.

Sure. So, let me just do near-term deposits for the company quickly. So, and let me actually start with wholesale. So, wholesale deposit growth was quite strong this quarter actually and uh has been for the first half of the year um you know if you recall last year was particularly strong i think this year we were expecting it to be sort of fine but slightly less strong and so far the first half of the year has outperformed our expectations um you know obviously uh a lot of that is the strength of franchise and winning deals and taking share but some of it is also the kind of lending environment particularly the sort of BFI space and a lot of the data center stuff like however you look at it you have a little bit of the dynamic of loans creating deposits and that's going to disproportionately show up in wholesale so that's probably a little bit of a tail end for wholesale on consumer um you know we talked about you know expecting low single digit growth this year and um that expectation is still in effect it's unchanged um which is good because i think there were some different moving pieces there and you know, they could have played out differently in some sense. But if you look at what those pieces were, it was fundamentally the balance between ongoing, very robust net new checking account growth and, you know, the question of yield seeking flows and the impact that that was having or not having on average balances per account. And, you know, you saw obviously very strong net new checking account this quarter. And, you know, in light of the fact that the rate environment is a little bit more hawkish, the yield seeking flows are still a factor and probably a little bit of a risk. But on balance, you know, the picture is in line with our expectations for this year, which is good. And so then the question is, how does that all feed into the 15%? And what I would say about that is, you know, we feel great about the franchise and we feel great about how everything is going. And, you know, there's no change to that sort of hope or aspiration. But I would think about that as a kind of natural long-term consequence of executing the strategy that we believe in across all the various components of it, you know, focus on primary bank relationships, branch expansion, deepening, product value proposition, et cetera. And so, you know, the view is that the 15% will be an outcome of that, and we still feel good about it.

That's great. And for my follow-up, bigger picture question on the expenses, really the returns that you're getting from the branch build-out, the investments, the higher the bankers. ultimately, I guess the question is, where are we in the investment cycle? And really, how does it play into the operating leverage outlook over the medium term? Thanks.

I would just say it's a complete continuation we've been doing for years. So you shouldn't really expect any change.

Yeah, I mean, that's what I was going to say, too. I mean, obviously, there are other expense dynamics this quarter, which maybe I'll save for another question. But in the end, you know, we're investing, we're always going to invest, it's been working and obviously the returns so far speak for themselves and I think I think that we've been saying for a long time is that the power of this franchise is such that we are able to aggressively invest for the future for the sake of generating future returns and to solidify the competitive position of the franchise while still delivering exceptional current returns I think that would be true if we were delivering you know 15 16 17 percent returns Obviously, when we're delivering these types of returns, you know, it really is firing on all cylinders.

Thanks so much. Thank you. Our next question comes from John McDonald with Truist Securities. Your line is open.

Thank you. Good morning. Jeremy, I was wondering if you could talk a little bit about the drivers of the upward revision to the XMarkets, NII, and perhaps the cadence to in third quarter, fourth quarter as we think about the exit rate, you know, heading into next year.

Yeah, sure, John. So, yeah, revising up from 95 to 96.5 for the full year, and you see our first half actual, so you can infer the second half. And as Jamie always likes to say, what matters is, you know, the run rates and the exit. And if you sort of do that math, it does suggest a higher exit run rate, which, you know, in the central case, assuming the yield curve plays out as the Fords currently forecast and the deposit and other drivers are in line with our current expectations, that's what we would expect just mechanically in terms of the drivers of the um of the upward revision uh the biggest single factor is deposit balances i would say across both wholesale and consumer both sort of the overall quantum of it but also like mixed shift inside of that in favor of slightly higher margin overall and then you know rates are like a little bit higher than when we previously guided both in the short end and in the back end and as you know we've got sensitivity to both and probably our actual sensitivity is a little bit more than the EAR suggests right now because of the performance of the consumer betas relative to the model and that difference is probably disproportionately in the front end so when you assemble that together you have you know a little bit of the of the increase as a function of higher rates but most of it is balances.

Okay. And then just to finish up on the NII, the market's NII is guided a bit higher, even though the outlook for rates is also a little bit higher. So I guess what are some of the drivers there? Is it balance sheet mix and some other factors?

Yeah, it's a great question, John. So yeah, you correctly allude to the fact that we've said previously that the market's NII number is actually liability sensitive, all else equal. also obviously in the context of what we always say which is that in general changes in the markets on ii especially when they are driven by rates are almost always fully offset uh in the bottom line through nir um and so yeah you're right this quarter although sequel based on higher rates you would have expected markets and i had to be down uh and instead the forecast is up and the difference changes in balance sheet composition you know essentially expecting lower amounts of finance non interest-bearing assets on the balance sheet and sellable grades you know one balance sheet unit of that stuff drives the number like quite a bit if you think about it and can overwhelm sort of the rate effect so that's what's going on there if you you know to just indulge myself for 30 seconds there's also another interesting nuance which is you will have noted that we actually increased the equity allocation to the CIB this quarter for reasons that I think are pretty obvious in light of the amount of growth of supporting clients that we've done and the way that's playing through RWA and the consequence of that is to move some equity essentially out of corporate into the CIB and a lot of that is markets that obviously comes with a little bit of nii and so that nii is moving out of you know nii x into markets nii and so it would it's sort of a rare exception to the rule that it changes in markets nii are offset in the bottom line this piece which to be fair is quite small it's probably like 150 million um is is a part of the increase that we would not expect to be offset on the bottom line although it's equal since obviously it's left pocket right pocket at the level okay that's helpful thank you Thank you.

Our next question comes from Erica Najarian with UBS. Your line is open. Hi.

Good morning. I just had one question. I do want to revisit the succession line of questioning because it is so critical for a lot of your current investor base. And so, Jamie, I guess maybe re-asking the question a different way, you know, what characteristics are you and the board looking for in terms of, you know, the new leader of JP Morgan. You know, what do you think makes an exceptional CEO in the future as you pass the baton on? And additionally, you know, I think that some of your investors may have read the announcement, particularly Marion's departure as sort of an extension of your tenure. And I'm wondering if we should, you know, think about your remaining, you know, tenure is more fixed or if, you know, investors are still thinking about a more rolling type of retirement date and a longer stay as executive chair.

So the question to that is, though, the timing is essentially the same, obviously completely off the board, but it hasn't changed. It's just a natural change that we have to go to about how we go about this. But, look, you know, that question is obviously critical, but I've always said it's, you know, you want to be good at management, you want to be good at people, you want to be analytical, you want to be detailed, you want to be culture carer, you want to be curious, you want to have heart, you want to have grit, you want to have soul, you want to have work ethic, you want to be able to travel, you want to be able to walk in operating centers and deal with CEOs and prime ministers. It's all of that. I mean, I could give you a long list of stuff, but it's all of that. At the end of the day, we're blessed with a lot of people who are great culture carers across a broad spectrum. No one has all those things in the perfect way. And some of those things you learn and some of those things you get better at, but you know when you see it, we have two exceptional co-presidents, and we have other people at the company who are great culture carriers, but, you know, that's what you want. And you want it across the whole company, not wedded to investment banking or trading or, you know, just big CEOs, but also wedded to the fact that we've got, you know, 300,000 employees around the world. And in our branches, we have 50,000 top-notch people. In our operating centers, in our coal centers, we have 150,000 people. And you have to be a flexible mind to deal with this new, growing, complex world. And we have teams of people. And as you know, I think it's important, you know, we pointed out that, you know, we're blessed to have Jim Pipsack as the chief operating officer, and Mary Erdo is continuing to run the Asset and Wealth Management. So it's a great team of people, which I am totally confident of. I was hit by a truck, which is not my preference. we would be fine and just so I just wanted to unpack sorry I am going to ask a follow-up question what do you mean by no change in timing exactly we said last time whatever I said last time is the timetale is essentially the same several years you can use a few years you can use plus or minus or obviously it's totally up to the board not up to me okay thank you thank you our next Next question comes from Jim Mitchell with Seaport Global Securities.

Your line is open.

Good morning. Just, Jeremy, maybe a follow-up on the expense question and operating leverage question earlier. Understand completely longer term, no bank can generate perpetual operating leverage, but if we look at year-to-date results, it's been a strong revenue environment, but I think operating leverage on an adjusted basis was negative. You alluded to some expense one-offs potentially. no question you're investing heavily and should be. So I get all that. But just when I think about the benefits of AI and technology generally, is there a time over the intermediate term where you think expense growth could slow a little and operating leverage kind of becomes more likely in a period of time over the next few years?

I'm just going to answer that by saying when you have great returns and very good margins, which actually went up this quarter, not down, You know, the notion that somehow you can forever increase your operating leverage is a crazy notion. We don't have that. I think it's part of the reason why banks failed if you go back 20 years ago. We're never going to have that point of view. And AI will have its gives and takes. So we can't project. I do think you might actually see a slowdown in growth, you know, maybe a slowdown in 27 or 28. But, you know, the teams are looking at all of our opportunities. And we pointed out over and over again, when we have an opportunity to spend more money in marketing with a positive ROI, we're going to do it. We're not going to have false gods. We have to pray that we can't do something really smart. I've also pointed out over and continuously that some expenses, you know, if you account for them as investments, that they have very good returns, but they're expensive in the short run. And so, you know, and, you know, AI still remains to be seen because the other thing I think about AI, which is a little bit different than everybody else, is you don't uniquely benefit from AI. The ultimate beneficiary of AI will be our customers. And in a competitive capitalist world, you know, we always use AI to do a better job for the customers. And we can't just say, oh, it's going to increase our margins and we're going to keep that. If that were true, our margins would be 80% today because of computerization over the last 20 years.

Yeah, well, all fair. Appreciate it. And then just maybe a quick one on regulation. Is there any update on the thoughts on potential for adjustments to the regulatory proposals? since I know you and your peers have been particularly vocal around the G-SIB surcharge and some elements of Basel III. Just curious if there's been any developments there.

There are four obvious changes they should make. And I think it's unfair when I hear them say, you know, they should do the numbers the right way. And you guys should demand it. Do the numbers the right way. And if they think they want to be more conservative, they should add conservatism. They should not do the numbers in a false way to make the number higher. And I just think that's intellectual clarity and honesty and stuff like that. They should get rid of the double count in operating risk capital. They should get rid of the double count in market risk capital. We have $80 billion or more now in market risk capital, and the biggest quarterly loss we ever had was $1.4 billion. Even the C-card market loss, I think, is like $14 or $15 billion.

And so they should adjust the G-CIP the way they're supposed to going back to 2015, and they should change the way they're doing short-term wholesale funding to be fair to everybody those are the things they should do the number should be the number if they think we should hold more capital they should ask us to hold 10 percent more and i'd be happy to do that but i'm not happy to have these numbers falsely done yeah and i just just briefly add on short term wholesale funding i think there's an important point there in terms of the competitive dynamics that we were really quite explicit about in our comment letter which i would encourage everyone to read because it's it's a nuanced thing but i think if you go through it it makes the point very clearly and what what what they've wound up doing with this change the short-term wholesale funding is essentially you know increase the burden on you know banks like us and bank of america that have both you know markets and banking businesses as well as you know traditional consumer businesses uh disproportionately relative to our you know former investment bank competitors but a different business mix and you know i guess conceivably someone could want that as a policy outcome i don't understand why you would want that as a policy outcome because it is disproportionately damaging the ability of banks to serve main street um but you know if that's what someone wants they should say it and if that's not what they want then they shouldn't let it happen by accident as a result of like you know a seemingly very technical thing like removing RWA from the denominator of the short-term wholesale funding contribution to the GSIB score I mean this is a little bit what Jimmy talks about when he when he's saying like you know do the numbers right and just be clear about your policy objectives absolutely I appreciate the thoughts thanks thank you our next question comes from Matt O'Connor with Deutsche Bank your line is open good morning it seems like everything is inspiring on most or all cylinders, trading, got some banking, lending, credit.

Is this as good as it gets or, and I know you've kind of flagged, you know, from the risks out there, but is there also an argument you made that were earlier cycle given AI and what seems likely to be a big increase in global defense spending, global supply chain management, as we put all that together, what's, what are your thoughts? It's getting close to as good as it gets. we just don't know how long it's going to last okay um and then you know the rate expectations continue to move all over the place out there and you show that you're uh kind of well positioned for higher rates meaning make more money uh but is there a tipping point where the deposit behavior changes you know both from a volume perspective uh and then betas which you alluded to earlier have been better than expected so far but you know if we go up a certain amount do you think there could be a meaningful change in that yeah that's a good question actually you know short answer is like we don't really know um and if you'd asked me that question a couple years ago

i would have said that that you're essentially asking a question about the convexity of the rate paid dynamic especially for consumer deposits the negative convexity to be specific um and you know if you'd asked me that at the beginning of this rate cycle i would have said that we would be experiencing that effect right right now and we're not but you know just from a common-sense perspective like you have to believe that at some point that kicks in so when we do our stress testing and when we think about not just like you know slightly more elevated inflation environment and the slightly more aggressive response from the Fed but something that's like meaningfully different that's a true stress test with an actual change in regime one of the things that we look at and stress is like okay at what point do you have that kind of like acceleration and rate paid as a result of that type of environment and and that's one of the reasons why it's important not to be naive about higher rates because if you simply take our current EAR even recognizing that locally the empirical EAR is probably higher than our reported EAR and you ignore the convexity dynamics you could convince yourself that you know in seven percent rate environment is great and obviously that wouldn't be true if you had to do a massive revisit deposit franchise in order to protect it so we do assume some of that it's something that we think about it's in the models it's very much like part of the discipline but the question is you know plan and and obviously there's the larger question of the competitive dynamics and the full value proposition of the deposit franchise, especially.

Okay, that's helpful. Thank you.

Thank you. Our next question comes from Mike Mayo with Wells Fargo. Your line is open.

Hi. In response to the earlier question, you were asked about operating negative as negative, and you gave the reasons for that. But is operating negative the way you look at things?

I mean, when you grow revenues 15% core year over year, percentage-wise it's negative but dollar wise i think it's positive when i look at slide two and i don't know why i'm not going to i'm not going to create the narrative for you but um you know even if you take out those numbers if you yeah no it was it definitely was positive let me but can i just point out another thing it was positive but when revenues go up 10 you know like our if your general if your overhead if your margin overall is 25 when revenues go up 10 the marginal return than that since you're not in all the overhead is going to be a lot more than 25 percent and people kind of forget exactly but obviously a rapid increase in revenue drives a big increase in

operating leverage yeah so i agree with what jamie just said and maybe just since we've got a couple questions about this and and obviously uh we did revise up this year's expense guidance by two and a half billion which is not a trivial number so maybe i can piece all this together to to add a little clarity here. So first of all, if you remember the guidance that we gave in fourth quarter last year for the full year for the company, and if you made some kind of like reasonable assumptions about what type of markets environment and NIR X markets for the rest of the company at the time, you know, and you built out your models or whatever, I don't remember exactly what you had, Mike, but, you know, I'm sure that the consensus was for meaningful negative operating leverage in this year's numbers however defined and that's why you know a company update you know i gave the long speech about sort of what jamie always says about why operating leverage in the long term for the cycle is not a thing now for a company like us anyway uh producing the types of returns that we're producing now and and the root cause of that was essentially that the you know as jamie just said like there's a fixed expense base and there's a variable expense phase the very variable expense base is disproportionately associated with the kind of capital market complex broadly defined um and we were in a moment where coming out of the back of the rate hiking cycle and relatively modest deposit growth etc the nii was still working its way out of um out of the headwinds and so when you and in the meantime we had inflation and investments and the usual stuff, driving the expense phase. So that sort of was the operating leverage picture for the year. To Jamie's point, since then, in the first half of this year, the capital markets complex has outperformed our then expectations by $6.5 billion. And we have booked in the first half of the year $1.5 billion of additional expenses associated with that. So that says a lot about that kind of like marginal operating leverage point and then so therefore of the two and a half that we increased guidance one and a half is essentially already booked and a direct sort of happy consequence of the exceptionally strong performance and then yeah we've implicitly added a billion for the second half of the year and there's there are some nuances I wouldn't draw too many conclusions from that in terms of our expectations about the revenue environment because there are some other factors and there's some timing or whatever. But at a high level, you know, that gives you the picture. The second half of the year will be what it'll be. And I think when you look at returns, overhead ratio, any metric that, you know, your updated models are going to show for this year, it's obviously, you know, exceptional performance principally through the lens of, like, returns, which is what actually matters. All right.

There's a little bit of national wealth management, a little bit of that credit card spend, a little bit of that, other parts of the business, too.

Yeah, and that's why I say the capital markets complex is really, you know, the whole company as well. Yeah, exactly.

So your marginal margin, based on the number you just gave, is 77% on that. And so why is that as good as it gets? Are you referring to the revenue environment maybe as good as it gets, Jamie, or are you just being conservative or what?

No, I just think we're in a very healthy, active, exuberant market with very high prices and very high volumes, and we benefit from that. We just don't know how long it will continue. Could it get a lot better than this? It can get better. But, you know, how much better?

And then the second question does relate to the management changes and Troy taking over the consumer bank. And, you know, we don't know Troy as well as we did Marianne. And you have a lot more information internally. But to oversimplify and exaggerate, and we have an FX trader now, you know, selling mortgage, credit cards, and deposits, and I'm being simplistic for a reason, but what gives you confidence that Troy is the right person to run the consumer business when he doesn't have that experience in the past?

Yeah, you know, Mike, it's a great question. You know, first of all, like I mentioned, how you evaluate people, is their analytics, is their brain power, is their EQ, is their heart, their soul, their culture carrier? you know can they walk into operating says he's exhibited that you know in markets and investment banking you know they remember even the ib is an extensive operations function and and back office function technology function where he's exhibited great expertise we're completely comfortable with that i do think it's very important that people have experience across the company and when i've seen uh investment banks big banks take it over by someone only from the investment bank who only cares about the investment bank you know believe me the rest of the franchise can suffer you need respect for the rest of the franchise so i think it's great for him it's great for the company

he's already excited he's always been to branches and out and about and uh uh and you know he'll take it hopefully upward onward and upward and my just a minor correction uh troy with no offense intended to my old good friends who are foreign exchange spot traders but troy was actually an options trader, which is also where I started. So I think you would want me to correct the record on that one.

All right. Thank you.

Thank you. Our next question comes from Sal Martinez with HSBC. Your line is open.

Hi, good morning. Thanks for taking my question. I have a broader question on AI. And it is, is there an argument that we're vastly underestimating the potential benefits to efficiency and its impact and impacts on how companies can run their businesses I know block is a really different animal than you are on a lot of levels but they argued when they cut you know 40% of their workforce that given the advancement in AI tools if they look at their organizational structure with a blank sheet of paper they can be much leaner and not sacrifice on product velocity and commercial outcomes and I guess I'm asking if you think there could be a parallel with banks where you can operate with a different structure, be much more agile, be more efficient over time. I know it's a sensitive topic, but I'm curious how you think about these questions and how you're positioning yourself for this world.

So it's not a sensitive topic at all. We are going to use AI to do a better job for our clients. That's our job. We fully expect it'll have huge efficiency in certain parts of the company, And, you know, we analyze it all the time. I think we've mentioned in the past, we spend quite a bit of money on it. We have a lot of MPVs that we know we have. You know, the whole company is working on this at this point. And, you know, there are, I think there's almost 1,000 use cases today, though. I would say that the really important ones are 50, like 50 across risk, fraud, marketing, hedging, prospecting, note-taking, idea generation, document reading. And it's kind of just starting. So we do expect that. I think you have to put in the back of your mind that there are areas where we may just accelerate what we do that we want to get done anyway. Think of certain applications and customer-facing things and stuff like that. We are preparing to make sure we can retrain our people, and we have had discrete areas where we did reduce jobs by 30% or 40%, and most of those people offer jobs elsewhere. So we do expect that. I also think that over time, remember, this will be offered to smaller competitors, too, through, you know, Fiserv and FIS and other fintech high companies. And over time, we've been doing this nonstop for 25 years with just large computers and mainframes and, you know, APIs and various tools and tricks we use. We've always been trying to create more efficient stuff like this. This will be faster. This will be dramatic. You know, the whole company is involved in it. We have our off-site in July. Now, you know, you can imagine this is a big topic everywhere, you know, from front office to mid office to back office to, you know, marketing to risk to you name the subject. And more to come, but we're kind of in the midst of this mini revolution and we'll report to you. But I do also want to point out, you know, maybe you could be ahead of other people, kind of, but what always happens is the benefit accrues to the customer, not to, you know, the J.P. Morgan in this case. because other people are doing the same thing and, you know, presumably leads to lower costs and lower error rates and a bunch of things. You can't just say, well, your ROE is going to go to 50% and stay there. You know, if we had a 50% ROE going to 10% a year, we'd probably have, in 50 or 60 years, you'd probably be 100% of the GDP of the United States of America.

Yeah, yeah, okay. Thank you for that. Follow up on equities. And I think, Jeremy, you said, if I recall correctly, that the particular set of things that happened this quarter are, you know, difficult to see repeated. Can you just maybe elaborate on what was most exceptional this quarter? I think some of your peers have talked about Asia, prime brokerage there.

And I think you mentioned derivatives and cash being strong. but is there any areas or products or geographies that were particularly noteworthy in terms of of the strength this quarter that may you know be difficult to sustain going forward yeah I mean there's really not a lot like behind my comment it's essentially you know what you would get from asking any of the Marshall AI models this question and the two year old two stages old version of the model in other words it's all the obvious stuff that's been heavily reported like we had some major ipos we had some major index rebalancing we had some very complicated dynamics in korean equity market there's been a lot of activity in asia the overall environment has been dynamic and interesting across a whole variety of dimensions the clients have been extremely active so it's like all it's all the headlines basically that you know have have driven the market and of course that could obviously repeat but i just think like statistically it seems improbable that that particular combination of effects repeated so but it obviously and you guys those who pay attention you can see most of this on a daily basis through volumes of the york dock exchange the cme uh volumes through hedge funds i came through it's not not a secret marginal loans you can see a lot of this taking place during the course of a

quarter.

Got it. Thank you. Thanks, Raul.

Thank you. Our next question comes from Ibrahim Punuwala with Bank of America. Your line is open.

Good morning. I guess maybe a lot of discussion on the strong Wall Street backdrop. Maybe, Jeremy, just talk about the main street part of the U.S. economy. There is a sense that there's The fragility when you look at housing, real estate, rates potentially could go higher. Give us a sense around what you're seeing from on the consumer side, the ability to sort of pull forward and resiliency if rates go up. And are you seeing any broadening in CapEx beyond AI, or is it very AI-centric in terms of what you're seeing on even commercial lending activity?

Okay. Let me do these in reverse order, actually, because I'll just address your AI CapEx question quickly. We do see some decent kind of CapEx and associated loan growth across the franchise. And at least on the surface, some of that does not appear to be AI-related. However, I'm a little reluctant to draw that conclusion too strongly just because the AI theme has started to, you know, proliferate in so many different parts of the economy, right? It's like, you know, the comments about, you know, data centers wind up creating a lot of demand for like plumbers and electricians, right? So, you know, you wind up seeing it in sort of slightly non-obvious places. And so any given bit of loan growth or CapEx that you see that doesn't superficially look like it's AI-related might still be, but on the other hand, you know, it might not. So...

It's going to be the big numbers. I think CapEx is about $4 trillion a year, and AI went from $400 billion last year to $700 billion this year. People project, which so do our people, it'll be like a little over a trillion next year, and maybe a little reduction in the non-AI CapEx. But that's hard to figure out because some of the same people are doing the same.

Yeah, and I was talking to our economists the other day about the CapEx Impact of Chips Act, and some of that's kind of rolled off and it's getting replaced by more direct AI stuff. So it's a little bit hard to untangle the whole thing. Going to the consumer for a second. So a few things I guess I've kind of already covered. But so number one, spend is kind of fine, you know, robust and across income segments. Seems like a bit of a tailwind there from tax refunds. Delinquencies are a little lower than we expected. And, again, that's a better performance you see pretty much across the board by kind of FICO score. There's some of that economic heterogeneity data came out from the Fed recently, which also, I think, doesn't give a lot of support to the K-shaped narrative, essentially. So, again, we think about this, we worry about this, we look at it. But from our perspective, through all the various dimensions, there's not like that much there in terms to support the K-shaped narrative. Now, to your point about fragility and rates and housing and stuff like that, it is, of course, we are in a slightly higher than normal inflationary environment. I think Marianne had made some comments at some point about a cohort of consumers who are experiencing, you know, negative real wage growth and that potentially creating some distress for those folks. Now, some of that statistically is kind of always going to be true in any moment in time in any cohort, but that's probably a watch area. And, you know, I think generally, obviously, it's been a long expansion that's gone on for a long time. I think the economy is surprised on the upside, consumer strength is surprised on the upside, and that inevitably makes everyone worry about fragility and about the thing that could change But as I always say, you know, when it comes to consumer credit performance, it's just about the labor market and so you know you're not going to hear anything from me that's new or differentiated about the labor market like we all see the same numbers and you know it's been surprisingly resilient so for now that's the narrative got it and i guess just a follow-up on the capital front you have excess capital strong roes but i guess the question would be why buy back stock here at three times tangible book when things are so good bad things could

happen? Why not just have some even more excess capital for a rainy day if things go south? Just talk to us in terms of how you're thinking about buybacks at these levels. And I know Jamie's talked about potential M&A at some point, maybe asset management, fintechs, but yeah, would love to revisit that. Thanks.

So before I answer that, I want to tell you, I always enjoy reading your weekend notes. They're insightful and sometimes quite funny. So thank you for that. Thank you. No, look, you're absolutely correct. I mean, we've always said we want to buy back less stock as the price goes up and more stock as the price goes down. We had a lot of excess capital, and so we were struggling with that. If you can talk about two years ago, we still think the number, it was just approximately $40 billion, and I think we now think we've actually deployed it over time. You know, the world's gotten bigger. It's gotten more complex. I just got back from the tour of Europe. Our security resilience initiative, the hyperscalers, The needs are just big, and it's not just AI. You're talking about global infrastructure, the remilitarization of the world, the restructuring of trade is taking place, the enormous need of governments. You have global deficits are almost 4.5% or 5%, which is a very big number competing for the same capital. So we do think we'll deploy, and that has consequences. And we're not going to tell the market what we're going to do, but we agree with you generally. And if we think we can deploy it, it's very different than buying back stock. I've also never thought that buying – I actually want to get rid of that number, money returned to shareholders. I just don't even like seeing it because, you know, buying back stock is not returning money to shareholders. You're making an investment decision. You're not making a return money to shareholders decision. I actually do want to add up all the reports. And so, you know, you can see changes taking place. We're just not going to tell you what they are. And I made a mistake last time mentioning $20 billion. We could obviously do far more than that or nothing at all. What I was trying to point out is we have huge opportunities for organic growth in every single business we're in. Organic growth is hard. It's technology, it's people, it's systems, it's branches, it's bankers, it's hiring, it's training, it's recruiting. But I was surprised to find out in parts of Europe that when we doubled our share in certain areas, they think that we could do a lot more there, and country by country, including countries that we say aren't doing particularly well. And I think that's true here. We have our branches of the United States. We've got our credit card business. We've got the Apple business at one point, which we have pretty high hopes for if we come up with better products and better services. And so, yeah, so the goal is to deploy our capital at a 17% return. That is the goal, which we think we can do over time. We should always be looking at inorganic. What we don't want to do is look at inorganic as a sign of weakness of organic, in which I think companies do sometimes. They bullshit about M&A when they should be focusing on why they're not doing particularly well in the area or something like that. And we have a lot of competition, by the way, and we have pointed that out before. very good competition not just not just goldman sachs who's doing a great job if you didn't read their numbers this morning because i did but you know you got stripe and paypal and cash and block and chime and sofi and revolute and they're good and we have to make certain investments to keep up with them or to you know hopefully do a better job than some of them and so we're doing all of that uh but it always you should always be looking at things that could be good for your company inorganically and so we've done a bunch of deals this year you know most were goods a couple weren't particularly good and we're going to be looking and we're open-minded it wasn't any particular thing or any particular place it might be adjacencies it might be data related it might be a whole bunch of errors we have a bunch of skunk wars going on you know we have we hope chase UK that we continue to build that in a way that becomes a great European digital bank over time. It could take a lot of time and effort to do that. But you raise a good point.

Thank you. I'm glad to hear you're reading. My parents will be proud. Thanks, Jamie.

Yeah, I do, of course.

Thank you. Our next question comes from Glen Shore with Evercore. Your line is open.

Hello. Thank you. Just two quick follow-ups. One and the last couple of times you talked publicly, You had a couple of comments on the SmartCash tool that you're working on. I know you said it's nascent and early, but sometimes technology moves fast. So curious, status of the tool, when you might roll it out into who, and maybe a little more on your comments on you're going to have to pay more for money over time. I'm just curious.

So it kind of relates to the thing that Jeremy was talking about before about the velocity of money and how it's going to move in a new world. So we are kind of prepared for that. So this is still a test case. You know, banks, people are in a different position. And if you actually look at accounts, these don't relate to every account. They relate to a narrower segment of accounts and where you're competing for their investment business and their deposit business. So what you're going to see is certain tests coming out, and then you'll find out about what we can do, what we can't do. And we're going to learn a lot by doing some of that. And we think it could be good for customers and good for us. We're not, you know, just finding ways to waste money.

Okay, so still this year thing, I take it? Yes, you'll see something this year.

Okay, cool.

One other follow-up on you just touched briefly on it. I'm just curious of how you'd state your European consumer banking aspirations. You mentioned opportunities. You do plenty of business there, but you mentioned opportunities in each country by country. but maybe you could just sum it up in aggregate of what are you trying to be as a consumer bank across the major markets in Europe?

So we didn't, when we were talking about just bricks and mortar, we weren't going to try to compete because we couldn't have with local banks, their brands, their capabilities. And unlike the United States, over there we'd have to add all the overhead in different languages and different regulatory regimes, et cetera. And we have no real reason to win. Digital may have changed that. So we started Chase UK, I forgot, like four or five years ago. was a it was a complete startup you know and and we made you know a little bit of fits and starts but we have um i think almost three million or two and a half million customers in in the uk we have we've opened up in berlin we've actually done much better in germany than we thought we're going to do though it's not quite properly yet so we got to look at there is you have a platform the platform costs money as you can distribute across more and more clients and more and more countries uh you know you can get to the point where you're you know break even and then hopefully profitable and so we've added the investment products in the uk you can assume we're going to try to add them elsewhere uh and probably credit card uh uh and hopefully you know the dream would be that it'd be a pan-european successful digital bank building off of jp morgan chase's strengths you know we are a private bank we do have a upscale a huge business here We've got a lot of clients that go across the border. We've got a lot of, you know, training capability and underwriting capability and research capability. So, you know, but it's still adjusting over time. We've always called this, like, this is – it's not in-coit. I mean, it's not a brand-new thing, but it's developing over time. I have high hopes for it. And, you know, the management team is doing great. We tell them, you know, constantly come in and tell us what you want to do, what you want to do differently, what we've learned. And we're kind of patient, kind of.

Us too. All right. Thanks, Jamie.

Thank you. Our next question comes from Gerard Cassidy with RBC. Your line is open.

Thank you. Jamie and Jeremy, you guys have talked about you seeing some excesses in underwriting and credit late last year. I think it was Jamie. Jeremy, you talked about risk on in the capital markets. What are you guys seeing in credit underwriting from your competitors? Is it getting crazier or no, it's still pretty good? And what's the outlook there, please?

I mean, crazy is a strong word, but, you know, I spent some time looking into this issue like a week ago. And, you know, we did hear some example. I mean, I don't know, for whatever reason, I think the data center underwriting space is one that resonates with me as a kind of bellwether for what people are doing. And, you know, we passed on some deals that, you know, obviously, because when you look at the data center stuff, the key question is, like, what happens with power supply? What happens with tenants? What happens with, you know, it's a well-discussed thing. And we have a pretty precise framework to govern what we're willing to do and what we're not willing to do in that space across those types of risks. And we saw some deals come through where, you know, we were just like, yeah, we're not doing that. So, you know, it's normal, I guess. it's it's competitive and people are eager to be involved and you know in some cases there's ironically some element of like relationship lending that's happening through the data center space when it's kind of a startup entity that's building the data center so that's part of the story a little bit too but i don't think we're screaming from the rooftops that you know underwriting is underwriting centers have collapsed but i think you see normal pressures And we're navigating those in the way that we do, which is, you know, we do flex in some moments for particularly important clients in situations where we feel like it's the right thing to do. But in general, you know, we try to be the one that holds the line and make sure that we're guided by our own risk appetite and the kind of appropriately skeptical view of the environment.

We didn't talk about a huge deterioration in credit underwriting standards. I think we're talking about it's a very mild one, but it's across several spectrum, which is, you know, people, assumptions on revenue growth or add back of expenses, more PIC, weaker, some weaker, and this is not across the board, but it's more some players than others, you know, some weaker covenants, some people taking more rollover risk, and by that I mean if rates go up, how much interest rate exposure you're taking as opposed to, you know, underlying exposure, and it's just things like that. But it is across that spectrum you've seen a little bit of weakness, and the only point we're always trying to make is when there's a credit cycle, and there will be a credit cycle, how will everybody perform? And I don't think it's going to be like a bell curve of performance. I think there will be some outliers out there, just like there were, by the way, in the great financial crisis.

I totally agree with you, Jamie, on that. I don't want to sound Pollyannish, but on a question regarding the regulatory outlook, obviously we've got Basel III endgame. Hopefully it will be codified maybe by the end of the year. I know you guys have put out your remarks on it, and next year hopefully we get tailoring. Could you envision a period where, and again, I don't want to sound Pollyannish, but a period where the regulators are just set? Where do you go? Because the last 20 years, there's been constant change with the regulators affecting the banking industry. Could we enter a period where we have a stability in the regulatory environment, which could enhance valuations possibly for bank stocks?

Well, go ahead. I would break the question down into two parts. Like, could we envision stability and impact on valuations? On the question of stability, I mean, I don't think it's Pollyanna-ish to say that regulatory stability is a desirable thing. And I actually think it's a relatively nonpartisan idea. Like, you know, I think it's understandable and correct that, you know, there would have been a big reaction to the crisis and then maybe a reaction to the reaction and that the sort of amplitude of those oscillations might be decreasing and we get to a place where we've got it about right. And, you know, frankly, we get to a point where banks are primarily focused not on complying with regulatory constraints of various types, which should probably in general operate as backstops, but rather thinking about what their own standards are and what, you know, their own risk appetite is and have that be kind of the true north of any given set of decisions. And I think we're getting closer to that state, which will be good. Whether achieving that state would be, you know, particularly supportive of bank stock valuations, I'll leave that question to you. But at least I think for banks like us, I'm not convinced that's a major drag right now, to be honest, or that it has been in the recent past.

And I would just add this one legislative litigate Supreme Court decision that makes it less likely that we wouldn't have flip-flopping, which is a president can remove a lot of people more easily. But I'm hoping, I mean, what really should happen now is when they write legislation, they could be more clear about their intent and what they want. Because they could have written it and said, we want this independent, or you can only replace so many, or we don't want flip-flopping regulations. But I really like the fact that Mickey Bowman and Kevin Warsh are taking a step back and looking at the broad range of changes, which have been extensive over 20 years and never-ending, and often with no ultimate intent or intended consequence what they want in a system and outside a system makes it safer. But I actually believe we can make the system much safer, much safer. And that should be the real goal, you know, not just adding layer upon layer of bureaucratic reporting. You know, some of the regulators said that from now on they're going to focus on safety and soundness. Well, if they do that, we would have no MRAs, you know, because none of them related to our safety and soundness. They related to other issues. And I think if you relate to the safety and soundness, Silicon Valley Bank and First Republic wouldn't have happened simply upon they were taking too much interest rate risk, which was disclosed. That one thing. And so I just think the goal should be to take a step back, look at these things in the open light, be very honest about what worked and what didn't work. Like resolution did not work. Resolution recovery does not work. People should look at the discount window differently. And, anyway, if those things are done, I think we can have a safer banking system where we don't have to be breathless every time a bank fails.

Thank you. My thoughts, exactly. Thank you, Jim.

You guys are the guys who know so much about this that should be making some of these recommendations to the regulators. It's in all of our interest the system would be better. Not any one of us, all of us.

Agreed. Thank you, Jamie, and thank you, Jeremy. Thanks, George.

Thank you. For our final question, we will go to the line of Manan Ghassalia from Morgan Stanley. Your line is open.

Hey, good morning. Jeremy, as we think about the various expense buckets you called out at the start of the year, the volume-related expenses, bankers, tech, marketing, I know a majority of the increase in the expense guide is coming in the revenue-related line, but are you also bringing up some of the other categories, you know, maybe pulling forward any tech or marketing spend given the environment?

Yeah, there's some of that stuff going on. So I'm trying to sort of keep it simple and disproportionately focus on the big driver, which is obviously volume and revenue-related expense. But as is always the case, there are some ups and downs, some of which relates to things like our marketing strategy, which I probably don't particularly want to disclose. But I think one topic which is not financially meaningful this year, but which I think is interesting and may be coming in the future, is the question of token expense. Because that is something that we're spending a bunch of time on, I think, as, you know, probably pretty much everyone in corporate America is. So just for the avoidance of doubt, it is a trivial number for the first half of the year. We are forecasting some meaningful acceleration of that number for the second half of the year. But still, nonetheless, the full-year contribution of that is still trivial, and obviously we had budgeted some of that, so it's not in any way a meaningful driver of the current outlook or the revision of the outlook. but obviously you know when you listen to the frontier labs talk they talk about the exponential and the acceleration uh of usage which is obviously driving their revenues and you know someone's paying those bills and we're in a sense like a representation of the economy as a whole that we're probably lagging a little bit some of the you know cutting edge adoption and usage as we should given who we are as a company but it is an important question for us as we go into next year and the subsequent years and I think the good news is that we've done a lot of really high quality thinking on this and a lot of the infrastructure that we've built over the last couple years is going to position us to be quite sophisticated about using the right models for the right purpose I mean just to use one sort of topical example no offense intended to those of you who tend to write slightly long reports but as you can imagine sometimes people like to summarize those reports using AI tools and as you know the tools are quite good at doing that and you know you really don't need the latest cutting-edge you know incredibly expensive model to summarize analysis reports and the idea is use the right model for the right purpose be smart about open source were appropriate and sure that you're getting value out of it ultimately in the end you know either we're gonna have a lot more capacity or we're going to have a lot more efficiency or both, or we're going to have better revenue outcomes, or we're going to compete more effectively, and we just need to be disciplined about how we handle that. So, that's a body of work that's happening right now.

Got it. Very helpful. And then, maybe just on CIB and the increased capital allocation there, I guess, how nimble do you expect to be there? Do you think we're at peak allocation here? Are there any internal limits that you might be rubbing up against, or is there room to keep allocating more balance sheets to the business if the environment remains where it is?

I mean, I'm definitely not going to get into discussions with you about, like, internal limit management. I guess it was on the press call, so many of you didn't hear this, but I did get a question about this, and I think you said this correctly, but I just want to throw on the side of being precise here. Sometimes people think about capital allocation almost as if it's a hedge fund where you're, like, giving a pot of people some capital and telling them to go use it. That's not the way it works. It's the opposite of that. In other words, we have demand from clients to support them in various ways. And to be clear, we also have some what you might describe as passive effects, like, obviously, when volatility is higher, market risk capital goes up passively. and simply the appreciation of global equity markets increases, you know, the RWA associated with things like the prime business. So you've got active and passive effects, but the active effects are us responding to client needs. And obviously we've got, you know, a ton of access as a company. And as Jamie said, our primary goal is to deploy that organically. So when our CIB clients want us to serve them, and we can do that in ways that make sense for us from a risk appetite and from a returns perspective we've got plenty of capital to do that and so you know we do that sometimes there are other financial resource constraints and that's part of what we do for a living is trying to manage that stuff and you know i talked a little bit at company update if you recall about the system and the fact that the system is currently quite flush with capital but at the margin less flush with liquidity and that's obviously an area of advocacy especially in light of uh you know the stated goal to reduce the size of the fed balance sheet you really need to reduce bank demand for reserves to get that done and so that in turn probably requires some

adjustment to liquidity regulation so that's uh you know the next thing on the agenda right and our but our risk standards haven't changed it was you know it's possible some of these change because people self-select and pick somebody else and that would be fine with us Got it.

Thank you very much.

We have no further.

Thank you.

We have no further. Thank you all for participating in today's conference. You may disconnect at this time and have a great rest of your day.