JPMorgan Chase & Co. (JPM) Earnings Call Transcript & Summary

Okay. We're ready to get started. Up next is Jamie Dimon of JPMorgan Chase. I'm sure there's a ton of folks listening in, so I did want to just welcome all of you to Deutsche Bank's 10th Annual Global FIG Conference. Obviously, this is virtual, and the format will be fireside chat. If you have registered for the conference, you can submit questions via the webcast. Jamie, welcome back, and thank you for joining.

Matt, happy to be here, folks. Welcome. Go ahead and shoot, Matt.

So you always talk about how JPMorgan was a port in the storm during the 2008-2009 financial crisis. But I think one could argue, banks in aggregate are a port in the storm this crisis, given how supportive they've been of staff, clients, government initiatives. Maybe you could talk about this both from a broader banking perspective and specifically to what JPMorgan is doing.

Yes. So I totally agree. I mean banks are a port in the storm this time. First of all, they're all very well capitalized. They all have very healthy earning streams. They all are more diversified. Some of the regulations were good for that, for liquidity and capital, et cetera. In some ways, they're even better capitalized than people think because no one actually looks at operational risk capital, which I don't really think belongs there; or how G-SIFI is calculated, which has not been adjusted at all for the size of the economy or something like that. So -- and of course, the banks are doing their jobs. I think all of the banks are lending that money, not just the revolvers but bilateral loans, helping clients, participated in PPP, which, of course, was an extraordinary effort on part of some of our people, thousands of people. And so I think it's a good thing. I think banks are doing what they can to help this economy recover and support clients knowing that things can actually get worse, which means all these extra loans you make could actually have consequences. And for JPMorgan, again, I think a lot of banks are doing the same. We're doing -- obviously, taking care of your employees, whether they are going to work, whether thinking of extreme hygiene and protocols, et cetera. We all were able to get a lot of our people working from home. I think something like 80% of our U.S. employees are working from home, and it's amazing how effective it has been, all things being equal. And we're taking care of our clients, whether it be consumer, small business, through PPP, directly, large corporations. Like in terms of credit, we had $50 million of revolvers drawn down. And I don't think it was necessary that companies did that. But the fact is they paid for those revolvers. I completely understand that they want to feel comfortable. A lot have started to pay it back already, by the way, and paid down commercial payer by doing bond issuances. I think we did another $50 billion of bilateral credit for those who are getting prepared for what might be a very bad recession, et cetera. So -- and of course, we're all participating in forbearance programs. I think we have 1.5 million people, one way or another, involved in forbearance programs. So banks are trying to do their part to help the country recover.

And if you look at the Fed and the U.S. government, they've clearly done a lot from a financial perspective to help markets, to help the economy. I mean I feel like it's a lot sooner and more aggressive than they did for the financial crisis. But what else, if anything, do you think they should be doing to help bridge the economy to an eventual recovery?

Yes. Yes. I think -- first of all, I think they took extraordinary effort. And I think you're totally right about the speed and pace, so that when the -- when COVID-19 started to look really bad like in February, but before the -- all the states started to close down, they acted by a couple of weeks into March at both a huge fiscal and huge federal reserve actually taking place literally in weeks. If you go back to the original, the great financial crisis, I mean, Bear Stearns failed in March of '08, Lehman failed in September of '08. And I don't think we had a fiscal stimulus package until February, March of '09. And if you look at the Fed actions, they kind of took continuously increasingly strong actions throughout parts of '08 and into parts of '09. This they just kind of did all at once. I mean this wasn't the bazooka. This is -- the Fed took out the whole military and applied it. I think they did a lot of the right stuff. Of course, people are going to criticize these programs. There'll be a lot of grandstanding, finger-pointing blame. I'm sure there will be fraud associated with PPP. On the other hand, it is going to save a lot of small businesses. And so a lot of people got loans they needed. Unemployment insurance, they estimate that 50% to 70% of the people in unemployment are earning more money than they were earning before. So that's obviously helping a lot of people avoid an extreme amount of stress. And of course, the payroll, the -- giving people $1,000, cutting taxes for certain people, that kind of stuff. Those are all huge. The Fed rolled out trillions of dollars of programs and just announcing some of these reduced spreads in the marketplace. And the Fed can always do more. So I think they did the right thing. And I guess we're all hoping and praying that you're going to have some kind of recovery start in the third quarter from -- which obviously would be a very bad second quarter. There obviously is more they can do. Most people think they'll do $1.5 trillion more on the fiscal side sometime in the third or fourth quarter. And the Fed, of course, they have a lot of tools they could still use at their disposal if they wanted to.

And what about from a global perspective? Obviously, JPMorgan is a very global bank. And sometimes it's a little hard for us in the U.S. to look globally and keep track of the central bank actions, the local fiscal actions. Do you think enough is being done outside the U.S. in the markets you operate in?

Yes. I think if you looked at it, I mean, roughly -- it's roughly equivalent in the U.K., Europe and Japan, both on the physical side and the monetary side. They did it a different way. Some people did direct payroll for -- into companies to help them keep their employees. The central banks, obviously, are smaller than the -- our central bank. But for the most part, they took similar type of actions to create liquidity in the markets and to get cash into the hands of both employees and consumers and individuals and stuff like that. And I think -- but there is -- and there's a heightened consciousness about the effect in the emerging markets. That to me is still hanging out there. If this recession drags on for too long, that there are countries and companies can have some issues with the leverage they have, et cetera. And of course, you probably read about the IMF, was talking about that they have $1 trillion of firepower if they had to, to help developing nations and emerging markets get through this.

So bringing it back to the U.S., you're obviously a very large debit and credit card player. Volumes went down sharply end of March, early April. How are those tracking, broadly speaking, as you look at the second quarter and more recently?

Yes. So the -- I guess most of the trends I'm going to tell you about, you probably have read about, which is -- and obviously, credit card, and our credit card is more prime and more travel and restaurants and stuff like that. That was down like 40%. That's come back a little bit but still down like 35% or maybe 30% at this point. Obviously, if you bifurcated into who is up and who is down, the Amazons, Netflix, Walmarts, Targets are up. Groceries are up. And then, obviously, restaurants, travel, airports are down 95% or something like that. So debit card has kind of recovered to where it was before. So that's kind of more people everyday spending. So you've seen that kind of pop right back to where it was. So year-over-year, it's actually rather flat at this point, which I think is a good thing. The consumer is in good shape relative to -- we expect unemployment to go to 20%. But the way you should all think about that is it's not effectively 20% because those consumers, like I said, 50% to 70% are earning more money they're earning before. They've gotten other benefits from the government. They're -- they've quarantined themselves, but a lot of them expect to go back to work. So it's a healthier consumer. And you see that in actual underlying delinquencies, roll rates, housing prices. The last global recession, housing prices were down 40% from peak to trough. They're still up here. So then it's completely different from the consumer standpoint. As the recovery begins, we maybe won't -- having a good -- healthier consumer will be a -- obviously, will be a good thing for the economy.

So shifting to risk, broadly speaking, as well as credit, but one of the things that you said earlier and you said before is it's not just the risk that you come into the downturn, but it's the risk that you extend or take as the downturn is going on, including to support some of your clients and customers. And one thing that we saw a few weeks back was prepaying with Marriott to purchase some of the points. Obviously, it's been a long-term partner for you, and it's essentially a bet that travel will come back. But just not maybe that specific deal, but just talk about how you weigh those risks and the potential upside from those deals because there is some upside, too, if it works out the way you're planning, I would think.

Sure. Mr. Marriott, usually we approach any deal with partners. We're always like which -- it's got to work for everybody. So not like you're trying to out-negotiate someone. They needed some help. We asked for a bunch of things in there. So they've been an absolutely outstanding partner, and we're hoping this turns out well for both of us. I think on the risk side, the way you think about a little bit. So bank -- in the last global financial crisis, I think a lot of banks had to pull back their horns because they had no choice. This time, as we mentioned before, a lot of people are very well capitalized. So I'd mentioned in my Chairman's letter, that JPMorgan last year had pretax earnings of $48 billion. Well, that earnings stream allows you to bear a lot of risk. Obviously, some of your revenues may go down, but it allows you to bear a lot of credit risk. So you have your normal credit risk, kind of your normal cycle you predict. This is not normal. But again, you can look at it and say, "Okay. How much risk can I take before I can no longer do that?" So if this goes on for a long time, like think of 20% unemployment until the end of the year. And then, of course, I think you will see some banks pulling back because they simply can't take more risk. And a lot of the regulatory risk-based measures, et cetera, will get dramatically worse because advanced risk-weighted assets go way up as companies get downgraded, et cetera. And there's some other -- and CECL is a -- I mean more things are counted pro cyclical this time around than last time. Think of reserving risk-weighted assets, some of the regulatory things, some of the liquidity things, they will actually make it harder for banks at one point to extend credit, but that hasn't happened quite yet. So -- but look, you got to -- whenever you look at something like that, you got to look at -- you have to be -- you hope for the best. You expect some kind of base case, and you plan for the worst. We do consider our job to help people through the toughest of times. So when I mentioned all the credit we did, $6 billion was to hospitals, health care systems; billions was to municipalities, schools, you name it. We're trying to help them through this. And yes, we know we may bear some risk, but we'd rather -- for JPMorgan Chase and other big banks to say, "We help you get through your toughest of times." And yes, we lost some money is better than "No. When times get really tough, we pulled in our horns and you went bankrupt." We are their lender last resort. If you look at the total bank lending, I think total, it's up almost $1 trillion. That's far more than Fed lending has happened, so -- or even PPP. So when you put it together, it's been an important part that banks continue to lend into the crisis a little bit.

So you gave some possible outcomes in your shareholder letter under stressed economic assumptions and compared them to CCAR results from last year. We've now got a couple of months of additional data. What are your thoughts on how credit losses might compare to the scenarios run by the Fed?

Right. So the first one -- look, that's one scenario. And one of the things I was talking about the stress test is, one scenario is not how you prepare for risk. The way you prepare for risk is we do like 120 scenarios a week. And you've got to be able to handle a lot of them and react rather quickly and stuff like that. But take a base case. And I'm going to use unemployment as the proxy for the economy. You can look at GDP or a bunch of other factors. But the base case, most economists now have unemployment in the second quarter ending somewhere around 18%, give or take, 1% or 2%, okay? And like I said, it's not as bad as real unemployment, 18%. And then the base case has it going to 14% in the third quarter, maybe 12% or 11% or 10% in the fourth quarter. And that's kind of the consensus estimate. If that happens, and I think it has a chance of happening because you're already seeing people going back to work, states opening up, restaurants opening -- they're opening up again. So you're already seeing the positive effects of the opening up taking place, at least for the economy. If that happens, since CECL is very forward-looking, I think that banks will have to put up a lot more credit reserves this quarter. So our -- we would have substantial increase in credit reserves in the second quarter. But if the base case happens, you may not need any more credit reserves in the third and fourth quarter or going forward. Again, because CECL upfronted a lot more than it did before, but it's very sense of something like that. You always have to be prepared for a worst case. Like, what if somehow we stay at 18% to 20% of unemployment until the end of the year? Well then, of course, you'll be putting up more reserves because now you're looking another 12 quarters forward, another 6 quarters forward. I think the base case in some numbers is worse than the Fed stress -- severe stress. So -- but on the other hand, unemployment isn't exactly the same. Housing prices didn't go down. There was no global market stress, which we've always thought wouldn't happen anyway, the trading stress thing that happens in the first day and you have no recovery from it. So depending what the Fed does, when they look at this next go around, which we're going to find out next month, we'll see what it is. But the fact is, it is very different than the Fed's adverse -- it's a really adverse case.

And if the base case is close to the average...

But even -- but I said even if the simply average case, even a worst case plays out, JPMorgan Chase will have the capital and the wherewithal to continue to do their job. Now if we go into a Great Depression, that will be different. That will strain everybody. And you're going to see banks and other large companies start to make decisions, which could make it worse as they try to protect themselves.

And just on the base case, if that does play out, the substantial reserve build in 2Q and maybe on the rest of the year and beyond, do you think the second quarter reserve build for the industry would be higher than the first quarter? It seems like that's still a possibility.

I don't know yet. It easily could be roughly equivalent. And we all have a different mix of business. So you really got to look at the difference in credit cards, in wholesale, in auto, middle market. They're all different. But roughly going into the first quarter, you didn't forecast 18% unemployment going to the second quarter. And like I said, CECL is very forward-looking. So we will pick up some of that over time. And so -- but look, I don't think that's a terrible case. I mean if we start to have a recovery where unemployment drops by 6% in the third quarter, that's not so bad. People have gone home. They've quarantined. Their incomes have stayed up, for the most part. Hopefully, a lot of these small businesses won't be permanently damaged, and you'll start to have a real recovery.

And then in terms of the timing of the actual credit losses, there's obviously a lot of...

Can I say one other thing -- can I say something that's also very important? You're going to know a lot more by the end of the third quarter because you're going to see what actually happened to delinquencies and roll rates for credit card. You're going to see the first round of forbearances and mortgages come due. How many people can actually start paying new mortgage again? So you're going to see like how much stressed and strained it was. You're going to see more about home prices. You're going to know a lot more about whether people opening up dramatically increased COVID cases or just a little bit. So I do think by the end of June or at least by -- when companies report mid- to late July, you will know a lot more, and you can inform -- your decision will be a lot more informed than right now, even though it's only a little over 30 days away.

Well, that essentially answered my question on timing of when we might have more clarity on credit. Last kind of topic on -- as you think about credit and maybe the downside...

Matt, I know I'm in trouble. The thing about CECL is everyone uses their own assumptions. So it's going to be up to the analyst to kind of dig into the 10-Qs and ask the question about what's your assumption? Some people are assuming a very strong recovery. Some are assuming something different. Some use probabilities of different scenarios. Some use -- some are expecting home price to go way down. Some expect them to go up. So you've got to dig into CECL to figure out what the hell they put up. It is one of the reasons I always thought that CECL was a bad idea. And people are going to spend more time playing around the assumptions than looking at the actual underlying data.

So I do want to ask on dividends. A few weeks back, there was a lot of concern, certainly, question about the banks being able to continue to pay the dividends. I mean frankly, for JPMorgan and many banks, it's really hard for the math to show the need to cut the dividends. But I guess the question is, one, I want to make sure you still agree; but then two, under what circumstance may bank dividends be cut or suspended? I would imagine it might not just be financial in nature, if you could address that.

Yes. So I think it's important that a company try to sustain its dividend. I do think there are legitimate complaints in the great financial recession that a lot of banks, in particular, and other companies, but banks continue to pay very outsized dividends going into a crisis. And they depleted too much of their capital by doing that. Remember, this time around, the real capital being used to buy back stock, and all the banks stopped that. And people are a little misguided when they're talking about dividends. It's a drop in the bucket. So we just announced our dividend for this quarter. It's less than $3 billion, like 0.15% of our capital base. If you take the base case, what I was just talking about, the kind of the base assumption that economists have out there, we will earn quite a bit of money this year. Obviously, it'll be down a lot, but that's a lot of money. Why do you cut your dividend and then you just have to increase it right away to meet that obligation to shareholders? And of course, you don't really need it either because you still have a lot of excess capital. So the better course of action was to wait and to see. And if you go -- if the recovery starts -- and like I said, I think we have a pretty good idea when we report earnings. Then you don't -- you will never need to cut your dividend. If by any chance that it's pretty clear that this is going to get worse dramatically, then of course, the Board will take up the issue and say, "What should we do? When should we do it? How should we do it?" If they have to -- if a Board is mature, they'll consider that. But you have to have a pretty bad economic environment, I think, for banks to justify their Boards and to show that we should cut it now. It is cheap capital if you have something like a great financial crisis that goes on for 3 years. It's cheaper to do that and try to raise capital in the marketplace. So -- but again, you've got to look at the numbers. These banks, most of them are really well capitalized.

And conversely, if things keep moving in the right direction, it's not going to be long before investors and analysts start asking about resumption of buybacks. Obviously, the entire industry of big banks preemptively chose to suspend buybacks to support clients, to support customers, to support the economy. What are your thoughts on resumption of buybacks?

I think you're a little premature. I think you've got to see the white of the eyes of the recovery before you start something like buybacks. But I think the companies that -- and to be more opportunistic. If companies all of a sudden are retaining a lot of capital, they're earning money, reserves are coming down, et cetera, yes, I think you may see people start them, but they probably won't be the size that you saw before. And yes, we've always...

And just longer term on buyback...

Excuse me?

No. Go ahead, please.

I think it's -- and the other notion that people have about buybacks, something bad about, buying back your stock -- and I've always thought that you shouldn't buyback your stock when you think you're buying at a price that your remaining shareholders are getting a good deal. I never believed this notion that you buy -- that it's returning cash to shareholders. Therefore, it doesn't matter what price you pay, which is kind of -- so there's this attitude that people overpaid. Obviously, that's true sometimes. It's a free world. People are going to overpay. On the other hand, it's a normal recirculation of capital that you can use, and you give it back to your shareholders. This notion that disappears is dead wrong. You're just recirculating it to somebody else to a higher and best use. And obviously, banks should retain the capital they use to safely run their business. Once they've done that, there's no reason they shouldn't be buying back stock if they think that's the best use of their capital.

And do you think, looking to the other side of this as banks, including JPMorgan, thinking about allocated excess capital, will it be done differently? You've talked -- you've floated the idea of supplemental dividends over buybacks given some of the price. So do you think that could gain some momentum, again, looking at the other banks?

No, I don't. And it's the worst -- to me, that's the worst way to handle excess capital. So there's nothing -- to me, the way we look at excess capital, there's nothing wrong with holding excess capital for a while because you can tell your shareholder, "Hey, this is excess capital. I hope to deploy it for you at a good return 1 day, soon, in the next year or 2. If I can't use it, I do want to give it back to you. I'd rather just raise the dividend and slowly suck down the excess capital then do a special." The reason that people are considering special dividends and stuff is because the way the regulatory system is working, you were heavily penalized by having dividends. And so you couldn't raise your dividend too much or something like that because it would penalize you under a bunch of tests that they have or something. So I'd rather that you -- as long as you meet your regulatory requirements, you get to decide your dividend, and you don't have to worry about that. You don't -- special, obviously, you can do one day. I think it's not the preferred way to do something.

And if I could segue into the longer-term impacts from the current crisis. I mean the first thing that comes to mind is where we just left off on regulation. And banks were obviously at the center of a dramatic increase in regulation last cycle. Hopefully, it'll be different this time. But talk about how you think regulation may be different from this crisis, both for banks and maybe broadly speaking, for corporate America.

Yes. Look, I've always acknowledged that there was a -- you always want good regulations. Some people believe there's been more. I mean more isn't always good. More could actually be worse, have adverse consequences. And obviously, after the crisis, there was a need for regulatory reform. Some of these institutions, not banks so much as investment banks, massively overleveraged. A lot of the shadow banks massively overleveraged. Accounting allowed people to have these huge off-balance-sheet things that just simply not accounted for, and they were overleveraged and mismatched in terms of maturity, their liabilities and assets and stuff like that. So reform was a good thing, transparency, more liquidity, more capital, more stress testing for those who didn't do it. Some of us already did it, but those are very good things. But of course, you can look at a bunch of other things. I think -- and I don't want to be complaining about regulation. They are what they are. We'll deal with them the way they are. But it does make sense at one point to look at, were they calibrated right? Were they coordinated right? Do they have adverse consequences? And I won't go through it here, but there are a lot of things which are having adverse consequences today on swap rates, on repo rates, on the movement of money, the -- where the risk is ending up in the system. The papers are right about mortgages today, like we have this problem on mortgages. No, the problem with mortgage was created by bad regulation that forced a lot of none -- forced a lot of mortgage lending out of banks, that forced servicing out of banks, that forced less transparency over there. So there are all these things that took place where the consequences were 5 years from now or 7 years from now. And people at the time don't necessarily look back and say, "That's why we actually call it the problem." So I think one day, they should be looking at how you look at liquidity a little bit closer, operational risk capital, G-SIFI -- I think, G-SIFI is by far the stupidest calculation I've ever seen in my whole life. And then in America, we gold plated it. We added to it. So -- and the reason I say that, if you look at G-SIFI, cash is a negative. Repo's a negative. Short-term AAA stuff is negative. And there are negatives over and over, and these multiple calculations take place. Is that what they really intended to do? And so you've got to look at these things even -- I believe in having tons of liquidity, but certain things give you no liquidity value and, therefore, creates a little bit of a cliff effect. And like I said, I already mentioned the pro cyclicality of CECL, reserving generally risk-weighted assets generally and a whole bunch of other stuff that actually, if this thing gets worse and worse, will cause banks to pull back dramatically at precisely the wrong time. So I do think after this is all said and done, maturely, people should look at these things and decide which ones work, which ones didn't work, which one should be modified, which is the way people should always be looking at regulations. How can we make it better? How can we make it more efficient? How can we make it serve the markets better? How do we make it protect the system better, protect consumers better? And sometimes, the rules that are put in place have the absolute opposite effect that people expect. And so you've got to be very careful when you put rules into the marketplace on what you expect them to do.

And I want to talk about how this crisis might cause some tweaks to your business model. I mean the first thing I want to ask about is on the technology spend. It's an area that you've been focused on for many years. You highlight the annual budgets of $11 billion to $12 billion. How will your approach to investment spend in technology change from the crisis, whether how much you spend, where you spend it?

Well, it won't change the way we look at it, which is you have to build technology to serve your clients better, faster, cheaper. And that's just as true today as it was 10 years ago, 20 years ago, 30 years ago. Obviously, the technology is different. So now you have cloud, you have AI, you've got work from home and all these things, which obviously, you use technology to adjust to. But if you look at our business, it's people, products and technology, branches. It's -- and so yes, it won't change the fact that we try to use technology to do a better job for clients. It already does a tremendous job on risk, fraud, marketing, getting your cost of servicing down, your cost of digital, which is great for clients. It also reduces the cost rate. In some cases, of course, it's more fraud or errors out there. But -- so I don't think it's going to change. I think what's going to change a little bit, it will accelerate -- in my view, accelerate people working from home because you have more data, you know what works, you know what doesn't. You had this great experiment of all time. It will not accelerate digitization, but that -- because that was already taking -- but maybe it'll accelerate just a little bit, but that was already taking place. We're a little surprised of seeing the consumer business that the folks who are already digital are doing more of it. The folks who aren't digital aren't exactly picking it up. And I wish we could find a way to incent them to do that better. But I'm not sure it's going to change that much. The markets the world have already been effectively, most -- for the most part, digitized, clients are getting very used to it. But some of the fundamentals stay the same. You got to do a great job for your client, and you're going to have competitors who are using technology to try to unseat you. And so you always have to be looking at the whole landscape to make sure you're doing the right things.

And then as your role -- as JPMorgan's role as a leading global adviser, you're obviously talking to big companies all around the world who are both trying to get through the downturn that we're in here and probably also thinking a little bit differently about their business or if they're not already, will be soon. Are those conversations happening? And how can JPMorgan be in a position to help them with some of those strategies to execute on?

Yes. So they're definitely happening. A lot of it is speculation, but thoughtful -- I shouldn't call it speculation. It's just thoughtful questioning about what did we learn and what will it change about society how consumers operate, how companies can operate? Obviously, and you've seen a lot of it, we all can talk about how much more people can work from home and which can do all the commercial real estate and possibly big cities and suburbs. And look, we simply don't know. But I do think it will have some effect in those things that you try to figure out. I think for the most part, right now, companies are still in the mode of making sure they can get through this. So I think you're very, very wisely, so a lot of companies raising capital. So I've got a lot of clients say, "I now have enough capital to take me to the end of 2022, the end of 2023." The equity markets are open. Convert markets are open. Private placement markets are open. Investment-grade, high-yield -- I think investment-grade and high-yield alone in March, April and May, may be the 3 biggest months ever. And so I think those are very wise moves that people are thinking about, "How do I just make sure I can protect my employees, my customers and my company for an extended period of time to help get through this thing?"

Maybe shifting to current trends in your 10-Q from a couple of weeks ago. You raised the outlook for net interest income, both for 2Q and for the full year. What's driving the better net interest income?

I would say it's marginal. I think we raised it by $300 million or $400 million a quarter. It's marginal, and it's mostly growth in deposits, loans, balance sheet and stuff like that. Expenses will be -- I think we -- I think the last time we spoke was $65 billion. They'll be a little bit less than that $65 billion. Trading markets, this quarter, so far, there's still a month to go, are just as strong as last quarter.

And some of the growth that's happened on the balance sheet, obviously, the commercial line drawdown. You mentioned some of that has already started paying off. But there's also a lot of deposits that go with it. Is there an opportunity to take some of this business and make it more permanent, whether it's from a relationship perspective that you've been able to get closer to them? Or even just markets aren't opening for all customers, I would imagine. So some borrowers might have to come back to the bank versus the debt market.

Yes. I think the answer is yes, but it's very hard to isolate it. So I think what we have seen a little bit is if you've got great services and products, you're still winning business. Obviously, JPMorgan Chase may be a safe harbor for some. So I do think some of the deposits we got, some of the clients that we got was because of that. Our experience has been, yes, we get some, and we also lose some down the road. People forget -- they forget the safe harbor, and they can save 3 basis points sometimes. And -- but I do think it's really the quality of products and services. The -- obviously, in a crisis like the stability of a strong ship. And I haven't -- yes. I'm sorry, go ahead. No.

I was going to go a different route. So go ahead.

Yes. No, go ahead.

Okay. And then just on the expenses, what's driving some of the slightly tighter cost there? Obviously, you've been a good expense manager over time. You've talked about tightening, if needed. But what's driving the slight reduction in the cost outlook?

First of all, some is volume-driven. So it isn't because we did anything greater ourselves. It was volume-driven. And some of it is, I would say, in general, is headcount-driven. While attrition is lower, headcounts are lower, hiring is a little bit lower. And obviously, you can get tougher in certain expense categories. So I think it's just kind of what I call no regrets expense management.

So I wanted to circle back a little bit on credit quality...

But it's not cutting the fact we're trying to open new branches or trying to expand this business or that business or invest more in technology. In some cases, it led to obviously more rapid change in technology.

I want to circle back on credit quality. And the forbearance, it's a very interesting concept because there is maybe the human psychology aspect where if you're kind of kicking your payments down for 1 or 2 months, you get right back in and start paying off, if you have the ability to. But if it ends up going on 2, 3 quarters or kind of some magic time frame, it could cause focus...

Well that's 3 months you're talking about, yes. Yes. Well, like I said, I don't want to get into...

Yes. I just want to conceptually -- right now. I just want to conceptually talk about there's a little of that risk where you give people flexibility and how do you know they pay when they can?

Well, that's a very good question. In fact, just so you know, we do check. And we had several -- it wasn't a huge number, but several people who we know had $5 million or $10 million asking for forbearance in their mortgages. I mean some people just think of it just like an entitlement. Now here's some other interesting data. I think about 1/3 of those who ask for it never actually use it. And I suspect a lot of people who asked for it, even people who started using it, did it as a safety precaution. They hadn't started to collect unemployment insurance. They didn't know if they're going to lose their job or not. So there are all these various reasons. So my hope would be is that when you start to see the first people come off of forbearance that the people start repaying is higher than people think, not lower, which, by the way, also gives them an increased chance to do refi, which could be very smart for them in certain cases. So -- but we're going to see the first cohort of people coming for forbearance sometime in June. And so we actually have some real data to look at that. In the old days, it was always a danger that when you stopped paying that mortgage, you would never start again. But remember, last time around, with the thing we're looking at, home prices are down 40%. There's a good reason not to pay. You weren't going to lose any equity value in your home, whereas today, it's the opposite. There are very few people underwater in their homes today.

One of the things that we see from a crisis like this is those kind of strengths kind of reconfirmed but then also maybe some weaknesses exposed. And I wonder if you could touch on this, maybe specific to JPMorgan. And if you have any thoughts on the industry as well. I mean we touched on a couple of them in terms of like the capital and liquidity. But like one thing that comes to mind for me is bank technology, I think, generally gets a bad rap. Yet the vast majority of employees have been working from home, and it seems like things have been working. Trading is happening. ATM is working, cash management, mobile deposit. So I don't know if that's just my perception, but maybe that's something you could talk about even more broadly speaking. Just your view.

No, I think -- banks are huge users of technology and quite good at it, with back-up systems and topnotch data centers and ATMs. And the big banks, we run like 6,000, 7,000 applications. They all mostly work all the time. But of course, something will go wrong somewhere. And you're always going to piss off a customer because you didn't do something exactly right. I think if you look historically, a lot of banks weren't the best, what I would say is making customers happy. Then you have people come along who is customer satisfaction. That's what they drove. They drove it all the time. So I think banks do a much better job today in customer satisfaction. But I do agree with you, this whole pandemic showed the strength of bank's back office, the strength of the technology, the strength of the digitization, the strength of the fact that we can put traders, bankers, ops, people, call centers, all at home working, effectively, with at their fingertips, pretty much the same tools they had before. That's kind of extraordinary. And you haven't seen people's data centers go down. You haven't seen major problems. You have seen, in certain other industries and you've seen with some of the fintech companies, they had those problems. They couldn't trade for their clients. They couldn't move money for their clients because they did have an extended outage of some sort. So I think banks are getting -- they've always been bigger users of technology. They're getting better at the friendly side of it, making the customer happy all the time, customer satisfaction, which, of course, we measure nonstop now.

So we talk about various macro scenarios from here, and I have a few questions that came in over the webcast. Essentially, trying to get your best guess on how it tracks from here on the economy, on the stocks. And one client said, "I don't know how you ask this, but Jamie set the bottom last time when he personally bought stock." You already own a lot of JPMorgan, but anything you want to comment on that line of thinking would be of interest to the audience.

Yes. Well, I'm not -- yes. I do own a lot of JPMorgan. And I think JPMorgan is a very valuable company at these prices. I mean its capabilities around the world getting through this. I look back, by the way, even in '09, we earned 7% intangible capital. That was our finest year. That was not our worst year. That was pretty good. And if you look at this year, I will feel the same way that we did our job. We're hopefully going to earn some real money anyway. Of course, it will be down, but remember, a lot of companies can go from profits to losses very quickly. So I think it's a very valuable company. But we are -- we're the -- we'll always be affected by the global economy. You cannot be a bank and be immune to what goes on in the world out there. And some companies may be -- like maybe a serial company, or certain things where it doesn't change very much because people have to eat or something. But no, we have credit and risk in markets and clients and all the things like that. So I don't -- and I'm not going to try to predict the bottom. My base case, I think -- look, the way we're thinking about today is kind of that base case, which is, hopefully, this thing will happen. I give it some pretty good odds. The government has been very responsive. The Federal Reserve has been very responsive. Large companies have a huge wherewithal. Hopefully, we're keeping the small ones alive long enough that most of them can get back into business. People are not completely demoralized by being unemployed now because, for the most part, they consider it temporary. And that while we're going to report a really bad GDP this quarter and unemployment, you could see a fairly rapid recovery. And I think that's got a good chance. And that's one base. Think of that as, obviously, it could be that, give or take a little bit. And it's not a bookend, but it's kind of a decent outcome. Hopefully, we can do better than that, but it's a decent outcome. On the other side, it just gets extended. You have that 20% unemployment, and we can't get out of it because capital is being destroyed. Big companies start to lay people off. Some of these -- you can't prop up the stock market forever. And some of these liquidity part may not work exactly the way people expected. The emerging markets have more problems. The government doesn't have another $1.5 trillion stimulus. So you could come up with a scenario. No, it can continue. And you guys can put your own odds in what that would be. Bank has to be prepared for both. You can't just pretend. "Well, this is the one that's going to happen. If that one happens, I'm going to go bankrupt." So you have to be prepared for both. And the stock market itself, a lot of announcements have taken place by a lot of people who are very bright about the stock market. And one of the good insights is that it's not a stock market. Banks are down 40%. Oil coming down 50%. Airlines are down 80%. And then, of course, you've got the winners: Amazon, Walmart, Target, Netflix. So it isn't like you don't have -- so you can't look at the stock market as one vehicle and one beast. But you also have a tremendous amount of liquidity out there. When the Fed puts trillions of dollars of liquidity in the system, I talk about liquidity. When they buy assets, that cash that they put out there is kind of like water that fills every crevice. The crevice that get filled may not be that the buyer who sold the treasuries to buy more treasuries. The buyer may buy emerging mortgage common stocks. They may make venture capital investments. They may look at stocks with 2% or 3% dividends and say that's a hell of a lot better than 68 basis points on the 10-year treasury. So I do think that, that liquidity lifts up, in some way, it's almost impossible to measure the stock market and all asset prices. And so look, we got to hope for the best, which is that, that recovery takes place. And if that takes place, it may very well justify stock market valuations, et cetera, then the bad case takes place. And I think we should all do everything we can to maximize the chance that the good outcome takes place. And that means the regulators, the government, fiscal policy, monetary policy, financial regulatory policy, to make sure we get out of this thing. Because I think if it does go on for a year, it won't be very good.

Well, we are bumping up against the end of the session. So Jamie, thank you so much for joining. I know there's a lot of interest in your comments. So thank you for you and JPMorgan participating again this year.

You're very welcome. Everybody, keep the faith. We will get out of this thing. We'll talk to you all soon. Thank you. Bye.