Good morning, ladies and gentlemen. Welcome to JPMorgan Chase's Second Quarter 2021 Earnings Call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation.
Please stand by. At this time, I would like to turn the call over to JPMorgan Chase's Chairman and CEO, Jamie Dimon and Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead.
Thanks, operator, and good morning, everyone. Before we get going, I'd just like to say how honored I am to be on my first earnings call, Following the footsteps of Mary Anne and Jen, both of whom taught me so much during my time working for them and whose shoes will be very difficult to fill, but I'm going to try. So with that, this presentation is available on our website and please refer to the disclaimer in the back. Starting on Page 1, The firm reported net income of $11,900,000,000 EPS of $3.78 on revenue of $31,400,000,000 and delivered a return on tangible common equity of 23%. These results include $3,000,000,000 of credit reserve releases, which I'll cover in more detail shortly.
Touching on a few highlights, combined debit and credit spend was up 45% year on year and more importantly, up 22% versus the more normal pre COVID Q2 of 2019. It was an all time record For IVPs, up 25% year on year, driven by advisory and debt underwriting. We saw particularly strong growth in AWM with record long term flows as well as record revenue. And finally, credit continues to be quite healthy as evidenced by our exceptionally low net charge offs across the board. Regarding our balance sheet, The trends for recent quarters have largely continued.
Deposits are up 23% year on year and 4% sequentially and loan growth remains low, flat year on year and up 1% quarter on quarter. Although we have bright spots in certain pockets and the consumer spend trends are encouraging. So now turning to Page 2 for more detail. As I go through this page, I'm going to provide you some context about the prior year quarter because the year on year comparisons are a bit noisy. So with respect to revenue, the Q2 of 2020 was an all time record for markets with revenue of over $9,700,000,000 And we recorded approximately $700,000,000 of gains in our bridge book.
With that in mind, Revenue of $31,400,000,000 was down $2,400,000,000 or 7% year on year. Non interest revenue was down $1,300,000,000 or 7% due to the prior year items I just mentioned, partially offset by strong fee generation in Investment Banking and AWM as well as from card related fees on higher spend. And net interest income was down $1,100,000,000 or 8% driven by lower markets NII and lower balances in card. Expenses of $17,700,000,000 were up 4% year on year largely on continued investments. And then on credit costs, going back to last year again, you will recall in last year's Q2, we built $8,900,000,000 in credit reserves during the height of the pandemic, whereas this year we released $3,000,000,000 So in this quarter, Credit costs were a net benefit of $2,300,000,000 And setting aside the reserve release, it's also worth noting that net charge offs Just over $700,000,000 or half of last year's 2nd quarter number and continue to trend near historical lows.
On the next page, let's go over the reserves. We released $3,000,000,000 this quarter as we grow increasingly confident The economy in light of continued improvement in COVID, especially in the U. S. In consumer, we released $2,600,000,000 including $1,800,000,000 in card $600,000,000 in home lending and in wholesale We released nearly $450,000,000 So this leaves us with reserves of $22,600,000,000 which As a result of elevated remaining uncertainty about COVID and the shape of the economic recovery are higher than would otherwise be implied by our central Now moving to balancing and capital on Page 4. We ended the quarter with a CET1 ratio both retail and wholesale lending.
This quarter also reflects the expiration of the temporary SLR exclusions And as we anticipated, leverage is now our binding constraint. As you know, we finished CCAR a couple of weeks ago and our SCB will be 3.2%, which reflects the Board's intention to increase the dividend to $1 per share in the 3rd quarter. Okay. Now let's go to our businesses, starting with Consumer and Community Banking on Page 5. TCB reported net income of $5,600,000,000 including reserve releases of 2 point Acceleration of card spend.
And so while card outstanding remain lower than pre pandemic levels, this quarter's trends make us optimistic. Total debit and credit spend was up 45% year on year and more importantly up 22% versus the Q2 of 2019. And within that compared to 2019, June total spend was up 24%, indicating some healthy acceleration throughout the quarter. And travel and entertainment has really turned the corner with spend flat versus the Q2 of 2019 accelerating from down 11% in April actually up 13% in June. The rest of the CCB story remains consistent with prior quarters.
Consumer and small business cash balances remain elevated resulting in depressed loan growth. Overall loans were down 3% year on year from continued elevated prepayments in mortgage and on lower card outstandings, partially offset by strong growth in auto and the impact of PPP. Home lending and auto continued to have strong originations with home lending up 64% to $40,000,000,000 the highest quarterly figure since the Q3 of 2013 and auto up 61% to a record 12,400,000,000 Deposits were up 25% year on year or approximately $200,000,000,000 and client investment assets were up 36%, driven by market appreciation and positive net flows across our advisor and digital channels. And our omni channel strategy continues to deliver. We are more than halfway through our initial market expansion commitment as we have opened more than 200 new branches out of our goal of 400, which have exceeded our expectations by generating $7,000,000,000 in deposits and investments, and we are planning to be in all 48
in the U. S. States by the end of the summer.
Digital trends continue to be strong as retail mobility recovers at a faster pace than branch transactions, which are still down more than 20% versus 2019. Active mobile users grew 10% year on year to over 42,000,000 and total digital transactions per engaged customer were up 12%. Expenses of $7,100,000,000 were up 4% year on year driven by continued investments and higher volume and revenue related expenses. Looking forward, the obvious question is the outlook for loan growth, especially in card. And we are quite optimistic that the current spend trends will convert into resumption of loan growth through the end of this year and into next.
And while we wait, the exceptionally low level of net charge offs provides substantial offset to the NII headwind. Next, the Corporate and Investment Bank on Page 6. CIB reported net income of $5,000,000,000 and an ROE of 23 percent on revenue of $13,200,000,000 ID fees of $3,600,000,000 were up 25% year on year and up 20% quarter on quarter, an all time record driven by advisory and debt underwriting leading to a year to date global IB wallet share of 9.4% and a number one ranking. In advisory, we were up 52% year on year benefiting from the surge in announcement activity that has continued into the 2nd quarter. Debt underwriting fees were up 26% driven by an active acquisition finance market offset by lower investment grade issuance.
And in equity underwriting, fees were up 9%, primarily driven by a strong performance in IPOs. The resulting investment banking revenue of $3,400,000,000 was roughly flat year on year due to the headwind of the prior year's markup in the bridge book. Looking ahead to the Q3, the pipeline remains very strong. We expect M and A activity in the IPO markets to remain active. And while IBCs are likely to be down sequentially, we still expect them to be up year on year.
Moving to markets, Total revenue was $6,800,000,000 down 30% compared to an all time record quarter last year. While normalization has been more prevalent in macro, overall we ran above 2019 levels throughout the quarter on the back of strong client activity, outperforming our own expectations from earlier in the year. Fixed income was down 44% compared to last year's exceptional results, but up 11% compared to the Q2 of 2019. Equity markets was up 13% driven by record balances in prime as well as strong performance in cash and equity derivatives where we matched last year's great results. Looking forward, While we expect normalization to continue across both Investment Banking and Markets and most notably in fixed income, The timing and the extent of the normalization is obviously hard to predict.
Wholesale payments revenue was $1,500,000,000 up 5%, driven by higher deposits and fees, largely offset by deposit margin compression. And security services revenue was 1,100,000,000 down 1% as deposit margin compression was predominantly offset by growth in deposits and fees. Expenses of $6,500,000,000 were down 4% year on year, driven by lower performance related compensation, partially offset by higher volume related expense. Moving to Commercial Banking on Page 7. Commercial Banking reported net income of $1,400,000,000 and an ROE of 23%.
Revenue of $2,500,000,000 was up 3% year on year with higher investment banking, lending and wholesale payments revenue largely offset by lower deposit revenue and the absence of a prior year equity investment gain. Record gross investment banking revenue of $1,200,000,000 was up 37% on increased M and A and acquisition related financing activity compared to prior year lows. Expenses of $981,000,000 were up 10% year on year, driven by higher volume and revenue related expenses and investments. Deposits of $290,000,000,000 were up 22% year on year as client balances remain elevated. Loans of $2,500,000,000 were down 12% year on year, driven by lower revolver utilization compared to for our prior year quarter and down 1% sequentially.
C and I loans were down 1% quarter on quarter with lower utilization partially offset Our new loan activity in middle market and CRE loans were down 1%, but we saw pockets of growth in affordable housing activity. Finally, credit costs were a net benefit of $377,000,000 driven by reserve releases with net charge offs of only 1 basis point. And to complete our lines of business on to Asset and Wealth Management on Page 8. Asset and Wealth Management reported net income of $1,200,000,000 with pre tax margin of 37% and an ROE of 32 Record revenue of $4,100,000,000 was up 20% year on year as higher management fees and growth Deposit and loan balances were partially offset by deposit margin compression. Expenses of 2.6 dollars were up 11% year on year, driven by higher performance related compensation and distribution expenses.
For the quarter, net long term inflows of $49,000,000,000 continued to be positive across all channels with notable strength in equities, AUM was $3,000,000,000,000 and for the first time overall client assets were over $4,000,000,000,000 up 21% 25% year on year respectively, driven by higher market levels and strong net inflows. And finally, loans were up 21% year on year with continued strength in securities based lending, custom lending and mortgages, while deposits were up 37%. Turning to corporate on Page 9. Corporate reported a net loss of $1,200,000,000 Revenue was a loss of $1,200,000,000 down $415,000,000 year on year. NII was down $274,000,000 primarily on limited deployment opportunities as deposit growth continued and we realized $155,000,000 of net investment securities losses in the quarter.
Expenses of $515,000,000 or up $368,000,000 year on year. So with that, on Page 10, the outlook. Our 2021 NII outlook of around $52,500,000,000 remains in line with the updated guidance we provided last But as you'll note, we've also lowered our outlook for the card net charge off rate to less than 2 50 basis points, which As I mentioned in CCB, provides a meaningful offset to the NII headwind. And it's worth mentioning that The current environment makes forecasting NII even in the near term unusually challenging. So while $52,500,000,000 remains our current central case, You should expect some elevated uncertainty around that number, not only because of the ongoing impact of stimulus on consumer balance sheets, but also due to volatility coming from markets among other things.
And as a reminder, most of any fluctuation in markets NII, whether up or down is likely to be offset in NIR. On expenses, we've increased our guidance to Approximately $71,000,000,000 driven by higher volume and revenue related expenses. So To wrap up, we are encouraged by the continued progress against the virus and the economic recovery that is underway, especially in the United States. Although we want to acknowledge the challenges that much of the rest of the world is facing and we're hopeful that a global recovery will follow closely behind. Our performance this quarter once again showcases the power of our diversified business model as headwinds in NII from consumer delevering are offset by strong fee generation across AWM and CIB and exceptionally low net charge offs across the board.
While we're proud of the performance of the company and of our people through the crisis, the competition in every business from banks, FinTechs and others is as intense as ever. So as we look forward to an increasingly normal environment, We are enthusiastically focused on competing for every piece of share in every market, product and business where we operate and making the necessary investments to win. With that, operator, please open the line for Q and A.
And our first question is coming from the line of Glenn Schorr from Evercore ISI. Please go ahead. Your line is open now.
Hi, Glenn. Hi, there. Hi, Jeremy. Welcome. Welcome to the party.
Question on the MDI, if I could. And I apologize if it's a little multifaceted. But Even though we're getting some inflationary data and you're positively inclined on the economy as of my rates So, not sure you want to opine on why, but let's talk about, you kept the NII guide, I'm assuming because Deposit growth is strong. Curious your thoughts on consumer payment rates staying at this elevated level, growth staying at this elevated level. And then most importantly, if you're managing the balance sheet any differently, meaning you had been slow playing, Putting money to work, rates are even lower now.
Are you still slow paying putting money to work? I appreciate it. Thanks. Yes. Thanks, Glenn.
All right. So let's take that in parts. So in terms of our NII guidance, so yes, so We're reiterating 52.5 for the full year. So just to take your deployment point first, obviously rates All a little bit lower. Long end rates are a bit lower.
The curve has flattened a little bit since we provided that guidance. But when we provided that guidance, we were Reasonably conservative in our deployment assumptions through the rest of the year. So as a result of that, it's not really a meaningful factor sort of at the level of precision that we're talking about here. In terms of the consumer side, as you say, obviously, it's really card is really going to be the big driver. So You heard us talking about payment rates and you see the sequential growth in card loans.
So we do believe that the Sort of acceleration and the pickup in spend is going to translate to, as I say, resumption of loan growth But we do think that pay rates are going to remain quite elevated at a minimum through the end of this year. So as a result, we don't really see revolving interest bearing balances increasing meaningfully this year. And so as a result, that remains a headwind for the overall NII for this year, which is incorporated in the outlook. Okay. And then in terms of managing balance sheet any differently in terms of putting money to work, you still conservative on that front?
Yes. Look, I mean, I think you've heard us talk about this before, right? So our central case From an economic perspective is for a very robust recovery and that's pretty much a consensus view between us, our research team, the Fed, etcetera. And that view is associated with higher inflation along the lines of the Fed's own targets for higher All those things together, it's an outlook that's associated with higher rates, all else equal. And so in light of all that, we do remain happy to stay patient here.
And if you look at our EIR disclosure, which you obviously won't see until you get But some of you guys have written about this recently. Our overall sensitivities here are kind of in line with the industry. So when you consider kind of Tail type things that Jim always talks about the complexity of the balance sheet, and various other factors, we do still feel that being patient here makes sense. Okay. And just one quickly on the recent both acquisitions and investments.
And you or Jamie could Feel free to take it. I'm curious on, A, big picture, is it just coincidence that there's been Five things in a very short period of time. And maybe if you want to expand on maybe Nutmeg Specifically and why the change in terms of shying away from international expansion in the past Now, I'm making a little bit bigger move in. I appreciate it. Thanks.
Sure, Glenn. So let me start with the international expansion Point on the consumer side because that's interesting. You've heard Jamie over the years talk about why it wouldn't really make sense to do international And we're going to continue to see expansion in consumer. When you think about that through the lens of a branch based strategy. So if you imagine going outside of the U.
S. And opening branches And other countries and competing with, the incumbents just from a branding perspective, from an operating leverage perspective, We've never felt that that was likely to be a successful strategy for us and that hasn't really changed. The difference right now We have the ability to do that digitally. So what's really particularly exciting about the international expansion narrative both in the UK and now with our Recent investment in C6 in Brazil is the ability to kind of experiment a little bit. Obviously, it's a strategically compelling Opportunity Brazil, as you probably know, is like the 3rd biggest consumer banking market in the world.
But it's kind of fun to be the disruptor. And so I think for us, given our position in consumer banking in the United States, being in a place where we are actually the So I'd and to challenge ourselves a little bit from the inside. So we're quite excited about that stuff. All right. Thanks very much.
Thanks, Glenn.
Our next question is coming from the line of John McDonald Autonomous Research. Please go ahead. Your line is open now.
Hi, good morning, Jeremy. I wanted Want to ask you about capital. You mentioned leverage is now the binding constraint and Jen has previously talked about a 12% CET1 target. I guess, could you talk about the multiple variables that you're balancing as you guys decide what capital levels to run at? You've got a rising G SIB score, And SLR cushion that's shrinking, but maybe the rules get revised and obviously in SCB that came down a little bit, but maybe you're hoping for more.
How are you wrapping that all together into what kind of capital levels to target?
Yes. It's a good question, John. And yes, there are a lot So let me start by saying that in terms of the 12% target, it's not off the table is what I'll say about that. Meaning 12% it's not necessarily doesn't necessarily need to be higher. So for now, it's not off the table.
But the element of Time, I. E, when are we bound by what matters quite a bit as you think about this. So, just to go through some of the pieces, You've noted the G SIB point. So we're in the 4% bucket now as of the end of last year. That comes into play in 2023.
We're currently operating in 4.5. As you know, that's quite a seasonal number. So it's still possible to get under 4.5 for the end of this year. But we have to acknowledge an elevated probability, I would say, of landing in 4.5 bucket this year. But the 4.5 bucket would be binding in 2024.
And as you noted, in the meantime, we're bound by SLR. And we've been quite public about our views about these things, about the extent to which increasingly our capital requirements are driven by Non risk sensitive size based measures, which were really designed especially in the case of SLR as backstops, which The Fed has acknowledged. So, our priority right and the Fed has talked about We know we're waiting for an NPR on a SLR, but also they've said that a potential G SIP fix could come as part of the holistic implementation of So there's a lot of things that are going to play out between now and some of those minimums becoming binding. And realistically, right now, we're going to be operating above 12% anyway in light of the leverage bound in all likelihood. So we're managing a variety of different factors, near term, short term, perhaps common, etcetera.
And we're just going to try to be nimble about it as more information comes out over the next few quarters.
And Kenny wants to make a supportive point. We have tons of capital, $200,000,000,000 of CET1, dollars 35,000,000,000 of preferred, dollars 300,000,000,000 of long term debt, only $1,000,000,000,000 of loans, which The riskiest asset we have and $1,500,000,000 of cash and marketable securities. With an underlying theme that there's just tons of capital in the system,
And then a Quick follow-up, Jeremy, on expenses. You revised the fiscal year 2021 outlook upward a few times now. Could you give a little more detail And also we hear a lot about inflation across the economy. Are we seeing broader inflation play Your role in your company's expenses and outlook?
Yes. So, a couple of things there. So, yes, As you note, we have revised up from 70 to 71 and the biggest single driver there is volume and revenue related
Spence, where Which is comp. It's comp, but it's always up to. The comp, we're going to be competitive comp no matter what it takes. Just keep that in the back of your mind.
It is a little bit of comp. It's also transaction related volumes. It's also marketing expense in certain pockets. So it's all the stuff that fits in the category of volume and revenue related. And I think the point is, obviously, we're all a little bit focused on the NII headwinds right now.
But from an NRO perspective, across markets, AWM, IB, CIB in general, And even pockets, Wealth Management and CCB, we're actually outperforming the revenue expectations that were built into our prior So that's kind of the dynamic there. In terms of inflation, I would say that we're not seeing inflation in our actuals, But obviously, your guess is as good as mine in terms of the future, but it would be reasonable Assume that that's going to be a little bit of a challenge to a greater or lesser degree, if the economy as Holds in a slightly higher inflationary environment and we did probably include a little bit of that expectation in the 71 for this year.
Got it. Thanks.
Our next question is coming from the line of Ken Usdin from Jefferies. Please go ahead. Your line is open now.
Thanks. Good morning. Jeremy, if I could just follow-up on your Points about capital and just how we should be thinking about the you gave us clarity on the dividend and we know there's the $30,000,000,000 open authorization on the buyback. Again, just kind of fitting for the middle there, how do you balance just the magnitude of buyback you do from here versus the ongoing growth that we have in the balance vis a vis what you just talked about as far as the limitations? Thanks.
Yes. So I mean the answer to how we balance it is we talk about it a We have a lot of smart people looking at it, trying to balance all the different constraints that we're managing. And I think, Jen talked before, especially when it comes The balance between our risk based minimums and the SLR constraint, which as you know, we can address with prefs about kind of the mixture of prefs and common. So we're looking at that. I think RRP is helping a little bit on the deposit growth side, which a little bit with the management of SLR.
But as I said previously, we're going to stay nimble there and use the tools I'll strike the right balance between buybacks and pref issuance recognizing You know that over issuing prefs potentially locks us in to high cost prefs With little flexibility because of the 5 year lockout. So there's a lot of balancing there and we're just staying in the role as information potentially trickles on the evolution of the rules.
Okay. And then just so then as far as how you guys will communicate, we'll just find out about the buyback on a quarterly basis as opposed to you giving a more broad outlook of your expectations around buybacks as it happened more in the past. Is that fair?
Yes, I think that's right, especially
in the new environment that we're operating in from a buyback perspective, now that it's not Sort of an approved plan through CCAR, but it's rather just the overall $30,000,000,000 board authorization, Given what I've just talked about in terms of the need to stay nimble across multiple constraints, we wouldn't want to box by speaking publicly ahead of time in terms of what we're going to do. So, and you know obviously our normal capital hierarchy at the end of the day, we're always going to Invest first and look at interesting acquisitions and pay sustainable dividend and at the end of that, we'll look at buybacks in the context of all the We
can probably give you a more definitive thing after they finish Basel III, which is now 10 years in the making and SLR and all the updates and then We'll have more certainty about how this can operate going forward.
Okay. Thanks a lot guys. Appreciate it.
Thanks, John. I mean, Ken, sorry.
Our next question is coming from the line of Jim Mitchell from Seaport Global Securities. Please go ahead. Your line is open now.
Hey, good morning. Maybe just a follow-up on the card business. You had 7% quarter over quarter growth in balances, But I think your guidance was still a little cautious. Is that just being conservative? You're still not sure about the relationship between spend And balanced growth or how do we think about the good quarter and sort of that cautious outlook?
Yes. So I wouldn't use the word conservative. We've tried very hard in our outlook to give you central case numbers. So we're going to be wrong, but hopefully it will be wrong symmetrically. So we really want to try hard to give you central case numbers that don't have Baseless optimism or unnecessary conservatism.
So the point that you highlight, the sort of apparent disconnect Between the sequential increase in card loans and the relatively muted NII outlook is really just about pay rates. So we continue to see very elevated pay rates by historical standards really highly unusual as a result of some of the themes that we called out in terms of So as long as that's true and we're seeing sort of unusually low conversion of Spend into revolving balances, that's going to be a little bit of an NII headwind, until the consumer starts to relever, which we do think will happen. We just don't think it's likely to be a meaningful effect this year.
That's fair. And then on the charge offs, that's obviously been a big benefit. I think if we look at Delinquency is both early stage and later stage. They kept falling throughout the quarter. Is there anything unusual this quarter where we saw a pretty big drop?
Should we expect Further declines in NCOs as the year progresses given delinquency trends?
Yes. So I think on charge offs, I would just stick to the updated card guidance that we gave, which is lower, just saying that it's going to be below 2.5. But again, it's the same themes, right? Like elevated cash buffers in consumers All resulting in exceptionally strong NCO performance and sort of upside surprises in terms of people paying. So There's sort of 2 sides of the same coin right now, lower revolving balances, better MCOs.
And then as we continue returning to normal, In 2022, we should see both of those come back slightly to historical trends.
Right. Fair enough. Thanks.
Our next question is coming from the line of Mike Mayo from Wells Fargo Securities. Please go ahead. Your line is open now.
Welcome, Jeremy. Hey, Jeremy, welcome. My question, I want to follow-up, I think Glenn asked Jamie, for the answer to this question, so I'm going to try again. Are these acquisitions that you've done, I count 8 since December. And the question is, Jamie, what is the strategy?
Is the strategy, I guess, in some cases, it's to disrupt the new markets, as Jeremy said, Maybe it's to avoid costs, maybe it's to scale across tens of millions of customers or and this is Real question, are you looking to connect some of these acquisitions like Nutmeg, I can't even read all these, Craft Analytics, Maxtex C6 Bank OpenInvest Fi5 IP, is the goal to somehow 1 plus 1 plus 1 to equal more than 3 as you introduce these acquisitions, these companies, these people to each other to Create kind of like a 21st century digital banking storefront or is that too much of a reach? What's the grand plan here?
A little bit But there's a very smart analyst who said it was a finger pearls, and I put it in that category. So asset management, Campbell is just a Imagine lumber assets, timber assets is going to be great thing for asset management. 55 IP adds tax, Tax efficient management there. Obviously, Nutmeg and what we're doing in the UK will be linked together, Offering consumer digital products, both in deposit, small business, eventually lending and investments, global investing, etcetera, makes sense. C6 is another one.
Jeremy said it's a huge market. So we're looking at anything which has adjacencies. It could be data, it could be management, a lot of these you're going to fill in and some a little bit more of a skunkworks. So how we look at The retail digital overseas, we've got patience and time and we're going to spend a lot of time to see if we can build something very different than we have in the United States. So it's a little bit of everything.
CX loyalty on the travel company, again, if you look at that, we are only so large in the travel business. So think of this as And services and products and capabilities to offer our clients travel packages, etcetera, which we already forgot to remember, I think the 7th largest Travel company in the United States and that doesn't include all the travel that goes across our credit card and debit card that's travel, but we aren't to travel And so it's a little bit of all that. I'm thrilled we're doing it. We're looking all the time. We're not going We're not going to end up with a lot of wasted assets, but some of these things may not work there, but that will be okay.
Yes. Mike, the only thing I would add is There's a couple of themes that to me come through some of the things that we've done recently. One of them is ESG. You see that especially in the AWM deals and the It's just improving the customer experience, whether it's through various FinTech deals or CX loyalty, Customer experience is a key priority for us and we want to have all the tools necessary to deliver that.
And equally important, we're putting A lot of money is building that we have like every quarter for the next 2 years, you're going to have new products and new services being rolled out across the company. I think it's just exciting and very good and more and more integrated, more and more simple to use, more and more customer friendly, etcetera. And so So we're doing a little bit of all of that.
And then one
Yes, sorry.
Go ahead, Mike.
No, I've just got my follow-up, as you talked about disrupting, I thought that was interesting, disrupting in the UK. But since you write your CEO letter, Jamie, I mean, it's only gotten more competitive from the FinTechs and Big Tech and Big Retail and everybody else. And that's a question that comes up probably to everyone on this call. Are you going to be disintermediated over the next 5 years, Whether it's you know all the companies, but it just seems like they're ramping up that much more. You have an executive order from the White House, Maybe you have to share data, what's your current mark to market of the threat from outside of banking to your business?
Yes. I don't feel any different than when I wrote the Chairman's letter. I think we have huge competition in banking and shadow banking, FinTech and Big Tech and Walmart. And obviously, there's always a changing landscape, but we also have a huge we got brands and capability and products and services and market share and profitability. I think some of these competitors are going to do quite well.
I think a lot of them succeed over time, but that's good old American capitalism. I'm quite comfortable, we'll do fine. I do think there's going to be a lot of people struggling in the banking business. I'm trying to turn over 5 or 10 or 15 years. I think one day in a call, just when they talk about shadow banks, they're immune to banks who are shadowed, will be shadows of themselves.
Yes. But in the meantime, we're working hard to make sure that we're offering services that are Disruptible because they're good. So if our clients are happy and we're providing them a great experience, then there's nothing to disrupt.
All right. Thanks, Jeremy. Thanks, Jamie.
Our next Question is coming from the line of Ebrahim Poonawala from Bank of America Merrill Lynch. Please go ahead. Your line is open now.
Good morning and thanks for taking my question. I guess just sticking with the digital strategy, we've heard Jamie talk about multiple times And on the lack of imagination that caused the banking industry in terms of either payments or buy now pay later. And you talked about your international expansion. But again, going back to Mike's point, as shareholders of banks in the U. S, should the expectation be that banks will be fast Followers of what FinTech comes up with and replicating that, given the risk of cannibalizing your own sort of revenue set?
Or do we expect or do you think we should expect More disruptive innovation coming from banks in the United States on consumer banking?
I think it's both. I mean, it's not an either or question. And remember, a lot of these banks have done quite well, including Bank of America has done quite well through digital products and stuff like that. So when So the lack of imagination, I mean, the whole company, I mean, when you look at some of these things, it was we could have imagined more of why they become a competitor down the road. So Some of these competitors are quite good.
I call it Bob and Louise and they start with one little thing. They had product, they had services, they had eyeballs, they had customers and they find ways to monetize it. So we got to be a little more forward looking in how they're looking at their strategy and stuff like that. But in our case, it will be a little bit of other things.
Yes. And I would just say the whole cannibalization and fast following thing, I think we've moved a little bit beyond that. Like there will be times where we have the first idea and we're There will be times when someone else has the first idea and we're eagerly copying it. But the whole, We don't want to do this thing that makes sense for the customer because we might be cannibalizing our own revenues. That's a recipe to become a shadow of your full
We have no form cannibalizing the revenue, just keep that in mind. We will do the right thing when the time comes and sometimes we're a day late, the dollar is short, but we'll do the right thing. And just when you look at the company, I mean, when you look at when we talk about SLR, I always get when you talk about SeaStone SLR, but look at the flows across this company. Look at the debit card, the credit card, the trading flows, the market share, that's why I look at much more than what are the ups and downs of the earnings this quarter because of CECL. I don't think that means anything for the future of the company.
I mean our bankers, our traders, our credit card, our debit card, our merchant services, Our auto business, our digitization, it's doing pretty good. I read these reports, my God, the company is doing quite fine. And yes, and we'd like to be a little critical of ourselves. I think these companies aren't, that's part of their failure. They should look at what they didn't do well and what other people have done well.
And so be prepared and they have a really fair assessment of the competition. It is very large and it's going to be very tough. Does not mean that JPMorgan will win, it just means your eyes are open.
And I agree, I think banks don't talk enough about client acquisitions And market share, so I agree with you there. Just as a follow-up, Jamie, very quickly, there are some questions around like peak inflation, peak growth. I know you guys are very bullish. Compare and contrast how the world looks to you today versus back in 2011 when we came out of the financial crisis and the risk of GDP growth disappointing over the next few years?
I think they are completely different fundamentally. Coming out of the 2009 crisis, okay, the world was massively over leveraged. You had banks overseas, Dexia, the land of banks, I can't remember half of them, all went bankrupt. You had hedge funds deleveraging, you had quant funds deleveraging, you had Half a $1,000,000,000,000 to $1,000,000,000,000 in mortgage losses that were going to be recognized, actual losses spread around balance sheets and derivatives and stuff like that. The world is in massive deleveraging mode.
The consumers overleveraged, companies overleveraged, the bridge book on Wall Street was $400,000,000,000 Today, it's slightly 60. To look at today, today, everything we talk about loans being down is the consumer is the pump is primed. The consumer, their house size up, their stack size up, their incomes are up, their savings are up, their confidence are up, the pandemic is kind of in the rearview mirror, hopefully, It gets worse with it and they're ready to go. When you see it in home prices, you see it in auto purchases, you see it I mean, they'd be much higher, but for supply constraints right now. And so and businesses equally are in good shape.
They're not over leveraged today. They do have a lot of charts show that Corporate debt is like higher than it was, but so is corporate cash. If you look at middle market losses, it's almost 0, Almost 0 and huge unutilized revolving stuff like that. So the second the economy starts to grow, which and I mean, As you you're going to see loans go up because inventory receivables and capital expenditures and stuff like that. So it is completely different And you've got fiscal policy on autopilot, meaning there's a lot that hasn't been spent yet.
There's a lot more that's going to be passed. And you have QE so far is a little bit around $220,000,000 a month. And I just think you're going to see hopefully see a very strong economy. We don't know how long. Obviously, if you listen to what I just said, that there's a little inflationary effect in that.
And we don't know the future, I talk about Goldilocks. Goldilocks to me is and I'm hopeful, Not predicting. Goldilocks is that inflation goes up, the 10 year bond goes up, the growth is still quite strong. You may have growth in the second half of this year that's stronger than it's ever been in United States and America, okay. And Europe is probably 6 months behind America.
And so growth can go into next year and the 10 year bond goes to 3%, a lot of growth, the short rates go to 12%. It won't make any difference. As long as you had a strong growth in consumers there, jobs are plentiful, wages are going up. These are all good things. And so Obviously, inflation could be worse than people think.
I think it will be a little bit worse with the Fed thinks. I don't think it's all going to be temporary. But that doesn't matter if
we have very strong growth. Yes. There are always risks in any environment, but the risks in this one I think are quite different from the ones that we had coming out of the global financial crisis.
Got it. Thank you.
Our next question is coming from the line of Steven Chubak from Wolfe Research. Please go ahead. Your line is open now.
Hey, good morning.
Hey, Stephen.
So I wanted to start off with just a follow-up question on Jeremy, you did strike an optimistic tone on the higher spend trends and the potential for future NII tailwind as payment rates start to normalize. And just looking at the card revenue rate, given there are another of inputs in that metric, I was hoping you could just help us isolate The potential NII benefit versus the current baseline from a normalization in payment rates. So just the payment rate normalizing, What would be the incremental step up in the quarterly NII run rate?
Okay. So there's a lot of pieces in my questions even. So first, let's talk about the revenue rate. So a couple of things. So in terms of the NII, we don't really see a meaningful uptick in Carta NII happening this year.
Like you might maybe see a tiny bit of it sequentially 4th quarter versus 3rd quarter, but I think it's going to be pretty hard to see. So I think you want to be thinking about that as of 2022 effect. I'm not going to get into guiding on revenue rate for 2022. And I will actually point out that we're in the market right now, Competing aggressively with some great offers and I'm happy to say actually the client acquisition in card is going great and we're seeing great uptake on the offers, But that comes with a bit of elevated marketing expense. So, as I look out to next quarter, you might actually see a bit of a dip in the revenue rate just because of the way the accounting
Okay. And for my follow-up, Jeremy, I just wanted to ask or at least hone in on one comment you made where you said you could I was just trying to better understand how much capital cushion You are looking to manage to under the SEB. And if the GSIB surcharge is not recalibrated, where do you think you'll have to run on a steady state basis? Just because it feels like waiting for Godot, we haven't seen any changes on the recalibration front, specifically with the G SIB surcharge.
Yes. Okay. So basically, that's a question about the management buffer, and a question about what we would do in a world GECIB doesn't get recalibrated. And a world where GECIB doesn't get recalibrated is a world where our capital minimums are quite a bit higher Starting in 2023, we obviously disagree with that. We don't think it makes any sense at all, given that A big part of the driver of that increase in the amount of capital that we would have and as Jamie pointed out earlier, both we and the system And that growth would increase that amount quite a bit for us and for everyone else.
So that's a big part of the reason why we've been so vocal For so long, we have the need to recalibrate that. And I think we see some of our competitors making those points too as they start to creep up into higher buckets. And to be fair, the Fed has acknowledged that this is a thing that needs to get fixed. It's just that they're kind of busy Trying to get the Basel III engine put in place in the U. S.
Rules, which brings particular complexities in light of the Collins floor.
I just add to this. So, I've always I thought the G SIFI calculation is going to be stupid as I've ever seen in my whole life. And then we doubled it here. So the European banks have a lot of disadvantages in terms of they can't they don't have common regulations, they can't expand across Europe. One of the advantages, they have pretty much half the G50.
And I just don't think that in the long run, that's right for America to be doubling in, But I could consider basing artificial numbers. So let's just wait to see what all the new rules are and then we'll answer that question. You don't have to sit there and guess It's going to happen. Yes.
And I think Steve, the important point is that in the near term, we're actually bound by leverage. So that's what we're focused on right now. That's Our biggest single thing that we'd like to see fixed is that is affecting the management The balance sheet right now in ways that we think really don't make sense and eventually result in higher costs that will get passed on into the real economy. Just to touch on your buffer point briefly, when all is said and done and the framework is fully settled, hopefully we're back To being bound by risk based constraints, we have a bit more experience with a couple of years of SCB, and there's a little bit less rule uncertainty. It would be there's an interesting conversation to have about what the right management buffers are for people in a world where we do think it's important and we've made For example, of the money market complex too, we have all these kind of guidelines and the rules have them as Buffers that you're supposedly free to use, but that's not the way everyone treats them.
So buffers become minimums and that adds a brittleness to the system that makes It's more procyclical than anyone wants it to be. So down the road when things are stable, the buffer discussion could become interesting. But right now, It's a somewhat simpler story and that's really about SLR.
Remember, there's one buffer you guys we don't really talk about, which is $40,000,000,000 of pre tax earnings a year. I tell you, that's a huge offer. It's huge. It allows you to change your forward looking capital. If you buy back stock, you don't buy back stock.
And so
we have a lot of levers. And Thanks, Steve.
Our next question is coming from the line from Matt O'Connor from Deutsche Bank. Please go ahead. Your line is open now.
Good morning.
Hi, Matt.
I want to circle back on costs. Obviously, this year, some of it is driven by The stronger than expected fees, some of it is the inflationary pressures you mentioned, some is I think discretionary as you've Pointed out in the past accelerating some investment spend. But the question is, as we exit this year, will we look back on Costs from 2021 and say they're a little bloated, because of all those factors? Or is this going to be a good base year to grow off of going forward?
Okay. So there's a couple of points in there. There's the word, let's talk about bloated. I You've heard Jamie talk about cost before, right? So we go after everything all the time.
We go after waste. We try very hard To never be bloated and to not waste, that is a constant discipline. It's hard work. We look for it everywhere. So I We'd like to say that bloated is not a word, but whatever it is to describe ourselves and we spend a bunch of time in the bowels of this organization.
I really don't think that that's True. And I don't think anything about what we're doing in terms of how money is being spent this year is wasteful. And in fact, as you know, the really big driver of the kind of impact on run rate spend It is the investments that we're making, especially investments in technology and customer experience and then transforming the core efficiency of the company in terms of things like technology, Modernization and data centers and so on. So in terms of projecting forward into 2022, I don't want to get into giving 2022 expense And I think that you really have to unpack that cost number between the parts of it that are volume and revenue related and the kind of More run rate, structural and investment costs as we've talked about before. So, I think this year is it's a little bit tricky to unpick the components From their perspective to project into that.
As we can find more good money to spend, we're going to spend it. And I told you guys that there's good expense. When we have Credit card can spend so much money in marketing, the returns are very good, we're going to spend it. If we can open higher grade bankers, we're going to spend it. If we can we spent $200,000,000,000 in new data centers, which have huge benefit for us down the road, we're going to spend it.
We do not manage the company, so we can tell analysts what the expense number is going to be. That is just a bad way to run a credit. And conversely, a lot of revenues suck too. Revenues aren't always good and we all know how much risk we take in these businesses and stuff like that. So we spend a lot of time in good revenues, bad revenues and good expense and bad expense and
Kind of longer term, is there a thought to more meaningfully increase the dividend payout? I mean, as we saw at the beginning of the COVID crisis, buybacks Suspended after stocks dropped sharply, banks couldn't repurchase until they roughly doubled, but dividends were maintained. And obviously, your pretax earnings power that you alluded to is very strong. It seems like that soft 30% cap It's gone, obviously. So just thoughts, it's not going to happen all in maybe one CCAR cycle, but if we do get a multiyear economic recovery, Is there thoughts on pushing the dividend higher, maybe closer to like a 50% payout?
Probably not. I mean, I think first of all, you want The dividend which is sustainable through a bad downturn. And so we really want to do that and I think this time kind of proves that, that it was a very minor thing relative to capital But we want to invest in our future and invest in growing and stuff like that. And if we can't and if we don't want to raise the dividend so high that it cripples your ability to do other things. Yes.
And
the way that flows into just capital buffer sort of makes that point clear, right? So every part of the reason that we're at 3.2 instead of 3.1 is
And if I owned 100% of the company, there would be no dividend.
Okay. Thank you.
The next question is coming from the line of Gerard Cassidy from RBC Capital Markets, please go ahead. Your line is open now.
Thank you. Good morning, Jeremy. Can you guys share with us, if you take a look at your net interest margin in the quarter, obviously, it came under pressure. And if we assume and I know this is a big assumption, but if we Assume that rates don't really change from here over the next 6 to 12 months, the long end stays anchored where it is. At what point does the average yield in your average interest earning assets start to stabilize or maybe go up because the new Business that you're putting on equals or exceeds what's running off in terms of interest rates on the products that are coming off the balance sheet?
Yes. Good question, Gerard. So I mean, I guess one way to think about your question is whether we basically think that NIM has hit the bottom in this quarter. And I think we've all learned the lesson that calling the bottom is a very dangerous thing. And I would also point out and I would direct you to like The last page of our supplement, I'm not going to give you a big speech on markets NII, which is my favorite topic and why that is really a Sort of a distraction that we shouldn't look at, maybe we'll do that next quarter.
But we do have that disclosure where we split out Total NII and markets NII as well as NIM excluding markets. And the reason I raised that is that, Yes, your overall mental model is not wrong. It's reasonable to think that NIM might stabilize around these levels, But it's noisy, and the market numbers in there and that's going to add noise. And also I would So right now there's an unusual amount of numerator or denominator type effects. So whatever winds up being true about the numerator, you also have quite a bit of volatility in Which is one of the reasons that we obviously don't manage to that number as you've heard us say before.
But your overall frame It sounds reasonable to me.
Very good. And then as a follow-up, and I may have misheard you, so correct me if I'm wrong, but I think you said that The higher level of non interest expense, the outlook that is, was really driven by the improved outlook Can you give us any color on that part of it, the outlook for non interest income improvement?
Well, it's I mean, some of it's in actuals and some of it's in the outlook. But at a high level, the point is simply that If you look at the mix of revenue across this company, we have some offsetting dynamics right now. We've got NII headwinds from The consumer delevering as we've discussed, but as you saw in this quarter's CIB and AWM results, we have exceptional performance in banking Even though and in Wealth Management and even though market is just down year on year, it's actually up significantly from what we expect Very good. So that's kind of how it all comes together.
I appreciate it. Thank you.
We want some of the expenses to go up because that means that good revenues are going up indeed.
Our next question is coming from the line of Betsy Graseck from Morgan Stanley. Please go ahead. Your line is open now.
Hi, thanks. Good morning.
Hey, Betsy.
I had a couple of questions. One was just on thinking through the outlook For NII, like you indicated, dollars 52,500,000,000 subject to market conditions. Can you just give us a sense as to how you're thinking about Market conditions, what's the trigger point for being maybe better than expected versus Coming down and I ask in context of I noticed your securities book you shifted a bunch from AFS to HTM. So it feels like From that, you're waiting more for rates to move up materially before you would lean into that Yield curve trade,
but maybe you can give us
a sense as to what that market conditions comment was referring to and how you're thinking about that?
Sure. So let's go through that for a second. So I thought I wasn't going to give one of big markets and I ask speech until next quarter, but I can't So, you talked about market conditions, the markets NII component Of that NII outlook includes things like the extent to which we have spec pools versus TBAs, the extent to which we have Futures versus cash in high rate countries like Brazil, the growth in prime brokerage balances, the common theme across all of these Is there situations where you're deploying balance sheet in the markets business to serve clients? And that's Profitable deployment on a spread basis, but there's quite a bit of gross up between the kind of non derivative piece of it and the derivative or derivative like Piece of it, where the derivative piece of it doesn't have any NII and the non derivative piece of it does. So every unit Of that sort of activity that you do creates a significant swing in the NII number either up We're down with very little impact to the bottom line.
Now that's not the entirety of the market story. There are parts of the market's business Well, we're actually doing more exactly what the market, not the market. No, I know. But part of the market dependent comment is The market dependent I'm on the markets business. I'll go to the other point in a second, and I'm almost done with the speech.
Anyway, You get the point. So that's one point of fluctuation. By going through your other piece, so the AFS HTM and I think your implied question, which is Basically, what would make us want to deploy more into a higher rate environment. So I will say that the AFS HTM Changes that you've seen are really just primarily about managing capital across the various constraints while preserving the right level of to do deployment, but given the level of cash balances right now, the AFS HTM is really the main constraint in terms of duration buys and I think we have enough flexibility in there to do kind of short on cash deployment tactically as we always do. So to get to the punch line, it's kind of what we said before, which is we're bullish on the economy.
We believe that that comes with higher inflation and therefore higher rates and in light of that, we're happy to be patient right now. When that actually changes and we decide to deploy more, you'll see it in future.
And Jim, a simple way to think about it, the 52.5 Other than the market's business, which goes up or down, if rates go up and you can see our earnings and risk disclosure, we will earn more NII. All things being equal, which of course they never are, but all things equal. And in addition to that, we can make decisions to deploy more money for more NII.
It's interesting versus when you were at our conference, Jamie, it seems like The 52.5% is more a function of the curve, given the fact that card did, it looks like better than You had thought at that time in the middle of June based on your comments about spend being up so much, but the Betsy, let
me just sorry to interrupt you, but let me just pick up on that point for a second because I think someone else has a similar question. But I would just remind you that We do see that very healthy sequential growth in card loans on the back of spending, but the key issue is the revolve behavior. And so our view on that really hasn't changed and we do see elevated pay rates as a result of the cash buffers, Which remains kind of the consistent reason why we have a muted outlook for Cardano and I this year.
Yes. Yes. No, I totally get that.
I don't want to correct anyone here, but I personally think you'll see it go up by the end of the year, okay? I think we'll be a little conservative in that because of all the spend and stuff like that. But Look, we hate guessing, but I look at much more as how many cards you have, how much spend you have, how many happy customers you have and NII will take care of itself.
And on that front, your card fees were quite good, right? You mentioned that in your press release. Maybe you can give us a sense as to the drivers. Is that new openings? Is that basically what it is?
How sustainable is that? Because that was A bit of an upside surprise in this result, the card fees.
Yes. I mean, I think it's just spend, right, Betsy? I mean, we can get you a bit more color than Reggie can follow-up if you want, but at a high level, I think the card spend number is really all about I mean, sorry, the card fee number is really all about the spend trends.
Okay. And then just one last if I can squeeze it in. Your VAR came down significantly. Can you give us a sense as to what's going on there?
Yes. I mean that's just the volatility of last year's prior quarter coming out of the time series, right, if you think about it.
All right. Okay. Thanks.
Our next question is coming from the line of Charles Peabody from Portalyst Partners. Please go ahead. Your line is open now.
Yes. I wanted to ask that NII question a little bit differently. In reiterating your $52,500,000,000 guidance, you said there was potential for some variation or variability around that number. And I'm trying to understand where the greatest variation could come from. Is it in your loan growth expectations?
Because I'm hearing that you really are not expecting much in the way of loan growth or is it in the shape of the yield curve because of the Fed's QE actions or words around taper. And talking about the yield curve, could you also talk a little bit about what's more important, the short end of the yield curve Between Fed funds in the 2 year or the long end. And in that conversation, I'll also talk about the significant amount of liquidity that's about to hit the short end.
Thanks. There is a disclosure in the March 31, 10 Q, which shows earnings at risk If rates go up 100 basis points, U. S. Dollar and non U. S.
Dollar of $7,000,000,000 if the whole curve goes up 100 basis points. So the $7,000,000,000 Some number like 4.5 or 5 is short rates versus long rates. The long rate number is cumulative. I would add every year and tell me roll over these things to That is the number, okay? There are obviously loan growth, that's in the plus or minus, but the biggest thing is the interest rates.
Yes.
How about the variables? Let me give you the variables, Charles, because it's kind of a reasonable question. So I'll spare you my market center You heard it already, but that's obviously a big factor. Within card, we are somewhat about loan growth, but just remember that that loan growth has to translate into Revolve to drive NII. And so if pay rates Pay rates remain, as I said earlier, it's a central case forecast that reflects the recent experience.
So we are forecasting Elevated pay rates, but of course we could be wrong. They could be even more elevated than we are currently forecasting. So that would be downside. And the opposite of that, if we see the consumer delevering Starting a little bit sooner would create upside there. And then there's the impact of deployment.
So we're staying patient right now. That means that We're not earning the steepness of the yield curve. And if that changes, that could create a little bit of upside. And then there's always the tactical actions that we can take In the front end of the curve, right now those aren't very interesting because I OER is above money market rates, which is a big part of the reason that you see having so much uptake, but if that were to change and there were opportunities in repo and so on, then that could Help a little bit as part of our constant tactical deployment there, but that's not again our central case.
Just to follow-up on that. I mean, the liquidity that's going to hit in July August is substantial and that's going to have some impact on the Shape of the yield curve at the short end. We saw a rise in the overnight repo rate, reverse repo rate in June. Is it possible that we have to have another one to keep rates from falling too far?
Yes. I mean, I think that's a question for our kind of short term fixed income market Strategists and my old research team, but right now it seems like the Fed is pretty committed to making sure that repo rates don't trade negative. That's part of the They made the technical correction. That's part of the reason RRP is paying what it pays. So We'll see what happens there.
But to me, the front end of the yield curve from a deployment opportunity perspective looks not very interesting right now and that That is kind of our central case for the rest of this year.
And did the rise in the RRP rate have any your comments about market driven NII, Did it have any impact on market driven NII?
Yes, that's not really the
way that works. About 5 basis points. Yes, I
mean, I think you may be I mean, I don't know if this is part of your question or not, but there's of course the increase in IOER and there's some pretty simple math you can do there about Five basis points on or ten basis points on $500,000,000 for half a year. So but those are pretty small numbers in the
A follow-up question is coming from the line from Gerard Cassidy from RBC Capital Markets. Please go ahead. Your line is open now.
Thank you. Jeremy, I just wanted to follow-up. Can you give us some color about the residential mortgage lending business? How was the gain on sale margins this quarter? Any outlook on margins or any outlook on volumes, I should say?
But also did you say also that you guys sustained a small loss or a loss in the servicing area? If so, what drove that? Thank you.
Yes. So let's talk a little bit about mortgage, which is a business I'm still learning. But we've had very robust originations, dollars 40,000,000,000 this quarter. I think the most significant one of the significant things that's going on is we've really finished unwinding all of our credit pullbacks from So we're fully back in the correspondent channel, which is obviously helping the volumes. There's obviously been a huge refi boom over the last year with And that maybe affordability starts to be a little bit of a headwind.
So as we sit here today from a margin perspective, You have your kind of typical dynamics as rates go up a little bit, refi slows down a little bit, the industry has built capacity. You have Probably a little bit of a margin handwind looking forward and obviously there's a mix effect. So as corresponding becomes a much bigger part Of the originations, you have mix based Margin compression. So,
and obviously I think Gainesville was at all time highs and now it's not It's just getting low at no time high.
Yes, exactly. So it's a headwind relative to a super elevated prior year quarter, but it's still perfectly healthy. In terms of the servicing business, I think really as you all understand in the current environment, The prepayment rates, prepayment speeds have been running significantly above our model forecast. And so As we continually update those as part of our risk management that can trigger some small risk management losses. But in general, the risk management Of the parts of the MSR that can be managed has actually been very good and very stable.
So I think that's everything you had, Gerard, right?
Yes. Thank you very much.
Yes.
No incoming questions in the queue.
I just want to thank Jen Kupzak for the great job she did as CFO. You also know she's happy in Wisconsin, a new job. And Jeremy, I know why you know Jeremy, but he's been the CFO of the IV for 7 or 8 years or so, So, a complete professional and so, Jeremy, welcome to your first call and congratulations. Thank you, Jeremy.
Hope we'll talk to you all soon. Thank you. Glad I survived
Thank you. Everyone that marks the end of your call. Thank you for joining and have a great day.