Thanks everyone. Very happy to have JPMorgan Chase CEO, Jamie Dimon, joining us. Jamie, thanks so much for coming back. Great to have you here.
Thank you.
I was hoping to start off with a few follow-ups from Investor Day last week.
Okay.
A couple of things on folks' mind after
Through the year about stock buyback.
Yeah. So I mean, I think, you know, for context, last week, you know, share buybacks are something investors are clearly very focused on. You're generating a lot of capital. If we fast forward a year or two, you'll have quite a bit of excess capital. So yeah, the comments about being valuation sensitive caused some stir. Maybe you could give, you know, a follow-up thoughts on how you think about that.
Let me just totally clarify. First of all, welcome everybody. Totally clarify, we told the world we're buying back approximately $2 billion a quarter. We continue to do that. Jeremy Barnum said we might do more. There's a logic to use the Visa after-tax money to buy back stock, because it's market neutral. So Visa goes up and down, and JPMorgan, I'm not going to tell you exactly the timetable of that, but think of that as a very rational thing to do. We've been doing some of that, we'll continue to do that. And from there, we could do more or less as we see fit. There are no promises on any which side. We've always been sensitive about the stock price. I do not believe that buying back the stock at any price is the same thing, and that we should be thoughtful about that.
So as the stock goes up, we buy less. As the stock goes down, we probably buy more. We are, we are going to end up with a lot of extra capital, and we're not going to just spend it because it happens to be sitting there. I personally think the valuations in the market are high. So it's not that we're saying JPMorgan isn't properly valued relative to the market. I'm saying that the market is high, and I think it's a mistake to be using all that capital at these market levels, and so we're going to be very patient. It's a good problem to have.
I look at ownership of a company no different than if I own the company. I wouldn't have any problem having excess capital sitting there for a while. Zero, none, nada. You haven't lost it, you haven't wasted it. It's earnings in store. We will find ways to deploy it, and if we don't, we can always make a big special dividend. We can do something like that, which is not my preference for a whole bunch of different reasons, but we're going to do it, which in the interest of the long-term shareholder, and so, does that clarify it?
Yeah.
Okay.
Absolutely.
Can I clarify one other thing? Because I looked coming down to your analyst projections, you know, roughly. I'm not going to comment on every line item. We have told you that we're going to be adding reserves, mostly for credit card, and you have not put it in your models. It's about $2 billion this year. It's about $500 million a quarter. Okay? So change your models. And there are, there will be other ins and outs, but literally, as the credit card balances go up, you have to add those things, and, and obviously, CECL, we can change CECL too. You know, assuming we don't change that, all things being equal, it's a credit card add for a bunch of the growth, the growth of portfolio.
$2 billion is what you expect for the year on reserve build for card.
For that, yes.
Yeah.
There'll be other ins and outs, yeah.
Okay. Another follow-up, topic of CEO succession came up.
Right.
You clarified that, you know, your time in the CEO seat is inside of the five years now.
Yeah, probably.
Um, probably?
Yeah.
Yeah. So-
It's totally up to the board. You can ask me all you want.
Yeah.
But the timetable is less than five years. You know, that could be 4, it could be 3, it could be 3.5, it could be 4.5, it could be 2.5. It's up to the board. The board will decide. We've got some great succession, you all know them all-
Yeah
so you should evaluate that yourself, but, and then there may be a term as chairman for a while after that. That's, again, totally up to the board.
So, two things. One, we've all seen cases where the retirement of iconic CEO leads to subpar performance afterwards. Besides the good bench, what else is ingrained in JPMorgan that gives you confidence that the company will continue to be successful when you're not CEO?
Oh, I mean, I think we have extraordinary management. Again, which you know, I mean, you guys should evaluate yourself one day, but you know a lot of these people, how capable they are. And I think there's an extraordinary discipline. You know, when you have, when you've built the 82nd Airborne, if you want to build an army or an 82nd Airborne or 101st Airborne, something like that, and you go to a foreign country, and you try to build it, it takes you decades. Okay? Just the, it's the equipment and the training and the culture and the character. We've got an 82nd Airborne. It's not going to go away overnight because, you know, you have a new CEO or something like that. There are all these disciplines that take place. You know, Charlie's building those disciplines.
Some of you just heard it in at Wells Fargo. You know, reviews, detail, analytics, observation, looking at competition, risk controls, all those various things. So those things will be. Some of those things are machine. And obviously, hopefully, the depth of management goes way beyond just the top people. It goes into every trading desk, into every branch, into every business. It goes into innovation. You know, the things we've been doing for 10 or 15 years have been... You know, we've been doing it for a long time. So hopefully, it's ingrained in people and in the board, by the way.
Just on that other topic, what is your view of the pros and cons of remaining on as chairman after you're no longer CEO?
You know, I read. There's a newspaper article today, and, you know, I love it when these people make binary statements. It's good, it's bad. They. How the hell do they know? That's why you have a board. The board should decide what's in the best interest of the company. And, you know, the chairman, the separation of the chairman and CEO or the chairman and CEO, there are tons of examples where chairman and CEO were separate, and it was really bad for the company. Global Crossing, Enron, WorldCom. So when they write these articles, this obsession with that thing, does the company function? Does it function properly? Does it have good governance?
I pointed out one of the most important governance things is that, and I've been doing this since Bank One, every single meeting we have, they get to meet all the senior people. They know them all well. But also at every meeting they have, I leave the meeting at one point, and they meet separately without me. And it's run by the lead director, which basically has the same authority as a chairman. And at one point I wanted to get rid of the chairman title, just have a lead director and a CEO. I mean, like, who cares? I mean, we're overstating the importance of this issue at one point. And then also afterwards, there are a lot of things where people stayed for a year or two, and it worked.
There's some examples where chairman stayed, they were there, they were a great partnership, and they went on for years, you know? So there's no magic to it, but the board should do the right thing. If the chairman is getting in the way of the new CEO, they should go. If the chairman is helping the new CEO in a million different ways, they should stay. And so, I applaud what Jamie Gorman did.
I think they did a great job. My board, you know, we gave the board studies of multiple successful and failed successions. There is no magic formula, but the quality and character and content of the people is probably the one thing that matters the most. Will people do the right thing? I'll do the right thing when the time comes. I don't have to hang on to the CEO or the chairman role forever. You know, I got fired once. I was fine. You know, and so I... You know, we'll do the right thing when the time comes, and so.
Great.
But I don't like cookie-cutter solutions. I. That's always wrong. Whenever I go to Europe, you know, it's the endless subject, particularly the FT, chairman, CEO, conflicts, but they never actually analyze it. There's no evidence that that's true, you know, and of course, America does much better than European companies, so maybe they don't have it right.
Maybe just one more on the Investor Day, for those that weren't there. You talked about areas where JPMorgan is doing great, where you're big-
Yeah
great market shares, but you said you also wanted your leaders to highlight where there's still opportunities, where you're undersizing. What are some of the key highlights there, where you still see-
I love it when, you know, as a part of the management team, if you were JPMorgan Chase, you know, I don't like, you know, inside, and we celebrate lots of stuff. We do road trips, we congratulate people, but in a management meeting, you know, we, and my view is emphasize the negatives. You're not here to toot the horn. A CFO is not there to put the best foot forward. There's none of that. It's like, what is the truth, the real—how are you doing relative to other people? Where are you weak? Where are you strong? Where does someone kick your butt? You know, where's—So I love it when, you know, they showed the, Troy and Jen showed the CIB, you know, where we're number one, two, or three in, you know, 22 of the 23 products, stuff like that.
But I love the second page more, when you break it apart by product, by area. So think of, you know, FX, credit, macro, you know, equities, cash, derivatives, prime, ECM, DCM, M&A, and you break it apart by region and stuff like that. Now you have that set, but we're not number one, two, or three in, you know, in half of it, you know, and why not? Why shouldn't we be number one or two or three in FX trading in Asia or in the country or something like that? And that highlights, that kind of heat map highlights where you can do things. That, that you could do that by city, by state, by country, by business, by product, by service, and we do.
You know, and they showed you charts in consumer where, you know, we're number one, two, or three in market share in this place. Those will show you that market share matters in terms of profitability, and and we did it. We could do it in payments. We could do it, you know, they showed you charts in payments where we're, you know, we're really good with we were the bankers' bank, so we're really good with financial institutions, but we had we were short versus Citi in tons of corporate areas, you know, and corporations, I mean, and stuff like that. And that's how we do it. We look at those things, we look at opportunities, and then behind that, you have the investment in pro, you know, product, services, technology to help drive that.
Huge, I think, you know, Chase, you right, we talked about Chase Offers and Chase Media. I like I just think that's going to be a great thing over time as we get good at it. And so... And of course, building the infrastructure is going to be important, you know, any bankers and countries, but they're all important, and we kind of lay it out for you. That's what we're going to do. I think some of that stuff won't change for a decade, by the way.
Mm-hmm. So it's been a year since we had significant turmoil rock the banking sector.
Yep.
How do you size up the health of the industry in general, and in particular, the smaller regional banks?
Well, you have to scenario plan, okay? If we have a soft landing and rates stay where they are, come down a little bit, which is what the world expects, then everyone's fine. If you have a harder landing with stagflation, yeah, you're going to see a lot of stress and strain in the system, from banks to leveraged companies, to real estate, to a whole bunch of stuff. That's what it is. If things get worse, it's going to filter right through all those things. And I, in my view, is the world's just not ready for that. I mean, a lot of you in this audience have never seen rates at 6% in a 10-year bond. And I don't know why you think it's not possible. It is possible.
You know, for one, I think the odds are much higher than what people think. So if, you know, you gotta look at the scenarios for that, and so... But I also think, what I see a lot of banks doing in particular is, you know, thinking ahead in terms of capital, interest rate exposure, real estate exposure, reserves. They gotta go bank by bank at that point. You know, it doesn't help to make a generic statement about banks. But I think, you know, real estate, too, I remind people in real estate, you know, because I heard you, Charlie, talking about it a little bit, rates went up 300 basis points. That makes any cash flow worth 30% less. So it's got nothing to do with real estate.
If an asset was worth $100, it's now worth $70. If people were lending $60 against $100, they're now lending $50 against the $70. That's all it is. That's not even real estate. That could be almost any asset out there. So, and of course, people, you know, have personal guarantees. They put in equity, and a bank will roll over, not at 50%, but maybe 90% to keep the thing alive. But that is kind of math. That's, I call it, that's the gravity of interest rates.
That's a cosmological constant. And, and so, you know, people need to be prepared for that. The surprise will be stagflation. I'm not saying it's gonna happen, I just give the odds much higher than other people. I look at the amount of fiscal and monetary stimulus that's taken place over the last five years as being so extraordinary, how can you tell me it won't lead to stagflation? Now, it might not, but I, you know, I, I, for one, we're quite prepared for it.
You mentioned that from a regulatory angle, we still really haven't addressed the things that caused problems last year on the funding liquidity side. What are the key-
Yeah, well, they're talking about it now because I saw some speeches that some of them gave. You know, you know, should I never liked HTM. You know, like, and so the amazing thing, and this goes on to, like, you know, regulations, I mean, and capital and Basel, incented you to put them in HTM. I don't know why held to maturity, something you cannot sell, you've tied your own hands, is better from a capital standpoint, when people walk in your office and say, "Well, you know, it's a 25% return in HTM, and it's 12.5% return in..." But it's the same security. I, I, I just don't get it sometimes, and people actually believe some of these numbers. And so I think there should be restrictions in HTM.
But based on something, I'm not gonna, you know, it could be based on your long-term debt or, or something like that. But, you know, to me, there should have been more analysis and interest rate exposure. It was well known, you know, that what these people are doing and stuff like that. So. And then liquidity, I think they should take a deep breath on liquidity, because liquidity is a big mumbo jumbo of stuff at this point. And what you want to do, and I agree with the term of the discount window, absolutely, that should be a real source of liquidity. But if you're going to use a discount window, you should change LCR to mimic the discount window.
That creates real flexible liquidity in the system, where you can lend and you're backed up by the Fed, as opposed to today, you know, LCR is HQLA and treasuries and stuff like that. So you're. It's very rigid. It will cause a problem one day. So I think they should look at the whole liquidity regime, and liquidity is the big point. It was never capital. You know, so when we look at capital, you know, and CCAR, you know, you better be a little careful to think that those things... It does lull people a false sense of security. I always looked at CCAR, we always did stress testing. Now it's like 80,000 pages on one test, and we do 100 a week.
So the way you protect yourself is the 100 a week, that you can handle various types of stress tests, which are things you've seen, the 1987 crash, the 1994 bond ramp, the 1997 market crash, the 2000 internet, you know, the '04. I mean, that we should be able to handle all those things, roughly, and we can, but barely. It'll never dent capital, you know, but it, but it can cause a crisis if people lose a lot of money or if they have liquidity problems, something like that. So I do believe in that. I just think my own view is it's time to revamp the whole regulatory regime. It's literally got. It's, it's all barnacles and added on top of each other. I mean, people should take a step back and say: What is it we're trying to accomplish? And, you know, international standards.
Do you w hat is the international standards? What makes— I think you can make banks completely run-proof if you want, and just get rid of this idea that, you know, depositors will lose money if something goes wrong. Just get rid of it. You know, because I'm tired of every time there's a kerfuffle in a bank, you know, the whole system gets rattled and stuff like that, and, you know, maybe we should end that. And there are ways to do that, which, you know, if people want to have a serious conversation about how to do it. And when you look at the uninsured deposits, you should look at runnable deposits.
You know, they're not one class of things, but you should—you can make all runnable deposits fully backed and have a very healthy banking system with lower capital requirements, not higher capital requirements. And I—look, I think they should do that at one point, really take a step back. I mean, if I were them, I'd take a deep breath and look at everything.
Using insured and uninsured is overly crude, right? Because you're missing some of the nuance there.
It's totally overly crude because, you know, if you are, you know, a big corporation, you're gonna have a billion, you know, billions of dollars in your checking account, you need it there. Not runnable the same way, but that might be backed up a different way than you back up uninsured or small businesses or middle market or, you know, and then you could do analysis if you just change the guarantee to a million, what would that do? You know, change it dramatically. They all relate to each other, so. But if you want, you know, if you want these medium-sized and regional banks to survive, you better be careful what you do at this point. You need to allow them to merge, they need the economies of scale.
You know, too much capital will drive them out of certain products, you know, loans and deposits. With these capital numbers and liquidity numbers, loans and deposits become very hard for a bank to do. And so now you have this huge growth in private credit. If that's what they intended, so be it. They should tell you that with a forethought, the mortgage business, you know, inside a bank, I mean, you could sit here and say, "Why would a bank have a mortgage business?" You know, and if that's what you want, then they're talking about, you know, Janet Yellen came out and said, "Well, the, you know, all these mortgage brokers now, mortgage originators and brokers and servicers, they won't be able to you know, finance their business in a downturn, so we should have a backup facility from the government for them." Really?
Is that what you really want to do? Just another one of these ridiculous backup facilities for an industry that doesn't deserve it. I mean, why should they put up the liquidity for their servicing requirements? And, you know, and then it gets embedded in the cost of the product, which the cost of mortgages will go up. You know, but banks have flexible liquidity and capital, you know, some of these other folks don't. So, all these things are gonna have, you know, ramifications down the road.
I also think they have, and this is important to me, I think they have ramifications to public markets. You know, that our public market is getting smaller and smaller and smaller. Is that what you want? And that's a function of capital regulations, requirements, litigation, SEC rules, you know, frivolous shareholder meetings. You know, our, I think our 10-K is now even smart people tell me, "You guys don't disclose this, and you don't." I say, "Yeah, we do. It's in the 10-K, page 410." You know, and even that, you know, just endless requirements, and we just, we just—we should—we have the best markets the world's ever seen. Let's not destroy them.
You mentioned it's helpful to have a mix of small, medium, large banks.
Totally.
With tech costs, regulatory costs, it's hard for small banks.
It's different for different banks. So if you look at small community banks, there are some who are very profitable. So I'm not saying here that economies of scale is important to everyone. You can run a single branch or four branches and run a very profitable business because you are very good, and you're relying on other people providing technology to you, as FIS, Fiserv or, or something like that. They remember, they're going to be providing, over time, AI and other products and services, but other banks are in a position where they need economies of scale. So if you're trying to compete with, you know, some of us in certain products, you need economies of scale. And so they should decide in their own circumstance what their strategy is, what their service is.
There are some banks who are very specialty banks, and they've done great, you know? And so you got to be careful to predetermine it. That's what you have boards for and shareholders, and so but some need the economies of scale, and they want it, and they're going to feel disadvantaged if they, you know, doing a deal takes them two years to close it. So if you're a board and you're sitting there facing, you know, a two-year time period, that's the regulators should be predetermining that.
That's a political decision, you know. Let them decide, you know, if you are owning these banks and putting them together, they think they can manage it. And it's hard to merge banks, I agree with that, and some don't succeed. That's called, you know, capitalism, but some succeed. You should allow them to decide on their own about what the strategy is going to be.
So you've had massive growth in net interest income over the past few years, you know, aided in large part by the ability to keep consumer deposit prices contained. What surprised you about Chase's ability to stay disciplined on pricing and also grow core relationships?
Yeah. They're, they're two totally different things.
Mm-hmm.
First of all, remember, the first part of the growth had nothing to do with betas or stuff like that. You know, going from 0 to 2, when we went from 2 to 0, you know, we didn't—we bore the full cost of that. So the first piece, it was just taking back what hadn't been there before. You know, an average on deposit, I mean, if you, you got to look through multiple betas, it's not that different than the past, you know? And so the spread, when you get to 2.5%, some banks to 3%, that's all you're going to get. Once you get there, the beta becomes, you know, 80% or something like that. So the uncertainty here is the amount of fiscal stimulus and monetary stimulus is extraordinary. The amount of QE was extraordinary.
We don't know the full effect of QT. Obviously, the markets are different. You got, you know, a lot of, you know, fintech companies out there and different people holding money and moving money, so you don't really fully know the full effect on beta, but it hasn't been that different. I've been on the more conservative side, you know, and I've been wrong. So, you know, Marianne Lake and Jennifer Piepszak, I would tell you, Jamie was wrong. He'd say, "Yeah, I was." I'm still on the conservative side because I do think there's you see, and the competition is very local, by the way. You know, it can be very different in Nashville than it is in Austin, and so, you know, we're conservative. But, but it's playing out kind of what we thought.
And, you know, the question is: When will it might get more competitive for us? I tell you, some banks are competing more for dollars and others aren't. You know, so you have to think that through, too. It isn't just, you know, it's not the system, but, you know, at one point, the spreads will stabilize, and it'll be fine. But when we look at the business, you got to manage the business through that. You can't, like, build branches and run your business like you're thinking that, you know, your spread's 1% or it's 5% when it's not going to be. So actually, when we think about the investment horizon, we actually look at more normalized spreads for a lot of different things, by the way, not just consumer NII.
Yeah, and on that, on that question, a lot of banks have been shrinking their branch counts, but last week, at Investor Day, Marianne laid out the case for why you've gone the other way. You doubled down on branch banking. You've become the only bank with branches in 48 states. Why, what still makes branches so important, even in the face of all this digital?
So we didn't, we didn't double down. What we did is, if you look at it, we are also consolidating certain branches where there's logic we should consolidate. Now, I'm a real skeptic about that. Okay? When I got to bank, when they were consolidating, you know, clicks, not bricks, you know, they were closing branches to make a $1 million a year profit. They would have made a $1 million a year profit for the last 20 years. I mean, what in the hell were they thinking? And by the way, Chase was doing the same thing. So it might be very analytical about what you close, why you close it, what you can keep. I give you some very specific examples, but I stopped closing a branch, and they, you know, they act like I'm interfering. I say, "No, I'm not interfering.
Don't close that branch." I'm not going to give you all examples. I don't want to tell my competition why. And also, it's like I say, "If you close that branch, you know who's going to open there? Wintrust, Cap One, like, tomorrow. Take the lease, move in." I remember, actually, I think I was at a Bernstein conference once, and I was in the back listening to... Who's the guy who built Commerce Bank?
Vernon Hill?
Yeah, Vernon Hill. Vernon Hill was up here, and he's doing a flip chart, a slide presentation for you all, and he was making fun of Chase. And he said, "You know, they closed this branch, I moved in. They closed that branch, I moved right in." And when he was walking down, I said, "Vernon, that will never, ever happen again." And I put in place a rule at the time that you couldn't close a branch without my permission. Because, you know, they would say, "Well, well, you can move to the second floor." He took 100% of our consumer business. 100%. Even if there was a Chase branch a block away, you know, "Well, they'll just go to the other branch." No, they didn't. They lived, they wanted that branch.
And of course, he did other things that got the good service, and then we opened branches too, because there's always places you should be opening branches, always places you should want to gain some share. And the 48 states is allows us to do other things in the states, and it's kind of a foot, a foothold. And, you know, we have a strategy around that, which I think she alluded to a little bit of a covering more people within driving distances, a little bit more rural, certain and there's certain different types of branches. So, we like our branch strategy. I think she said that nine out of 1,000 people visit a day.
So remember, you don't have branches because you have a strategy department, or you have a CEO, or you have marketing people or salespeople making statements. You have branches, you have customers who like them. People like to visit their money. That's what it is. And the branches, of course, have changed their nature over time, more advisory than operational, et cetera. And we can always adjust the fleet. So, you know, if you said to me, you know, "Well, what if, what if you're wrong? We could adjust the fleet very quickly." Okay? It's not. It literally wouldn't be that big a deal, you know, between leases and selling stuff and, you know, modernizing some of the branches, so.
Things worked out well for you, better than Vernon Hill. It seems like, because of the other side of the balance sheet, really.
You know, again, I would look at people like, I know Vernon, I still see his stuff, but you always look at every competitor and say, "What do they do that's better?" You know, and remember, they had those little machines that would put your coins together and gum for this, and biscuits for the dogs, and more hours and, and, you know, customer service works. So he did do a lot of things right, and you should always learn from that.
Mm-hmm.
When I got to Bank One, and they shout, Jamie, you know, got me cost efficiency and stuff like that, and that they would get rid of the coffee, the lollipops, and the dog biscuits in the branches. Well, if you go visit a branch, I mean, you could see dogs pulling their masters into the branch to get that biscuit. I mean, and they even would come into the drive-thru, and their tails be wagging, and they send the biscuit through the pneumatic tube thing, you know, like, and you don't get rid of stuff like that, you know? And some people like to visit the branch because they just are lonely, you know? And just you got to be really thoughtful how you run a business. Don't think it's all about math sometimes; it's not. And there's some wonderful story.
We had, we had a kid killed in a branch yesterday with a gas explosion in Youngstown, so, it was a terrible thing. But, you know, the branches are human. They deal with customers. You go- I go to these community branches. If you don't-- If you haven't been to one, there's one in Harlem, there's one in Fordham Road in Bronx. Go to the community branch, sit there for an hour and a half, watch the people walk in and out, and tell me it doesn't work. You know, and some of you guys used to do those branch visits.
Mm-hmm.
What analyst does them? Someone does it.
So they're not as much anymore, but-
No, someone writes every year about their branch visits. Anyway, you know, and I read that analyst report in detail because they're learning about, you know, what the people do this well or not well. I read John, too, by the way.
Yeah.
He's very good at what he does.
Not that report. But you've got the goal to go from 11% consumer retail share to 15%, and some of that seems baked in the cake from some of the investments you've made and all of that. It's a multi-year.
Yeah. They're all, you know, they're... You showed the branch growth that have been around for 15 years. The branch growth is only 5 years old, so you can build in what you think is going to happen down the road.
Mm-hmm.
But obviously, we want to cover more people, cover more accounts, more product, more deepening. You know, we announced today that I think it's been announced. If it's been announced, I'm announcing it now, that our self-directed investing, we've added fractional shares, we've added better kind of research. We've got like five or six different things. One day, that self-directed investing will be really good, and then you're going to see us really push it. And then you're going to see, because we have competitive advantage on it, and so, you know, I get very excited about that. When you can, when you can do certain things at Chase, that you can maybe, JPMorgan Chase can't do it. I also think our Order Match system will be better than payment order flow.
I'm going to try to prove that to Mikael Grubb over here. I can probably prove it, that you're going through our Order Match systems, and we give our consumers the same order match effectiveness that we give our host- our big wholesale clients. Okay, so you know, payment order flow has a deceptive characteristic to it, and so I, you know, I think there's advantages that you're going to see us try to take advantage of soon in self-directed.
So, um-
Chase offers Chase Media. I think, you know, if you have a Chase account. How many of you have Chase accounts? How many of you have Sapphire card? Okay. But you're gonna get, you know, you get offers at the bottom of your account, the bottom of your, your Sapphire card, if you go online, you're gonna get more and more highly relevant stuff. It'll take us a while, but, you know, we're building the systems to give you some really neat stuff.
And also, Chase Media allows other people to come in, and, you know, if you like golf or, or you, you know, and we make it consumer-friendly, so we're not just bombarding you with, which we do a little bit today, with stuff that is irrelevant. I tell the people, when you give me offers to have my nails done, you know, downtown. Really? You think I'm gonna, like, drive downtown, and I don't get my nails done? I'm not. I wouldn't even go downtown for a meal anymore. It takes too long. My God.
So on that topic, AI came up quite a bit at Investor Day.
Mm-hmm.
You talked, you said it's already interwoven into many of the businesses on having an impact at JPMorgan today. Just again, for kind of the broader audience, what are some of the examples of the biggest opportunities banks have to leverage AI?
I think people-- I think the best thing is to stop talking about what you're going to do. How... It's already here. We've been using this since 2012. We started our own department in 2013, you know? And, and, you know, to me, as a management thing, every time we have a management thing, there was-- I didn't go yesterday, Daniel Pinto did it. But, you know, every time there's any kind of review, it's also, what are you doing on analytics? Think of AI. It was true, by the way, before AI. It was analytics.... We're always doing deep a- analytics and deep math on credit, marketing, and underwriting, and now it's just a whole another level of that, where you can, you know, find correlations and things you couldn't-- the human eye couldn't do.
There, I think we said there are 40 use cases, probably by the end of this year, maybe 800. As management teams are getting better, it's not understanding AI, it's understanding how it works. That you say, "My God, you mean you can do this for me?" And so we use it for prospect, marketing, offers, travel, note taking, idea generation, hedging, equity hedging in the equity trading floors, anticipating when people call in, what they're calling in for, answering customer, this is on the wholesale side, but, answering customer requests. And then we have and we're going to be building agents, where it not just answers a question, it actually takes action sometimes. And just this is just going to blow people's mind.
It'll affect every job, every application, every database, and it'll make people highly more efficient. Like a lot of you, clicking away, taking notes, you won't have to do that because it'll—you can just summarize what Jamie said, you push a button, and you don't have to waste all that time. And it's just powerful stuff. And, you know, we use it for risk and fraud recognition, and bad guys are going to use it, so we have to use it to counter the bad guys. We have to use it to get better and better in cyber. So it's going to be everywhere. And I think, you know, for smaller banks, too, it'll be offered through AWS or through Fiserv or FIS, so it isn't like they won't have any access to that.
So, you know, I think we're in good shape, but it also will create some disruption. Maybe in payments, something where people use it to build something better, faster, that we, that we just didn't do or something. And, you know, to me, it's just part of the management team now. We have someone on the management team, very experienced. Some of you may know, Teresa Heitsenrether, who is now responsible for data and analytics, because they're directly related. Getting to the cloud, private-public, is directly related to access the compute power you need, and then to go across all the database in a way you never used to do it before. And then there's a mirror inside credit card, consumer, payments, trading, banking, to do the same kind of work. And we're just getting smarter and better at it.
But in the meantime, the other thing, what I don't know is the pace by which all these things will happen. Because, you know, we're, we'll probably be adding headcount at AI for quite a while, so you'll see our costs going up, not down. We think there are benefits. We do try to measure, you know, ROI and NPV. In some cases, we do, in some cases, we don't. I think it's like a waste of time, but it is, it's super real. And it's, it's a continuation of the deep analytics we were doing years ago.
Maybe you could talk a little bit about the importance of some of the-
I think we gave some of them some very specific examples at Investor Day. The KYC cost down 50%, 80% faster, and that was, like, literally taking one person who was an AI expert, saying, "Attack this problem." And they just attacked it once. Wait until they attack it four times. And so think of, you know, when you ever deal with the bank and you're like: Why is this happening that way? You know, we should get... OSAT should be going way up to this.
Like you said, you've been doing it since 2012.
It will eliminate jobs, too, by the way. So, you know, in my view, don't be afraid of that. Get ahead of that. You know, I mean, a management team shouldn't be putting their head in the sand. They should be observing and, you know, thinking about what it might mean, because if you're ahead of it, you can save your people a lot of aggravation. You're not going to wake up one day and have to lay off 50,000 people. You can build it into your plans. And that's where I always say, attrition becomes your friend. You know, you do have 20% attrition, a lot of jobs, and therefore, that's 40% over 2 years. So you can plan, retrain, et cetera, if you think ahead a little bit.
So can you talk a little bit more about these adjacent businesses and how important they could be to the future for you? You've got a travel booking portal. You mentioned Chase Media Solutions.
Yeah.
you know, what, what's driving the opportunities there? Is it, is it technology?
So in every business, you know, I don't know if adjacency is the right word—in every business, the goal is to do a better job for your customer, see it from the point of view of the customer. So in a lot of cases, just making it better, faster, quicker, cheaper. You know, we add a lot of services for nothing. So think of today, you know, when you go online, you know, you've over the years, you have Zelle, you've got free trading, you've got more data, you've got more analytics, you've got free wealth planning, you got free... So some of it's just doing a better job for the client. Some of it may create revenue opportunities.
So Chase offers Chase Travel, where if you book through us and we can offer you better deals, you know, we also can earn the travel commission effectively. So we're both doing a better job for you, and we create another revenue stream. And that's true in every business. You know, I always tell people in a lot of wholesale businesses, we actually price by the drink. You charge a little bit for everything. A lot of consumer businesses, they're bundled. I just gave you an example about your account, so, but some aren't. And so, but anywhere you have data that you can use to make a client happier or offer them something they want, you know, you can maybe charge for or not charge for it. But think of, you know, even in, I don't even want to tell you some of these things.
In certain areas, where we can anticipate something and offer the client something better, quicker, cheaper, faster, and it's better for us, too. And so, you know, we obviously, we have to do compliance and regulatory stuff like that, but, it's, it's endless. And with our data, you know, like I tell people, we know, you know, we might know where you eat at night, on a Friday night, that you like Chinese food. So maybe the small, new Chinese restaurant, one block from where you eat every, you know, Friday night, we'll offer you, you know, you know, $30 off or even a free meal to get you to try it. That has to come through our data and, you know, small business will be very happy, and the client may be very happy.... Well, that's kind of a win-win, right?
So that could be for big companies, it could be for small companies. We have deals with some big companies already, and we could partner with people, and so it's anywhere. Small business, I think I've always looked at small business area that we should be able to do more to make their lives easier, a lot more. And you see it with things like Toast, you know? But the things that we can do, too, and or working with the Toast, you're embedding payments, something like that. Medical, I'd say, is gonna be a huge area, medical payments, so each area, we go through each one, and, you know, we expect the teams to be thinking. adjacencies data, customer service, OSAT scores, better, faster, quicker, cheaper.
So in your chairman's letter, you talked about the role of private credit, and maybe just give us a little bit of thoughts on how much of that-
Yeah.
Is a threat to banks, is an opportunity for banks, a little bit of both?
It's a little bit of both. So first of all, I'm trying to be neutral. Not neutral, but, like, really assess it, as opposed to, you know, just have a knee-jerk reaction to private credit. I already mentioned there is this issue about stuff going private. So as you know, private companies, private equity, private credit, and that's. There's a policy issue where that's good for the country in the long run. We're the most transparent market the world's ever seen, that's. By that, transparency is rule of law, research, disclosures, ratings. It's not just one thing. And, you know, it's also access to investment. So as they go private, there's less and less access. And there's. Then you have to ask the question about: Do you want to give access to retail clients or some of these less liquid products?
Well, the answer is probably, but don't act like there's no risk with that. So I, I will make a prediction on that one. So now, private credit, yeah, it's, it's, in some way, there's a lot of good stuff. You know, these folks came forward, direct lending, private credit, like, they'll sign a unitranche deal, they will do the covenants differently, they'll moderate it, you know, they'll modify it for the owner and stuff like that. They know the business. They might be a long-term investors. They're not going to be asking the business to do stupid short-term things to meet, you know, covenants. It could be good owners. It could be a good thing. And, you know, the fact you could stay private for long is probably a good thing. The fact you can raise, private capital in your private company is probably a good thing.
The fact that you could get. So that's all good. But not all the people doing it are good. And so I think some of these people are brilliant. I mean, so I, you know, I know them all. We bank a lot of them. They're clients of ours, but they're not all good. And the problem in financial markets is often caused by the not good one, the people who make the mistakes, and that you have illiquid products, maybe they're not properly marked, they have not been stress tested. You know, I, I'm. Do people really fully understand what I said about interest rates affecting what these things are worth? Do they?
And if a little old lady finds out that she can't get her money back, and there may have been disclosures there saying, you know, this money's locked up for five years, but you know what? The retail clients had to circle the block and call their senators and congressmen, and there could be hell to pay. And you know, the transparency around the marks, and the lack of research, the lack of rating sometimes. Even I've seen a couple of these deals that were rated by a rating agency, and I have to confess, it shocked me what they got rated. So yeah, it reminds me a little bit of mortgages, okay? And then they're going to blame the banks on the mortgages.
And so the rating agencies were rating them. They said they're double A or triple A, but they, you know, effectively weren't, because they, you know, the analysis about, you know, the subprime component. So there may be problems here. I don't think it's systemic, but I do expect there to be problems. I also expect there'll be problems when you mark these things, but, like, they have not been really tested during COVID, you know, if you—during those really bad months, you know, they wrote down, if you remember correctly, some of these things were written down 10%. I would tell you the number should have been 20. Okay, so but that only lasted for a month. You know, what if that lasts for a year? And what are the discrepancies?
You had this with private equity, discrepancies. Now one person marks a loan and another. The other thing, now they're coming closer. We've seen a whole bunch of deals go from the private market to the syndicated market. You know why? It's 200 basis points cheaper, and when rates went up, it matters. May have mattered less at low rates. So we're gonna compete. We can, we can do direct lending off our balance sheet. We can do direct lending and syndicate it.
And we also want to be agnostic, which is, you're the client. We, we'll do A, we'll do B, we'll do C, we'll tell you the pros and cons of each. So we're, we're in the mix, and we haven't yet. You know, a lot of these people raise these big funds and stuff like that. We haven't done that yet, and what asset management does is completely separate. This is all about what our investment bank is going to do in middle market to compete. So we're comfortable we can compete.
So two updates on, on your business line.
By the way, with our balance sheet and capital, we could put $100 billion into it, $200 billion. But I'm not afraid about that if you think it's good credit. The other thing which always surprises me, it's 2, right? I don't know what the price is today, because it literally changes every day. It's 200 basis points more expensive. And for JPMorgan, I kind of like the 200 basis points, and we get other revenues. Oh, and one last problem. When the shit hits the fan, and it will one day, we don't know when, there will be a lot of stranded borrowers because some of these people simply cannot roll over loans like we would, because they have a fiduciary responsibility to book the new loan at par on their balance sheet.
To do that, when things are bad, they're gonna have to book. There's got to be a 13% yield, and the company won't be able to afford it. So there'll be people saying: "I can't help you." And that, that may be a little bit of a problem, too, particularly if it starts to affect smaller businesses who call their congressmen also.
Could we get a quick update on the build-out of the consumer bank in the UK and Europe?
Yeah, look, it's generally going. I think we have, I think we said we have $16 billion of deposits. It's generally going to plan. It's a good product. People like it. If you actually go there, they are good at it. They do like it. It's always been a skunk works thing for us, because digital banking may make us able to do consumer in Europe, and it was never just Chase UK, but we want to get Chase UK right before we, you know, attack another country or something like that. And there are other things that we have to deal with, you know, ring fencing, what products we add or don't add, you know, how we look at the profitability a little bit, but it's generally going according to plan.
I think companies should always be. We have other skunk works that are there, which you don't know about. I think we should always be doing stuff like that, so I'm optimistic about it. And at the point it gets to breakeven, which I think we told you is gonna be four years from now, rather than three years from now. Once it gets effectively to breakeven, then we have something we can toy around with for a decade. And, you know, I don't know why we couldn't compete with any digital bank out there if they're making money. And some are now, you have a bunch of them actually making money, some of it because they're putting risky assets on the balance sheet, but some are making money, you know, not doing that.
Could we get an update, too, in terms of the efforts to integrate a wealth offering into the consumer business at Chase? What you're doing there and how you feel that's going?
It's just, it's going great. I mean, you know, God, we started only a couple of years, I, I forgot how many years ago, but it's $200 billion. It's almost a trillion. I think it is probably close to $1 trillion with the First Republic deal. You know, we're adding Chase Wealth managers in the branches. We're getting better at it. We're enhancing the products, their services. Our market share is small in that segment, and we have very big aspirations. And like Charlie was talking about, his different distribution, we have Chase Wealth Management, self-directed investing, private banking. We do not do, you know, with a third party, with independent stuff, but, you know. And we have J.P.
Morgan Advisors now, which is, you know, kind of the crème of the crème of, you know, how we handle the top, financial advisors there, who are great, and we're getting better at doing that. And I tell them that we want the best people, best products, best services, best comp, best research, access to J.P. Morgan, you know, for their clients who need certain private banking services or, or, investment banking services, and there's overlap. So it's, it's. And we're trying the J.P. Morgan Private Client branches, which, which will be 20. And, you know, if something like that works, then there could be 100 or 200 down the road. I think they will work, by the way. It's just a different way of running the business, so it's. We have to make sure it works for the customer, not for us.
Okay, we've got a couple more minutes. Maybe just the, the ROTCE target of 17%. You've been doing 20% ROTCE for a few years, talking about overearning a bit on deposit margin. Just how do you contextualize, you know, the through the cycle 17% and where you might be over and under earning today in different areas?
Well, I mean, I, I do think we're overearning. We're going to be honest about that, on NII a little bit and on credit a little bit. Credit, credit, Charlie used the word benign. I'm going to use another word. It's the best it's ever been, everywhere, anytime, ever. Middle market losses have been 0 for years. Credit card, if we sat here with credit card, which obviously is a big number, we would have told you, I think that through the cycle is 3.5 or 3.75. If you ask, "What's the lowest it can get in the best quarter ever?" I would have said, 2.5, 2.25. It hit 1.5, you know, and because the government gave $6 billion to people, you know. And, so, so middle large corporate has been very good.
It's in the you could see in credit spreads, but middle market has been very good. Mortgage has been zero. Auto has been, you know, auto's normalized a little bit, so it has to normalize. In NII, we're not quite sure and stuff like that, so... And then there's competition. You know, J.P. Morgan did benefit a little bit from COVID and other things, but the competition is fully back, you know? And, you know, you and I spoke about Wells Fargo has got good bones. They're getting their act together. You know, Goldman Sachs has been kicking our butt in certain areas. I mean, you know, you got to like. You can't just act like the world is a static place, so. And then Basel is going to add more capital, so roughly 17, still there.
The best chart I liked is the one that Jeremy Barnum showed you that shows potential outcomes under various adverse scenarios, which is what I always worry about. I want to earn good money. Our best year, our finest year, ever, 2009, our ROTCE was 6%. That was the best year we ever had. I mean, if we could earn 7%-8% in really terrible times, God, I love the b-- Then the business has become a really good business. Remember, a lot of companies went bankrupt, so-
Mm-hmm.
I, I did this. I made Mikael Grubb do this when we have our look at. If you take our, the 12 competitors are, in our proxy, how many earned more than 17% in a year in the last 10 years? That's 120 company years. How many earned 17% or more? I think it was 7 times. J.P. Morgan was 3 of them. Goldman was 1 or 2. Morgan Stanley was 1 or 2, and Cap One was 1 or 2, or something like that. 7 times. How many earned less than 6% in a year? I think the number is 30 or 40. Okay, so let's, let's not act like we're going to up that target, okay? We're in a competitive environment, okay? And so, and then I also went back to 10 years before that.
How many earned over 17% the 10 years before that? It was like 30 or 40 out of 120 years. And how many earned under 6%? It was like 30 or 40. But of the 30—Of the people who earned over 17%, most of them went bankrupt. So, you know, you got to be really careful when you analyze a business, and you start changing forecasts, stuff like that. If we could earn 17% for the rest of my life, I'd push that button right now. I wouldn't even think about it. I would have no debate. I mean, can you—And if you can compound the 17%, if you, if you can reinvest half your money and compound it 17%, you'll own the world in about 50 years.
All right, Jamie, we're out of time. We're going to leave it there. Thanks so much.
Thank you. We'll see you all soon.