We're happy to have JPMorgan Chase up next. We've got Daniel Pinto, who's the President and Chief Operating Officer of the company. Daniel, thank you so much for joining us today.
A pleasure to be here.
You had an Investor Day last week. For those that couldn't make it, maybe you could just kind of give us some highlights of the top messages that you, and Jeremy, and the team wanted investors to walk away with.
Yeah. Yeah, we had it, like, a few days ago. It was, essentially, we reaffirmed our strategy that is based in four pillars: to be global, diversify, operate, and scale, and have a complete set of products. All the businesses presented their strategy, and their target return on equities, and their opportunities. Even though it shows that the company is doing very well, we've been returning very good returns over time. There are plenty of opportunities for growth, and improvement in many, many areas within those businesses. We talk a lot about risk management, and resilience, and the amount of liquidity that we have, almost $1.5 trillion of cash and marketable securities, almost $500 billion of loss-absorbing capital.
The company is in a very good position. We've been very conservative and disciplined in the way we manage our risk. We give some. Jeremy gave some guidance on NII, $84 billion this year, including First Republic, and around mid-$70s billion through the cycle. We reaffirmed the 17% return on equity through the cycle. Expenses, where I think that is $81 billion, with the guidance we gave. It was a good gathering. It wasn't a lot of big news this year, but it's good to keep all of you updated on what we are doing on a day-to-day basis.
For sure. Sometimes it's good not to have anything big and new.
Yeah, some things.
Great. Well, no, it's a good update, and we'll dig into some of those things as well.
Yeah.
Let's talk a bit about some of the macro issues. What's your view around where we are in the Fed cycle, and how much of, you know, the impact of the cumulative hikes in QT has been kind of felt in the markets and the economy so far?
When you look at the global economy and the U.S. economy, at least for now, it's doing fine. Both Europe, the U.S., and other parts around the world, there is growth, and the economies are growing. The impact of interest rates always have a lag, and we will have a lag for sure. There are some indications where you see that there is some signs of slowdown. When you look at credit, conditions are tightening a bit, but credit demand is also relatively weak. You saw today the unemployment rate going up, and some numbers in the employment numbers, not necessarily the payroll numbers today, but others, that they're showing some degree of a slowdown.
I think that my view is that it's likely the Fed will get to around towards 5.5%, and they will pause, and then time will tell. They will give the time to see if the lag effects is really going to curb inflation, and if it doesn't, probably you will have another small set of hikes. It may be another 50 basis points or something like that. That's why it's difficult to see or to know what is the. It most likely will have some recession at some point. How deep or not it's going to be is difficult to assess. Obviously, they have to go one more round. They probably will be a bit of a deeper, a deeper recession. We will see.
When I look at our own numbers, we still see consumption, mainly to a credit card business, doing fine. They're still positive, but decelerating a bit, particularly in March and April, and a bit in May. Delinquencies, they are normalizing. They're not deteriorating, but they are normalizes towards the 19 levels. It looks okay for now. I think that there are plenty of issues going forward, that's why I think that it will be a recession at some point.
Mm-hmm.
I don't see for the moment, a crisis. It's just a slowdown in the economic cycle to deal with inflation, and that's probably it.
Is there anything in particular about QT? Just Jeremy had mentioned...
Yeah
... that he's more worried about QT than some of the investors in the room. Is there anything in particular that, you know, he's trying to draw attention to there or?
Well, what we have is a massive monetary expansion in 2020, in this country and in other places, around the world. Now we are seeing the reversal of that. QT is just one more tool that central bank uses when short-term rates don't create all the effects that they want to create and need to give more certainty across the curve. They use QE and then QT to unwind it. I don't know. There are, as I said, there are a lot of uncertainties. QT is one of those, but there are others.
One of the areas that is very concerning to me, more in the medium term than in the short term, when you think about the amount of debt that sovereign countries, but in the developed world and in the emerging world, but even in the developed world, in the last 20, 30 years, debt-to-GDP ratios really has gone up a lot. Just in the U.S., to stabilize it to, let's say, the 2019 levels, not much, it will require a fiscal adjustment that you know is not going to happen. I and it's similar in other places around the world. It's very likely that debt-to-GDP will continue to grow, at least for now.
In a world where interest rates, most likely they will stay more elevated than in the last 20 years, and deficits may come down a bit, but it's still going to be contributing to it. That is something that is concerning in the medium term, in the U.S., in Europe, in Japan, in many other places, and in emerging markets. The sustainability in the long term and the dynamics of the debt markets is going to be something that we want to keep an eye on. Not something that is pressing now, but we should keep an eye in the years to come.
How about the U.S. banking system? What does JP Morgan see ahead in terms of the impact of what the Fed's doing, both hikes and QT, on industry deposit flows?
Yeah
... deposit reprice?
Yeah. Clearly, the... When you look at the, as the central bank started quantitative tightening, deposit levels starts coming down. Deposits are a function of QT, RRP, and lending. The dynamics of those creates a level of deposits in the system. What we have seen is some, for the company overall, we have seen some slowdown in the amount of deposits, and then we recover some in the last couple of months. But we see that probably deposits, particularly in retail, may continue to decline slightly towards the beginning, mid part of next year, and then stabilize as quantitative tightening finish and start growing from there, as we normally happens.
On the industry, overall, when you think about what does the Fed looks, that so how far more or not they are going to go with quantitative tightening, most likely they are going to look at the level of bank reserves. If they are looks like the comfortable level is between $2 and a half trillion, if they were to go below that would be an indication that funding markets will be tight, therefore probably going to slow down that way. We will see. We have a dynamic this time around, that is the RRP program, that sort of takes deposits out of the system. That is something that we haven't experimented much in the past. It's been there for a while, but now with money markets having this ability to...
money go to money markets and then go to RRP, is something that at some point, probably what the Fed would want, is the amount of RRP start lowering down, stabilize reserves, and that create that proper, that proper balance.
It's been a tumultuous year, obviously, for U.S. banks. JPMorgan's done fantastic, but what are the lessons learned so far about risk management, business model, balance, and resiliency, this cycle so far?
Well, the lessons, it is. For us, we think in the following way: We have our central scenario that we run the company, and we're constantly looking at other scenarios and assessing what happen if those scenarios were to take place, how will the company look like? One of those scenarios that we were thinking about in the past is, so what happen if we are wrong and inflation is a lot more resilient and interest rates go up a lot more? That's why. We said, "Well, is that the bulk of the probability?" Probably not, but it was some probability. Therefore, we were very conservative in the way we manage our liquidity and the way that, how much duration do we have in our portfolios.
Therefore, when interest rates did go up, obviously we did have some potential negative mark-to-markets in the held-to-maturity portfolio and in the loan portfolio and the accrual portfolio, but it was a very small portion of the loss, would have been a very small portion of the capital as you compare with others. Essentially, it is all about how conservative you are, how prepared you are for the more extreme scenarios, and in those extreme scenarios, how will the company look like? What do we need to do? We never put the company in a situation where if one of those scenarios where we have to really where we are going to be in a very, very tough position. That's how we-.
Mm
... think about it, that's how we thought about it. We always be prepared. By being prepared, we were able to do the acquisition of First Republic, and not only that, onboard thousands and thousands of clients coming for those banks. In the private bank, in the commercial bank, in a small business. We have the ability to do that, the ability to absorb that, without really consuming a big amount of capital. The whole First Republic was fifth. It was some liquidity drain and 40 basis points of capital.
What are you focused on now from a risk management perspective? What are some of the tail scenarios people should keep in mind?
Well, I think that we are very focused in the potential outcome of inflation...
Yeah
... and monetary tightening, and economy, and recession, and all that. That's one set, which, as I said, the system is a lot more resilient than it used to be, so it's difficult to see, short of a geopolitical issue that we'll talk in a second. If all these scenarios, they may create accidents in some sectors, in real estate or somewhere else. We have several accidents, the situation with the banks, crypto, the LDI situation in the U.K., several scenarios, but they were self-contained, and the industry was resilient, and that problem was contained to that segment, and that was it. That should make everyone more comfortable that the industry is by far in a better place than it was in the past.
Be prepared for those accidents, even they are not systemic, is something that we are focused on. Clearly, the big scenario that is really very difficult to predict, and it could create a systemic situation, is a substantial deterioration of the geopolitical environment. An escalation of the war or a further deterioration in the U.S.-China relationship, those things, they will have a massive economic impact, global impact, and those clearly, that will be systemic. Everything else, they are things, but they are not, in my view, systemic.
There's been concern, we've heard some this week about, you know, potential credit pullback as regional banks, in particular, look to build their capital ratios, you know, protect against overexposure to commercial real estate and things like that. Are you seeing that more broadly? Is that a concern for the economy and a role for JPMorgan or private credit to fill in there?
Well, there is no doubt. You can see that regional banks and smaller banks, they are building up liquidity, building up capital. They are lending a bit less. For sure, there is a tightening credit condition, particularly coming from that segments. I don't think that the big banks have really changed their lending standards at this point because of that. I think that private credit has plenty of dry power to absorb some of the demand. The problem is more that the demand is not there, rather than the supply of credit. There is less... Obviously, if you look at the graph in the country, credit conditions are tightening, but loan demand there is also coming down. Like, the biggest part of that is mortgages.
If I look at our own company, from the peak, the refinancings have gone down around 95%, and probably new purchase origination, new origination activity has gone down from the peak, around 50%. Mortgage origination between refis and purchase from the peak is down 75%. That's something. When you look through the sectors, we have seen some loan demand that is coming up from the smaller part of the business in retail. Business that, all those small business, they got the benefit of the ERP, the PPP programs, and all these programs. When you go towards the smaller segment of those have, they have consumed big portion of their buffer, and now they need some lending for working capital. We have seen some demand there.
The bigger part of the, of that segment, the business banking, they still have substantial amount of buffers, and we see some demand of loan in the middle markets. Credit cards, what we have seen, I think that Marianne Lake mentioned, that we are finally back towards the 19 revolving levels, slightly above that. There is still, there is excess savings in the accounts, a bit less in this less affluent segments and more in the more affluent segments, but there's still quite a lot of buffers there, too. There is not a huge amount of loan demand in the first place, in any segment.
Mm-hmm. Can you talk a little bit about JPMorgan's commercial real estate portfolio? You're not very exposed on the office side, but some of the other banks are, so it's a concern. Maybe some just more general observations.
Yeah
you have about real estate.
Yeah. We did a bit of work to understand the dynamics in the real estate market in the last several months. The real estate markets totality in this country is around $13 trillion-$14 trillion, commercial real estate. Offices, the average insertion loan-to-value was in the low fifties. If you were to do a mark to market of that portfolio now at the new cap rates and new occupancy rates and all that. That probably the loan-to-value at the moment is between 70%-80%. Definitively, it has been a deterioration. An asset class that at insertion was $2.2 trillion, give or take, and probably now is sometime between $1.5 trillion-$1.7 trillion. The amount of lending against that is $1.2 trillion.
That is roughly half provided by banks and half provided by the markets, CMBS, some insurance companies, other participants. Out of all that, $600 billion of lending, we have, including First Republic, around $15 billion-$16 billion. Is around 8%-9% of the total amount of our commercial real estate exposure, that close to 2/3 of our commercial real estate portion is multifamily lending. Multifamily lending, essentially rents, they've been catching up with inflation, so it hasn't been deterioration. We have a very conservative portfolio with relatively low loans to loan-to-value. The office. Then you have retail, that a lot is being refinanced already. Industrial, the other segments are fine.
Mm-hmm.
The issue is real estate. There is still a cushion overall. Clearly, lower quality business, buildings in some areas, West Coast, for example, they are more impaired. I think that we see that as an opportunity. There will be plenty of opportunities to refinance all those portfolios and all those business, but it's something that you want to keep an eye. It's very likely the occupancy rates has gone down to roughly, at the moment, 87%, 13% vacancy, starting 8%, 9%. If you were to go another few points out, a lot of the equity gets wiped out, and then there may be some losses.
Mm-hmm.
It's still cushion, and in the big scheme of things, it is a problem. Don't get me wrong, because a lot of that exposure is with the regional banks and community banks. I don't think there is a systemic issue.
Yeah.
It's something that it will be dealt over time, through restructuring all these loans.
Let's shift gears a bit and talk about JPMorgan Chase. just remind us about your philosophy on running the company for long-term profitability. you know, how you manage for long-term returns, plan your investment spending, and decide on.
Yeah
You've got a 17% ROCE target. How do you land on that?
Yeah. There are two things. There are several things here. First is when we think about our returns for the long term, based on our economic outlooks and investments and all that, we also stress those numbers. You saw in Investor Day, the page with the color curves that Jeremy presented. Essentially, what that page show is how returns change in the different economic environments. Essentially, it was in the range between an unemployment rate of 5% to a bit over 7%. You see the different returns for the company, and in that, in any of those scenarios, clearly, in the more extreme scenario, it's not going to be 17% return on equity, but it will be way above the 10% return on capital.
The issue that the company is very well diversified is very important, and I make in Investor Day, I remember I talk about in 2020 what happened. Where the NII was impaired, NIR really drive, and it was Investment Banking, it was Asset Management, it was Origination of Mortgages, and it was amazing performance in markets. In 2022, the opposite happened. Where NII really went up, and then all those markets did okay, but everyone else really shrunk quite a lot. When we think about this is how we run the company. In terms of investments, we are very disciplined. We have our strategic priorities for the company and for the businesses, and then we allocate our investments based on that.
In terms of capital rules, it seems clear that you and your peers will have some level of increase in minimal capital requirements. We're waiting to get to Basel III, we may face different level of stress testing in the future. How are you thinking about and planning to operate in a world where you're likely to have some level of higher capital?
It's very likely, as we said, that the endgame of Basel III will bring some way or the other, some more capital. And probably the situation with we just have in the last couple of months, will have some implications of capital liquidity, which is very unlikely. Even the big banks were fine here, it's very unlikely that we're not going to have an impact on it. What is our benefit is that we are a very profitable company, our earnings capacity is very good. But we hope that the way that the increase in capital is happen, is a rational way to do it. And it comes by reviewing also some of the misalignments that we have today, like, for example, G-SIB.
G-SIB, you can argue if it is a good or a bad tool, but for sure, you cannot argue is that the economy has grown a lot, and they haven't recalibrated at all, even if they have the ability to do it. Probably, some capital comes in certain forms, and there is a recalibration of G-SIB, which is a good thing. Who knows? It's difficult to know what it is. At the end, we've been all the time optimizing for the capital and, trying to balance a business in a way that is diversified through cycles. We will continue working on that. Also there are ways where we can optimize more of the capital. We are doing a lot of work with our own clients.
As you look at the Corporate & Investment Bank, just to pick an example, we deploy, let's say, 70% of the capital of the unit to finance clients, either corporate clients or markets clients, through markets, through repo, and prime corporates through lending. There is a substantial portion of those clients, of this deployment of capital, that some portion doesn't cross the cost of capital, but quite a lot, quite a portion of that portion, quite part of that portion is in the segment between 10%-16%, which is our target ROE. What we are doing is just going and talking to those clients, just explaining that if you want to use, there's no problem in deploying capital to you, but you have to have a balanced business over the long term.
If you do that, the clients do react well because obviously we cannot withdraw the capital. That helps to have a more healthy dialogue, and I think that we will be able to optimize over time, even more. Like that, there are plenty of things that we are always constantly to optimize. The other piece beyond JP Morgan is that when the regulation comes and they bring more capital, they have to keep in mind, the regulation and the regulators, how much do they want of the business to leave the regulated space? At the moment, is a lot is leaving. Private credit is growing. Private equity is growing.
That is also important, that you will not continue shrinking the regulated space to create a bigger and bigger situation in the unregulated space.
Mm-hmm.
There is one more point, is, yes, so far we have the bigger banks absorbing more and more and more capital, but profitability is still quite good.
Mm-hmm.
Because these businesses are becoming so difficult and expensive to run, that we have seen more and more consolidation of the wallet into the bigger players. And the fact that we have more capital and more liquidity, it may be expensive to keep that. On the other hand, gives the confidence that the company is well-run, and we are in a good position, so therefore, we don't have the risk that others may have. We'll see. Time will tell. We will learn in the next few months, how is it going to play out, but the most likely scenario will be some more capital.
Mm-hmm. Has it caused you to pivot a little bit into less capital-intensive businesses? Is that part of the last couple of years, you've done a little bit more bolt-on M&A of...
Mm-hmm
non-traditional businesses?
Well, we always For us, the secret of success is to have this sort of balanced business. At the end, you cannot go and pick, "I'm going to do all the light capital, high return business," and hoping that someone else will do everything else. That business model, I can tell you, it doesn't work. You have to find the balance. Therefore, you want to have that balance, and as I said, if clients are consuming a lot of resources, and they are not doing enough of other things, so that client have to readjust the relationship with us.
We will continue to optimize, but I don't think that we can pivot it massively to be super capital light because it's not our business model, neither would it what is going to optimize the relationship and the returns for our clients.
Sure, sure. How have you used the bolt- on M&A to kind of fill in product niches or explore new areas not that you've done a lot, but maybe just a little bit of context for it?
Yeah. We do it for two reasons. The first reason, in every business, if you want to be the best, you need to understand the competition really, really well and not be defensive, understand. One way to understand is just constantly searching all the companies that are operating in the space. It could be in markets, it could be in asset management, could be in payments, in retail, whatever it is. Through that process of understanding how the competition operates, you will find things that they may be interesting, in many cases, partnering, that they can. We have an amazing distribution platform with clients of every kind. For them to distribute our products through us, we have done some of those.
In some of those, we realized that if we ended up buying a particular company, it will accelerate our go-to-market, or will bring certain technology that we don't have, or certain client base that we don't have. Like, for example, InstaMed, it was a way to pair services to the healthcare business with our payment infrastructure, and then attack that vertical. In some other cases, we have partnered with others to do that, and probably we'll do some more acquisitions in the future. In any case, our strategy is always organic. The first thing is, like, figure out how we are going to grow our business organically. When we identify these opportunities, we go and look, and the first analysis that you do is: how can we build it ourselves?
How much it's going to cost, and what will be the timing to market if we build it ourselves? If we do it, what is the value that they bring, that accelerate the timing of the market, is cheaper to buy than build it ourselves, and things like that. We incorporate them. We do a quite a good job in not killing the small company. Allow them the time to settle into JPMorgan, and obviously, they have to upgrade to our control standards, for sure. Give them the time that the big organization doesn't really.
Well, there.
... kill the small company. We have learned a lot, and we have done quite a few so far, so the process is quite, is quite good.
On the organic front, another change for you over the past few years is that you started to build out a U.K. consumer...
Yeah
Maybe a broader, you know, European consumer bank. Can you just give us an update on that initiative and kind of the timeline to get to profitability and longer-term ambitions?
How do we come out with this one is very simple. In the past, we always said there is no way that we are going to do retail outside the United States, because it was impossible, either through acquisitions, because it would have been to buy several banks and different platforms and trying to integrate, really, really difficult. Organically, that it will take 1 million years to build branches and, all that. The retail business in the United States is an amazing business, very profitable, massive scale, great set of products, very good. You never know when it could be disrupted by someone, by the technology platform and someone else. We see this as a way, over the long, long term, to diversify and complement our fantastic UK, US retail business.
We choose the U.K. because it's the market that we know the most. We have a lot of infrastructure. We know the market and all that. We say: Well, we are going to try and see what is the... Why are we doing it? We are doing it to build a business. We are not doing it just for fun, you know, this or that. We are building a business. We are selling a set of products. We are complementing that set of products, from checking accounts to saving accounts to wealth management offering through credit cards at some point, and other lending, secure and unsecure lending products. The U.K. business is growing well. $20 billion in deposits doubled in the last 12 months, 1.6 million clients, 1 million clients, 1 million active.
It's all going according to plan. We said that we are not going to spend, the net cash burn will not be higher than around $450 million, we are doing that. The U.K. business, we think that it will start breaking even around 2027, then it will be other European countries. We will consider if there are portfolio acquisitions or other things that we could do to bolt into this thing and accelerate growth, we will do it. C6 in Brazil, it was another way to get into this digital space, in the third-biggest retail market in the world. We'll see how it goes from there.
It's, it's relatively small in the big scheme of things, but it's something that, over the long term, will, if successful, will develop a lot of value and diversification value to the company.
Has anything surprised you so far as you've built that over in the U.K.?
One of the things that, I don't know if it is a surprise, but the Chase name recognition in Europe, it wasn't very high at the time. Everyone knows JPMorgan, but we don't use JPMorgan for retail. Very quickly, the brand recognition started to shoot up massively, and then how sensitive the name... Essentially, the quality of the service is really good, and now that the brand recognition is very high and the financial- how financially solid this company is, it gives you a big competitive advantage. How fast the amount of clients that we want to have react to a bit of dollars of marketing is really amazing. We could grow a lot faster, but we don't want to grow as fast until we have a more complete set of products.
We want to do this in a very conservative way, but the brand recognition has just sort of showed up massively, and we got the Best British Bank award a couple of weeks ago, so the client.
Yeah
Experience is very good.
Great. Let's shift gears and talk a little bit about the Corporate & Investment Bank. You gave some updates at Investor Day and some context for the industry background that was helpful. When we think about your markets business, you know, sales and trading, fixed income equities, where you did $29 billion in revenues last year, how are you thinking about the size of the industry wallet this year? Maybe could you put that in context of, you know, where we've been the last few years?
Yeah. We show there a page that the wallet in market has been coming down constantly until 2018, 2017, 2018, 2019. The average of these three years was $163 billion. It went up from 2020 to 2022, at $212 billion. We think that Coalition thinks that this year will go down by 4% against that average or 7% against last year.
Mm-hmm.
I think that we didn't know, or clearly, the wallet increased substantially in 2020 with all the market volatility and all that. We're expecting, at the time, a faster normalization, meaning down, but it didn't happen. The market remained liquid and relatively volatile. The wallet has been relatively stable, a bit up or a bit down, but in the 200 levels and no more into the 100+, and I think that it will be stable around that. I think this year will be a bit lower, but over time, probably you will see the wallet growing, probably in line with the GDP and in line with market developments from this level. That's a good thing.
On the Investment Banking front, obviously, revenues this year are below what we've seen in the last-.
Yeah
... couple of years, and, you know, you predicted a little more slippage in the wallet this year.
Yeah.
You know a rebound later on in Investment Banking. What's needed to kind of get things going there?
Certainty. I think that at the moment, there is too much uncertainty about the path of the economy, inflation, and other factors, and valuations that really make the process a bit sluggish.
Yeah.
We have a good pipeline, that we are executing. It's not that there are transactions going on, we do believe that, this year, the wallet... Last year was $78 billion, down from $133 billion and from $95 billion the year before. Last year was in line with 2019, and this year we think that the wallet will be around $70 billion. The other thing, the difference between last year and this one, normally, the distribution of the wallet among the products is around 35% M&A, around 45%-50% debt, and the rest is equity capital markets. Last year, it was 47% M&A and 36% or 37% debt, and the rest, equity capital market. This year is normalizing a bit.
M&A is still a bit elevated, around 38%, but debt is, it will be around 45%, the rest equity. That really plays a bit better to our mix because we have the more balanced investment banking business around, very good in M&A, in equity, and in debt. When the cycle is like this, we tend to increase our market share, but it will be a tough year. I think that probably next year, as we have some clarity about the cycle, probably we'll see a bit of a higher wallet, probably around $80 billion next year. I think that more in the medium term, my view is that the wallet will be in the range from 19%- 20%, which is between let's say $80 billion-$95 billion.
With you having high market shares across these businesses in Investment Banking, I know you always say-
Yeah
you can't be perfect everywhere. There's always opportunities.
Yeah.
What's the strategic focus for you?
We need to continue improving in M&A. We've been improving over the years, but there's still some room to do, to improve there, and then in some sectors. We're still in some sectors, where we have improved a lot in technology, but there are some sectors within technology where we need to invest, and other industries. In some regions. When I look around, yes, we've been number one in Investment Banking for the last 14 years. When you start looking in the sub-sectors, there are plenty of areas, either in regions or in industries, where we can do a bit better. For sure, we need to continue investing in M&A.
Mm-hmm. Back to sales and trading for a minute.
Yeah.
You've got low double-digit market share. You're huge, obviously. Can you still see sales and trading consolidate into the hands of bigger players like yourself?
Yes. I do believe that trend will continue. We saw a number that is quite interesting. In from 2017 to 2019, the average wallet of the top five players in markets, they own 41% of it. The total wallet. The same, the top five players from 2020 to 2022, they have over 44%. It was like almost 4 points of increasing wallet. I do believe these are business that you can only be profitable if you are on a scale, a player of scale. Over, with the increase in the wallet has made some of the peripheral players to invest for a bit, and then try to gain a bit of market share.
I think that you will have to have a lot of more market share in order to be profitable, and to have a business that is sustainable, and a business that is profitable enough to continue investing. I think that the bigger players, particularly in this business, have the competitive advantage of the profitability that allow us and others to invest at a pace that is different than anyone else. Therefore, the quality of the services is better. Then if you pair that with the deployment of balance sheet, which is very important for clients too, the mix is really difficult to beat. I do believe that market wallet will continue over the long term, will continue to consolidate.
Got a few more minutes. Just want to tackle a couple of things here. Technology spend, the journey for tech spend seems to be a never-ending one for banks.
Yeah.
You oversee a lot of this at JPMorgan. Just kind of big picture, as we think about where JPMorgan is on the road to kind of modernizing its consumer and wholesale businesses, and, you know, what's ahead on that front?
Well, I will say that technology transformation and modernization is the most important thing that this company have to do, with no doubt. We are somewhere along that journey. We've been investing over the years, not just in creating more and more features for clients, also replacing and modernizing all the core infrastructure. I'll give you an example, payments. We built three new platforms: Graphite for payments, GLASS for liquidity. Graphite, for example, is in the plans to replace eight payment platforms that are quite old. Gradually, we are replacing them. Graphite, all today, is processing 1/3 of the totality of the $10 trillion of payments that we do around the world. Helix is the third platform for merchant acquiring.
That we have to do, and then when you start seeing that, you see the real efficiencies, how much more you can process without adding a penny, how much better the quality of services to the clients is. It is something that we have no choice other than doing it. I can see how the investment in technology that we are making, that is substantial, $15 billion is a lot of money. That investment is really allowing us to scale without extra cost. Investment in technology has gone up, let's say, by 10% or something like that last year, and still we process, like, 40%, 50% more volume, and we have got a lot of better utilization of our internal cloud and virtual services and data centers.
All that, over time, will improve as we move a lot of our applications to the new data centers, a lot of our applications to the cloud. This is something that there is no choice. You have to do it. The returns that we have allow us to do it and do it as if we will go on that as fast as we can efficiently go, because it's crucial for the future of the company.
Maybe just the last question, just kind of how do you ladder that in over time to kind of also achieve what goals you have for, you know, efficiency and returns and long-term growth?
So the-
Yeah, just kind of your pacing of tech investments, to, you know, balance against your other goals, to grow the company and deliver good returns.
It's not only about modernization, it's about also investments in different and better services to clients. We will try to go as fast as possible, as it is efficient. If we were to say, "Well, we want to spend..." We're not going to do this, just in case you get the wrong idea here.
Mm.
If we were to say, "Well, we're going to do another $5 billion in technology," that will be wasted money because there is no way that you can hire the talent at the quality that we need to do that. We will try to do whatever is efficient and balance the money that goes towards modernizing the core infrastructure and the money that is about redeploying and redeveloping applications to create better and better client services. It's all linked to our strategic priorities for the company and for each of the businesses. We go from that, and then whatever is not strategic, we kind of cut the line.
Mm-hmm.
The issue, if you want, if you leave everything to the bottom up, and bottom-up exercise, which is important, but you will add a millions of little features to things that they are very relevant.
Right.
We all really look very deeply into that, and we say, "Well, these things are the things that we are going to do, and all those, we are not going to do.
Mm.
That's how we do it. That, all this investment in technology, they are creating and being the driver for all these returns that we are producing. Therefore, we will continue to be very disciplined. We see an increase in productivity. We are getting, for example, one of the investments is better developers tool to improve the experience of the developers. Therefore, they can, with the same money, do more.
More, yeah.
That's the thing. You create these tools and do all this, and I think that we have done a good job. We still a long way to go because this is a big company. They have thousands of applications and a lot of legacy technology. We have made a lot of progress.
Great. Well, that's really helpful. Giving us great perspective, Daniel. Thank so much. Appreciate it.
Thank you.