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

Great. Thank you, everyone. We're very happy to have JPMorgan Chase up next. We're delighted to have Daniel Pinto joining us. Daniel is the Co-President and Co-COO of JPMorgan and Head of the Corporate Investment Bank. A few housekeeping items. You can submit and vote on questions on the Pigeonhole link that's on the left side of your video. And also please participate in the Procensus poll that we're doing about this chat and about JPMorgan shares as well, and that's also on the left side of your video. Daniel, I know it's late in London. So thank you for joining at this time. You'd never know it's almost 10:00 p.m. You look like you're ready to start your day there. So thank you for joining us.

No, John, thank you for inviting me to your conference. It's a pleasure to be here.

Great. Well, it's been a crazy time for markets over the past few months. I thought we'd start off. We'll talk a little bit later about near-term trends. But for now, more broadly, at an industry level, how would you say market plummeting and the mechanics of the market are functioning?

Well, at the moment, they're functioning very well. But I think that is interesting -- it will be interesting to see that many of the things that happened when we have them in March, this extreme period of volatility is something that we kind of saw that it could happen. When you have 6 or 7 mini corrections in this cycle with very little news or very little bad news, the markets move dramatically and the debt of the market pretty much was very, very shallow. So it was expected to see when the correction -- the real correction happens, because of the end of the cycle, we are going to be in a situation of extreme volatility. I think that the -- that driven by probably changing regulations of other issues that really has made the availability of capital to facilitate the investment process, are less than it used to be, and you have a long, long period where asset gatherers, asset managers, they've been accumulating risky assets. So what -- so that's why you have that extreme volatility. What has been extremely helpful that the decisive action from Central Bank, particularly the Fed, the ECB and others, that knowing that they really decided, in a very, very short period of time, things that in the previous crisis they were doing bit by bit, probably over a period of a couple of years. So they did it in a couple of weeks. So therefore, that stabilize the market, reduce the volatility. And that, coupled with a very solid banking sector with good capital, good liquidity and all that create environment for the market to function very normal, and we've been continue to see that over time. So I think that at the moment, markets are functioning pretty much as expected.

Some folks have brought up 2009 as another period where we saw a lot of volatility and as a year that ended up being good for markets revenues, especially for bigger players. What are some of the similarities and differences when you compare this to back then?

I think that the things that they are -- obviously, there is a reception -- a recession now, and it was a recession then driven by different things. But I think that the main difference are the couple that I just mentioned, decisive intervention from regulator, Fed and, by far, more solid and in a better-positioned banking sector that allowed this sort of tough situation to be managed in a more rational way. The -- what we have seen as well is companies being a lot more conservative and draw liquidity in amounts that it was a lot of more than it was in 2008 but banks in general, being a lot of -- good with a lot of less risk than we have then, so in a better position to provide liquidity to clients, focusing clients and together with the action for the Feds allow the market to function properly.

And what's the opportunity for market share gains, consolidation in this kind of environment perhaps like we saw in the great financial crisis after those years where bigger players did gain some share?

I see it a bit different this time. I think that there is the short term and more the long term. In the short term, I think that because banks were in a better position, as I just mentioned, I think that I haven't seen a massive swing in market share in the last -- probably in the last quarter or 2 because we were all better than we were at that particular point. So -- but I think that the trends in the market are still there, the ones that there were before. Like this is -- the markets business is a business of scale that requires a lot of investments, require complete set of products, and that is a machinery that is very expensive to run that require really a lot of size and scale in order to make it profitable. So therefore -- and allow you to continue to invest in better and better services and products. And the moment that your investment starts slowing down, the competitiveness of your products is a lot lower, so therefore, you start losing market share extremely quickly. And I think that, that trend will -- it was there pre this crisis, and it will be here post this regardless of what had happened in the next -- in the last couple of quarters and in the next couple of quarters.

And could you talk a little bit of how you're managing balance sheet resources in this kind of environment? What are some of the pressures from the, what you call the passive consumption of RWAs?

I think that, in general, when you think about the RWA that we have, average in the fourth quarter of 2019, to what we have probably forecast for the second quarter of 2020, there was a substantial increase. Some of that is essentially seasonal. So we have lower consumption of RWA, and there is like roughly $30 billion of RWA increase that it was in the plan. On top of that, you have an extra roughly $100 billion of RWA that we are consuming, of which 70-plus percent is passive. That is -- draws on existing revolvers. It is value risk, regulatory VaR plus stress VaR. It is increase in failed trades, increase in margins and all these kind of things. And the other 30% -- the other $30 billion is mainly related to new activity that we are providing to clients in markets, in banking and in other things. So that's what it is. So it was a big [Audio Gap] was just by doing exactly the same. You have the cyclicality of the rules increase your RWA substantially. But clearly, we do have the capital. We were very focused in supporting our clients. And we deploy that balance sheet in a way that where the risk was properly managed and the profitability of those transactions [Audio Gap] acceptable. So that's how we did it. So we are constantly trying to optimize that utilization to provide the maxim -- to be able to provide a massive amount of services to our clients and retain or increase, if possible, market share.

And could you talk a little bit about corporate draw activity? What are you seeing there? Has it slowed? What other trends would you observe?

It has definitely slowed. So we have a big probably, at the peak in the wholesale business overall, not just in the corporate investment bank. So it was roughly twice as much draw on revolvers than it was in the 2008, 2009 crisis, and it was very, very fast. But -- and I think that now has stabilized and some of these facilities, some of that cash is being paid back, as company feeling more comfortable with the overall environment, and a lot of the companies, they've been able to go to the market, issue bond and finance in a very effective and more permanent way. So definitively, we are seeing a decline in demand. When I look at what we were planning for the second quarter and what has really happened, definitively, what has happened is a lot of less demand than we planned originally.

And that's because you've seen the inflow of new requests has fallen off pretty sharply, I guess, and then the pay downs of folks that already drew has also...

Yes. You have -- yes. You have a stop of new existing lines, existing lines been drawn and some payback and the demand for credit that it was very, very strong in the month of March and April is now new credit is slowing down. Obviously, it was a massive amount of issuance in the market, both in high grade and high yield that has helped that. And probably a bit of better visibility about the path forward for the seasoned economy that we have probably 1 month ago or 1.5 months ago.

And how about corporate deposit activity? It still feels like from the H.8 industry data that deposit activity and inflows have been strong. What are you seeing there? And how much of that is related to folks that draw on their revolvers and then park deposits with you?

Well, what you have is [ sadly ] is -- like, yes, a lot of companies are withdrawing on their revolver and depositing the money with us. But it's also, as the market business sold off and people reduce risk, some of the money came to us in form -- in the form of cash. So plus all the QE and all that, it was expected deposits substantially increase. What we have seen in the last couple of weeks is in the wholesale space, particularly in tiers and a small decline in deposits. Definitely, they are not growing up anymore, and some of the money is being redeployed. So...

So that's probably a good sign in a sense.

I think that there is -- things are functioning quite well. So well -- and the whole -- as market is stabilizing, also volumes are coming down. So when I see volumes in markets, so we were at the peak depending on the asset class between 2x to 3x plus 3x plus the normal volumes. But the average of the first quarter was between 1.2x to 1.4x, above what it was at first quarter of last year. So when I look at the month of April, more or less, is staying line, way off the peaks but in line with the increase year-on-year, probably 1.2, 1.4, FX a bit less but more or less. In May, we are seeing volumes going more towards normal, like relatively flat year-on-year and in some cases, like foreign exchange or commodities slightly lower for the month of May than what it was last year. So we are seeing that the situation is stabilizing. That's why deposits are coming down. So the markets are functioning a bit more -- companies are more confident, so the markets are functioning a bit more normal. Still, so yet to be seen, how this plays out, right, because there is a lot of optimism in the market that in an economy that is collapsing, so at least in the second quarter and have some recovery. So markets are really pricing a very good outcome here.

Yes, yes. Just on that topic of the balance sheet. We talked a little bit about the GSIB surcharge. What are the factors that you consider when you're deciding to kind of hold the balance sheet in the 3.5% GSIB bucket or burst through that to the next level of 4%. What factors do you need to consider as you manage that?

It just -- as you know, because the ranges haven't been effective and the economy until now that is slowing down has been growing quite a lot, is most of the banks we're bumping were bumping against the 3.5%. So this year, at the moment, we are -- as we said at Investor Day, we are gravitating in the 4% bucket, and then we will decide later in the year, depending what the situation is, if we are going to be at 3.5% or at 4%. I think that the key point here is that we don't want to constrain our client franchise, our client business. We want to maintain our market share. And if that entails to go to 4% is fine. And I think, as you know, if we were to jump to 4% at the end of this year, so that will apply in January of 2023. So by then, it may be some recalibration. It may be different way to measure GSIB. So we saw that is -- we are prudent in the way we do it, but we don't want to really constrain the franchise because of this. And we will see how the situation plays out towards the end of the year, but we are essentially not constraining the businesses. Trying to keep the 3.5%, we're allowing the business based on the plan, on our own budget to really gravitate towards the 4% market.

And do you have a sense of what factors the regulators are trying to balance when weighing the decision to recalibrate, factor in the growth in the economy and maybe provide some near-term relief amid the surge that's happening right now on balance sheets?

Yes. I think that it -- when you think about -- since they synergize to the end of last year, the economy probably has grown like 15%, 17%, and probably the economy will contract around 6% or 7% this year so -- by the end of the year. So you will saw that if financial sector wants to support the growth in the economy, you should allow that to happen. Number two, I think that the way that GSIB is being measured with this step function is very unhealthy. If you would have a more continuous function, would allow you to run the business a bit more normal because if you jump from 3.5% to 4% and the -- I think that the hurdle is 730 points, you don't want to be at 731. So you're going to take all the capital, not use it. So it's just a bit more constant function. It will be helpful. I think that in general, about regulation, it makes sense to me that I wasn't expecting really much change until we go through a tough period. And then all the 10 years of change in regulation and making the banking sector more solid with better capital, better liquidity, better control and all these wallet regulation that we have to face. So I really -- I wasn't really expecting the regulators to change before we try or road test in a real crisis. And I think that now they have the ability to do that, and then they noticed what worked, what didn't work, what it was helpful and what it wasn't and probably would have thought that we all learned from that. And then there is an adjustment in the regulation into the next cycle after this crisis that allows the bank not to lose control or have less capital, to be more effectively capitalize and more effectively use liquidity to support the market without really weakening the sector at all. So that's what I was expecting and probably that is what is going to happen.

Fair enough. That makes sense. When you think about risk management, how are you managing through some of the heavily COVID-impacted sectors, when you think about travel, consumer, health care, auto, both in terms of your own exposure and then also working with clients to get them through this?

So when you look at our exposure to those sectors, so it has increased a bit. But the way that we manage is very simple. We want to support the clients. We have supported the clients. And the way that we have done it, particularly in those sectors that they are kind of having a hard time, is providing liquidity but in a prudent way, structuring the transactions in a way that are properly secure, and also more important, not just use our balance sheet but also optimize the usage of the market when the market was opened. As you're seeing with it -- I think that is the biggest, high-grade issue with volume in a non-M&A situation, $25 billion. We have done Carnival Cruises, so a $4.5 billion bond, $2 billion convertible and equity trades, we have done market. We have done many deals used in the market and many deals supporting the clients like United and others by deploying balance sheet but in a way that is prudent and secure. So I feel quite good. Clearly, as the economy has deteriorated, so when you think about all these sectors and the downgrade of those sectors has increased over $6 billion in the first quarter, the amount of criticized credit. And as the -- in the second quarter the economy will deteriorate further, that number will go higher than that. But overall, I feel very comfortable with exposure to those sectors, the security that we have. The security of our own portfolio, when I look at our drawn portfolio, close to 85%, this year, high grade is collateralized. So the quality of the portfolio is quite good. And at the end, the way that you deploy and support -- deploy capital and support clients in this sort of tough environment, it will really cement your market share and relationship with those clients over the long term. So we've been very, very thoughtful about how we do it, not just in banking. The same in markets.

Yes. And beyond credit risk, what are the other risk management issues that are top of mind for you now, whether it's counter-party risks or valuations and liquidity risks and other -- what are the other kind of top-of-mind risk management issues that you are prioritizing now?

John, when I look at our -- in markets, for example, our franchise is purely a client-driven franchise. So we were -- and where we spend the most of the time is to assess what kind of risk we need to take in order to provide liquidity to clients in the good and the bad times because, as I mentioned to you in the past, the worst scenario is where you're trying to be very, very smart, taking a lot of risk. It goes wrong, and then you are -- ended up fighting -- in a tough time, you ended up fighting with the risk management of your positions, while the clients are giving you more and more of the same. So you lose money with your positions and you don't monetize the client franchise. So that is the core of how we think about the risk that we take in markets. So we don't need to take a huge amount of risk for the franchise to be profitable. At our scale, the franchise is perfectly profitable. So the only thing that we need to do is to always be in a position where we can monetize the franchise. And that we did. And that is in the way that we provide financing to our market clients, to repo, prime or other forms of financing, in the way that we participate in complicated blocks of any asset class and provide oversized liquidity when it's within what is possible, what is necessary and the way that we provide all daily flow of liquidity day in and day out. So clearly, when you think forward from here and you see the S&P trading at probably about 21x 12 month forward, when you see spreads substantially tightening from the highs and you have all these risks on where the market is pretty much ignoring any potential bad news and really rallying in good news, so you have to be a bit careful. You have to be a bit careful because, hopefully, the economy rebounds in a way that can really justify this type of valuations, but it's not 100% certain. So we are, at the moment, considering the current valuations being more on the prudent side because we want -- as we did in March before the whole thing start to be in a good position if tough time comes again and volatility picks up to be in a good position to provide liquidity. I talk about volumes that they are normalizing. When you look [Audio Gap] going back to pre-crisis level, bid-offer spreads, of every product they have some that is liquid. And then even financing spread of liquid assets is going back. Repo is going back to where it was before. So there are a lot of good news, pricing and markets, where you have to be careful. Hopefully, it plays out this way, which is a very good possibility. But as you [Audio Gap] worst.

Yes. So as we think about the near- and the medium-term outlook, I guess, just when we think about markets revenues and you look at the industry wallet, 2019 was one of the better years for trading revenues in a while. Obviously, you had a good first quarter. How about over the next year or 2? How do you think about the medium-term outlook for the industry wallet across markets?

I think that last year, if I remember correctly, it was slightly up, both in fixed income and relatively flat in equities. And when you look at fixed income, which is the one that kind of the wallet collapsed for the last several, several years, probably has sort of find the base. So we are not seeing further deterioration. And regardless of what happened with this extreme volatility we have lived, I think that probably, as the economy recover and capital markets continue evolving, so -- and European market, hopefully at some point, become more capital markets driven and probably emerging markets will have to develop capital markets to grow, so you can argue that over the medium to long term, the wallet will tend to increase. So it was my view before and is still my view now. In the short term, it just is a function of this sort of crazy situation. And so far, so good. But...

Yes. So what about near term, if you think about how the second quarter is shaping up in terms of market revenues, obviously, Jamie said, is good, but I'm hoping you could put a more -- some more detail around what you're seeing in FICC and equities for the second quarter in the way you look at...

So what we are seeing for markets overall is the following. If I -- and I'm going to be very clear here that we get it right. If I take revenues as of last night, whatever is the number, and I add to that for the next months, after 4 months that is in line with the average of the last 3 year for the month of June. It give us a number in markets year-on-year for the second quarter around 50% up, 5-0.

5-0.

But it may be a bit more, a bit less, but it's based on that. And the reason why I am thinking about sort of using the average of the last 3 years for the month of June is because I see in May the -- 2 reasons. First, I see in May volumes going back to roughly flat year-on-year, and also, a lot of the dislocation and pricing dislocation that we saw in April and March, they are more or less coming in line and adjusting. So it will be less of that, plus volumes normalize. And so I think that is prudent to assume that June will be similar to that. So year-on-year, 50%, plus or minus. We will see how June plays out. For banking, we are going to be up as well across -- and sorry, sorry, one more comment on market, is very driven by fixed income, very, very strong performance in fixed income and a very solid performance in equity. So overall, both are contributing to the deposit number, but we think that is the biggest contribution. For banking, we are doing fine. Our market share at the moment year-to-date is up 60 basis points at 9.7% considering as the logic. And revenues for the IB fees for the second quarter, we think that we are going to be up in the mid- to high teens, more or less. With gains in all the asset classes in M&A, in equity and debt, M&A mainly driven by transaction coming from last year that are being closed this year. The new M&A activity, when you look at the announced M&A, is roughly 40% down year-on-year. So definitively, new deals are slowing down, but -- which is going to hurt going forward, particularly early next year, but this year looks to be fine so far.

Yes. And then again back on the markets, both are up, FICC and equities. FICC is a bigger driver and is also up -- FICC is up more than equities?

Yes, yes, substantially. But it would just mean it's performing well. So I'm quite pleased with the performance of the business.

Yes. And in terms of the industry wallet on the investment banking side, how do you look at that? You mentioned that the M&A slowing down the pipeline. I assume DCM is still very strong. When you look at 2020, what do you think of a wallet and going forward?

I think that when you look at year-to-date, the wallet is relatively flat according to the logic. And then whatever you make, more or less, is mainly related to the change in market share. In M&A, the wallet is down year-to-date 17%. But volumes are down, and now M&A is down roughly 40%, 44%, weaker in the U.S., stronger in Asia -- weaker in the Americas, in general, particularly the U.S. and stronger in U.S. -- in Europe and Asia. Equity capital market is up 20% the wallet year-to-date. And debt is around 6% or 7%. And that is interesting because the wallet is up year-to-date 6% or 7%, but volumes are up a lot. When you think about March, we issued twice as much in the March before. And in April, we issued 50% more than the April before, and we have a substantial increase in high yield. The issue is that the type of high-yield deals, they are not underwritten deals. They're very separate deal that they pay small fees, but the market are open. So it was perfectly fine, and then high grade is baseless in general. So that's why there is a bit of a dichotomy when you compare year-on-year wallet increase and volume increase. So we think that -- I think that debt will be slightly up year-on-year. So when I think about high grade last year, the market issue around $1 trillion. Probably this time, it will be at $1.5 trillion, $1.6 trillion; probably a flat volumes in high-yield or a bit up. So I see that slightly up. I think that equity is slightly up and M&A, probably 15% to 20% down depending on how the economy goes. For an overall wallet, there is probably going to be from flat to slightly between 0% to 10% down.

Yes, with a lot of different dynamics like you said. Yes.

Yes. So -- but the next, who knows? The next 6 months, so many things happen. So it's a good outcome in the economy happen, so you can see a reactivation in M&A. There is -- when you think about M&A in the month of March, the dialogue totally stop, and at the moment, the dialogue is picking up. And you see companies with very strong capital position, looking at acquisitions, not big deals, but smaller deals. You see a lot of capital being deployed in minority or in controlled stakes in the sectors that have been suffering the most. And so there is activity going on. But considering this stage in the economy, so it's not a surprise that it's a little lower than it was last year.

Yes, yes. Well, that's a great update. I appreciate that. One quick follow-up on the market's revenues. With the May volumes starting to come down and starting to feel flattish and such a big FICC number, which is great, assume there's some marks going on that maybe swing the right way this time. And is that kind of reversing some stuff that happened last quarter on pricing in marks? Do you have to [ add risk taking ]?

There are -- so yes, I said that some markets. So you have some normalization of totally position that because of lack of liquidity, they were fully stressed and now they're normalizing, and you have some of that in markets. The marks that we reported last quarter, $900 million markdown in our leverage lending book. We'll report that line not in markets. We report that line in banking. So spreads had -- have tightened from there, so you can assume that some of that $900 million is going to come down. Also, we have in the line where we report FVA another credit adjustments, so we are going to -- the JPMorgan spread have tied them substantially, so we are going to -- I know that you don't pay too much attention to it, but that also will be a headwind. But leveraged lending or FVA, that is not included in the 50%, plus or minus, that I'm talking about markets. That is pure markets revenues as we normally report it.

Right. Okay. And driven by a combination of volumes and spreads?

Yes. Yes. Volumes -- yes, as I said, volume very strong, though they are coming down. And the spread is always a function of volatility. So as the market stabilizes, spreads will sort of normalize and they tighten back. Also what you see, when we talk about volumes, so that volumes at the peak went down -- went up like between 2.2x to 3.5x the peak -- at the peak, the bulk of that increase in volume was done electronically, which is not such a surprise because, essentially, in those periods of stress, the illiquid stuff is very difficult to trade and what you trade is what is liquid. And what is liquid, it trades mainly electronic. So essentially, I don't see that there is a big change in trends, that people now they are going to do more and more electronic. I think that the trend is pretty much the same, but the increase in volume was mainly related to liquid asset classes that mainly trade electronically. So whatever, it's not liquid, there is blocks or that it wasn't electronic before, it's not going to be electronic now. But the trend, if you look at all across asset classes in the last years, it come to electronic portion of the revenues continue to go up. The piece that is done by voice, it continues to be smaller but more or less in line with our expectations.

Okay. Transition to a bigger picture question that we're asking all of the CEOs across all the industries that are representing at the Bernstein conference. And it's really the idea of, if you think through the COVID pandemic and its aftermath, how might that impact your industry and your company and how you think about whether it's investing or cutting costs and any kind of permanent changes that might come about from the environment that we're going through?

I think that -- I was thinking about this. When you look at the key strategic areas of investments, which is the transformation of the asset management industry and how will affect our security services based on the markets business, so the wholesale payment space and how we are investing to create this platform. And the concentration -- the trend of concentration in wallet in the -- because of the payment space that it was very evident -- you have good page in my Investor Day presentation that it shows how much revenues of the top 4 or 5 players have been in the -- increase in the last 5 years versus increase in the wallet. All those place, including us, have really increased our market share a lot. The application of technology in banking to be able to free up the time of bankers and junior bankers to cover more clients and grow market share, so -- and the transformation in markets as the market becomes more and more electronic, more algo driven, more intelligent algos and all that, all these trends, they are, in my view, intact. What I think it will change is how -- 2 things that we learn. So first is we managed to have JPMorgan running in a very normal basis where almost 80% of the people working from home. And when you exclude from that branches and processing checks, which is lot box, which you can only do on-premises, so probably 90% of the people were working from home. And in a massive volume increase and very difficult environment and we managed very, very well with all that. So I -- when you think about that, our ability to deploy technology to work from home and you mix that with the sustainability agenda of reducing our real estate footprint, reducing the burden on public transport and all these kind of things, you could argue that I'm quite convinced that on a rotational basis, depending the type of business, you're going to have a substantial part of the population on a rotational basis not permanently working from home. And it will depend on the type of business. It may be either, in certain businesses, 1 week every 3 or 1 every -- 50% every other week or whatever it is when we get to normal. And I think that, that will be the way that we operate. And as time goes by, we'll have better tools to develop, to understand the productivity when these people are working [Audio Gap] The other thing that it was very evident is that when we have to make -- Gordon and I, we have to make very, very tough decision of sending people to work from home and deploying technology, so how fast things that could have take a long time to decide that were decided in -- very, very fast. So bureaucracy that these companies always have to deal with some way or the other in a way that we can retain some of that learnings and to make the company to grow faster. I'm quite convinced we are going to very soon -- a lot of work to see how -- so obviously, there is a change in risk appetite, what is the right balance and then how do you keep this momentum of fast deciding, fast in moving company and not allow the organization to go back to a more bureaucratic stage of business. So that's roughly what I think.

Yes. That's very helpful and insightful. Somewhat related in your role as Co-Chief Operating Officer, I know you're responsible for technology across the organization. I think we're all familiar, as consumers, with some things that differentiate Chase on the consumer side. When you think about CIB, what are the differentiating technologies that help you gain market share and utilize your scale and really differentiate what you're doing in CIB?

I think that is what it is this is about the technology that you support the quality of the services on the client experience and the completeness of the products and the globality and all that and that we've been quite good at that across the company. And I think that, as I mentioned before, when you think about the company spends roughly $12 billion in technology, we've been really trying to, as I mentioned at Investor Day, to get more out of those $12 billion. And when you think about, there are 3 components of those $12 billion that is similar in the CIB in retail or anywhere else. It is developers, and we have done a lot of work to really help develop to be more productive and being able to understand what are the constraints for -- tend to be more productive. And it's very clear that as we continue modernizing our infrastructure, so you can blend it out. There is another portion that is not developed where the people that support the technology organization, meaning prod managers, people that do checks and all these type of things. There is a substantial amount of money. But as you modernize the infrastructure, you need a lot less of that, and you can deploy those dollars to more and more effective ways to develop and increase even better the quality of services. And the fourth component is all the physical infrastructure that we use for compute and communications and storage. There's billions of dollars as well. And as we modernize infrastructure, you're going to have a computer environment, storage environment, communication environment that is by far more effective. That's why when I think about the $12 billion and I mentioned Investor Day that it may be another 20%, 30%, I don't know, whatever it is, more output for dollar invested over time as we modernize the infrastructure, I'm quite convinced that is the case. So that's why I don't believe that the $12 billion is a number that is going up and up forever because I think that we'll be able to do over time more and more and more with the dollars that we deploy today and really finance with productivity the bulk of investments that we need to make.

Got you. We've got time for 1 or 2 more questions. I've got a few on line here on the Pigeonhole. So Daniel, one of them is what would be the challenge of working in an environment of negative rates. It doesn't feel like the Fed wants to go there, but it's something the market worries about. Just from your perspective, what are some of the considerations that you'd have?

So there are -- so first, I really don't believe that the Fed will go there. And if they were to go there, it may be for a short period of time. So -- and what it will change the dynamic of the market if there are negative rates for a sustainable period of time as we have here in Europe. And you have a very different outcome for retail than is for wholesale. In the wholesale business, negative interest rates, obviously, we don't prefer that scenario. But essentially, for the business that are a being more affected will be the deposit-taking business. But since overall, when you look at the wholesale business, roughly finance itself is not such a big deal. So we will pass through to the clients the bulk of the negative interest rates. And clearly, it will be better if we don't have them, but it's not the end of the world. In the retail business, it's very different because you have a sustained period of negative interest rates. You may have to adjust the way that you do business that you charge clients and all these type of things. But really, it's not our core scenario. We don't think that, that is going to happen. The other point is, if it were to happen, are we operationally prepared or not? And the answer is, yes. In the wholesale business, we're premier TAM. We operate already in Europe for all the businesses, so there's not massive issues overall.

Great. Well, that is extremely helpful, and we are at the end of our time. Daniel, thank you so much for your input and your perspective, which is very helpful. And for anyone that's still on, we hope that you will participate in our poll from Procensus, and you'll get to see the results of the poll. And Daniel, we'll send them to you as well. Thanks again. Appreciate dialing in.

Thank you. Thank you, everyone. Stay safe. Thank you, John. Bye-bye.

Thank you. Bye.