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

So I'm delighted to introduce our next panelist, who's Jamie Dimon. Jamie needs no introduction. He's now in his 14th year as CEO and Chairman of JPMorgan. Since the merger with Bank One, JPMorgan's total returns have outperformed the market on -- by more than 100%. He's distributed more than $200 billion of capital back to shareholders, and he's clearly created one of the world's greatest financial services franchises. Jamie, I think the first time you spoke at this conference was when you were the CEO of Bank One in December 2000, so exactly 20 years ago, and we really do appreciate you coming back so regularly over the years.

So Jamie, I thought I would just start off with a question about the macro environment, and I know there's a lot of different moving pieces here. There's a lot of uncertainty. But what's your take on the current state of the economy? How does corporate and consumer confidence appear to be shaping up? And what are your expectations for 2021?

Richard, welcome. Happy to be here, and congratulations on all the great work that you do. So look, it's -- there's no mystery. We had the worst downturn we've ever seen in 2 months. And if you use a single point, 4% to 15% unemployment. The biggest upturn we've ever seen in 3 months aided by a tremendous amount of the U.S. and kind of global fiscal and monetary stimulus, and now it's a little murkier. But -- murkier but better. So unemployment has been better, though participation was a little worse. Confidence, it's really bifurcated. The companies are doing well. they have high confidence. The companies that are not doing well have lower confidence. Consumer confidence has been okay, but the reason they might get a little bit worse now at the lower end because they've run out of the extra money. Partner consumers they have, they're same as the way up, but the other ones don't really need it. So it's all over the place. We're still in the middle of COVID, how bad the winch is going to be, and thank God there's a vaccine. So -- and it's just going to be a little spotty for a while. I just think it's unavoidable. Hopefully, and then I look at really look at the bookends, one book end is the base case the Fed has. Well, unemployment is now below 7. By end of next year, it's below 6 or 5.5 and continue to improve. That's a great case. I give that a 50% chance. And then of course, there's always the case that we'll have some kind of double dip and return to something worse.

So I think since you last spoke, we obviously had an election. We obviously now seem to have a successful vaccine that gets rolled out. But can you talk a little bit around how important another round of fiscal stimulus is to your outlook, whether you think infrastructure spending is something that could happen, could that be meaningful, but also perhaps you could touch on regulation and whether you think you -- we will see any significant changes to the regulatory backdrop under a new administration?

Yes. So on the first one, we absolutely need another stimulus package, and it should focus on those who need the help, the long-term unemployed, some of the new unemployed. And you can debate the $200, $300 or $400 extra but something and then literally the small businesses. There's a whole bunch of other people, too. I feel terrible for the airlines and stuff like that, but those 2 really need help, and the damage will be far less if we help them. Kind of think of it as bridging them to May, June of next year with the vaccines out, and hopefully, the economy recover well. And so we support that. Now I think the regulator -- I think the government did a very good job getting out the money in these programs. Of course, there are always negatives when you roll them out. But who would have thought that our government can get programs out like PPP in literally 3 weeks. And so -- and then the regulations, obviously, we have a new administration coming. I think they put professional people already in the job. Janet Yellen, I don't really know, [ Michael Deezy ] but a whole bunch of others, and I hope that they focus on growing the economy in a healthy way. And I -- but it will be true that regulators probably tougher on banks, and it's just something we're going to live with. We've lived with it before. Obviously, the banks are much sounder better, running -- they've met years of consent orders and things like that. So -- and then -- unless the Republicans change, even they change, by the way, it's going to be hard to pass major legislation. So I think for -- at least for banking, you'll see regulation but probably not something in the way of legislation. And I'm hoping beyond hope that the regulators look at all the rules that were put in place, which was substantial over 10 years, and they're still putting some in place now to 10 years later and then kind of recalibrate. They should do a victory lap over the fact that Lehman could not happen today. They've had too much equity. They have too much liquidity. They have a -- they'd be the most over equitized bank in the world at the point of failure. And I think that will be good for the bond market, not bad for the bond market to have an orderly dissolution as opposed to disillusion with Lehman. That's a victory. And the FDIC had the right to take them over. But all these other things, G-SIFI, cash being counted in G-SIFI and LCR and SLR and treasury being kind of -- that's causing issues in the ability to intermediate in the mortgage from the time it gets tough. You saw that last year, you saw it in March, and you're going to see it again. So to me, I hope they recalibrate all those things, and we don't have so much capital liquidity tied up in a very rigid way forever.

So Jamie, let's dig a little bit deeper into both of those points. So let's start off with how the banking industry and how JPMorgan performed this year because this really was the first real-world stress test that we've had since 2008. If you were to give yourself a scorecard in terms of how JPMorgan performed, what would it look like? If you were to give the industry a scorecard, what would it look like? And do you think the industry could have done anything better or differently over the course of 2020?

Yes. I think -- look, obviously, the naysayer jump in and to say, "Well, the Fed not taking all those actions as we move forward for the banks." That's, of course, true. They didn't take those actions to help the banks. They took those actions to help the economy and the average American. But in general, the banks have so much capital, so much liquidity, so much capability. They all jumped all over themselves to help PPP and help all the businesses. They put up tremendous amount of money, revolver taking down, buy [indiscernible] done. So I think it's coming out of this looking great. But it's banking, you got to be careful. It has to be disciplined and stuff like that. So -- and if you look at CCAR, most of the banks can easily handle the CCAR numbers with quite far worse than what actually happened. And so we may be disclosing some of that down the road, like because you should be asking, "What do you think your real results would be if you went through a CCAR scenario?" Because it would be nothing like the ones that these are. And I understand why the Fed does their thing, but -- and then, of course, liquidity, the system just run it over. And that will be true forever. A lot of the liquidity can never be used the way it's been set up. I think that's got to be relooked at.

So let's talk about the regulatory environment because, obviously, this is the first time the regulatory environment that was largely introduced in 2010 has gone through a period of stress. Do you think that the rules broadly impacted your ability to service your clients in a meaningful way?

Not -- no, not broadly, but I think you have to look at the macroeconomics, like how much capital is enough capital. Can the bank -- every time you start to have a -- something looks bad, you have to cut the dividend or something like that. And why are bank stocks selling so cheaply? The banking -- and you should do this, Richard. The banking system as a size relative to the global economy gains smaller and smaller and smaller and smaller. And remember, the market sets capital requirements, not just the bank and not the regulator. So you've had 80% of the mortgage go outside of banking. Tremendous amount of private credit is going outside of banking. And you can go down one after another, things that are leaving banking because they get more favorable treatment outside. And the regulator [indiscernible] out what they want because eventually they're going to regulate the banking system out of business. So -- but it didn't stop us in the crisis from making loans. It didn't stop us in the crisis intermediating. I do think that some of the things like temporary measures don't really work because you got to think about what when it goes away what position you're in. And it does -- but the thing it did stop a bit of, and you saw it in March and you may see it again, is the ability of banks to intermediate because they hit a whole bunch of walls, which you've studied. And therefore, they have to stop doing it because of SLR or it could be in bank's LCR, it could be -- because certain things don't get counted the same way. And of course, who -- if the banks can't intermediate, who intermediates? The Fed. Is that what they want? If they are the permanent -- step in when something goes wrong to come intermediate, and that's what happened in March with the repo market.

So let's segue a little bit and talk about your strategic priorities. And look, I feel your strategic priorities have been remarkably consistent now over a 5-year period in terms of growing your footprint, deepening customer relationships, conducting business much, much more efficiently. As you digest this year, do you think your strategic priorities change in any way? Or do you feel the need to accelerate any of your strategic priorities as a result of what we've gone through?

They don't change in any way because we want to serve customers with a great product. We have very great pricing, and we still think branches are important. And obviously, technology is huge to get -- to build the technology for straight-through processing, lower error rates, AI, cheaper production cost. And that's all the same. But literally, the technology world has accelerated. And AI is real, the whole cloud stack is real, and you got to really move quickly. And recently, you saw Google, and they're entering the banking business kind of as a marketplace. Look, that's a real competitor. That's a -- I mean we knew it's going to happen. And you're going to see, I think, others do that same thing. So yes, if you want to compete with that, you've got to get better, faster, quicker. And if you have any complacency about that, you're a little crazy.

So let's talk just briefly around...

And I've also mentioned there are some great competitors out there not in the banking system. PayPal is worth more than most other banks. Stripe is worth more than most banks. Square has done an unbelievable job of Square cash. So you've had a huge amount of value in what you and I would have called the financial system, which has moved out of the banking system. And so -- and when you look what those companies done, they've done a really good job. But it doesn't mean some of the bank didn't do a good job. But I look at some of those things very often to say, "We could have done that, too," and we didn't.

So we'll come back to that, I think, because I think it's an important point. But before we do that, can we talk a little bit around financial targets and how your thought process around those has evolved? So prior to this pandemic, you had an ROTC target of greater than 17%. You had an efficiency ratio target of less than 55% over the medium term. Do you think that those are still appropriate targets for JPMorgan? And do you think you can hit those targets given your view of the operating environment over the medium term? Let's call it 3...

Well, they're not -- the ROTC is not appropriate next year, I mean just too low. And we believe that the consumer deposit with more is currently represented, so we're not going to try to make up for that, but that's obviously too low. But if you go back to a normalized environment, yes, we think it's kind of reasonable, but I think it's very good. I mean if I can get 15% a year for the rest of my life and grow my business, that's pretty good for shareholders. So I think it's a little ambitious, but it's possibly achievable. I mean a lot -- some of those businesses have very low capital deployed, so we're very critical of ourselves. We look at certain things, there's no capital deployed. And other things where there's capital deployed, you got a way to measure that. And obviously, the mix is going to matter. The same thing with efficiency. And the thing that's most important to me, efficiency. I don't -- we don't aim for an efficiency target because when we sit around in the management meetings here, they can all hit their efficiency target. But I want to hit -- I want to run an efficient business while investing for the future. So we spend more time in the while investing for the future part. So we're always doing both, improving costs over here but seeking out the things we need to grow to get better over here. And that -- there may be more of that. So...

So I think that one of the hallmarks of JPMorgan's success has been that you have taken, I think, market share in pretty much every single business that you operate in over the last 3, 4 years. In a world which is digitizing even faster post the pandemic, is it reasonable to expect that some of those market share gains should accelerate as customer behaviors continue to evolve?

I -- first of all, just so we all understand how we do it. At the aggregate level, yes, we've gained share. But if you actually look sometimes by country, by state, by branch, by product, by -- we haven't. So we actually go much later down -- lower down. There are a lot of places we didn't, so we think there's opportunity to continue to grow share. But it's -- we're more at the point now, which -- trench warfare. I mean you've got -- everyone's out there. Everyone's -- there's a lot of very good people in digital, and I've mentioned some who are not banks. There are some of the banks who are very good. It's trench warfare. Again, your company, Goldman Sachs, and investment banking, we've got all these new entrants in consumer banking. So I just don't think it would be easy just because you have a good position today that you can grow share. You got to fight for that share, and it's like -- it's an ongoing battle with lots of competitors out there, and there are some invisible ones. And then also, think of the ones out there that they're playing in a piece of it today. Think of some of the directed self-investment cheap apps. They want -- they're going to go into banking one day. So everyone is coming through. And I mentioned Google, that's not going to stop -- some of the other big ones from doing almost the same thing. So no, I think the competition is going to be very tough, and we hope to be able to eke out continued gains.

So the revenue outlook for the industry is challenging, obviously, given low rate structures, given lower economic growth. What are your expectations in the near term for areas that you've got some visibility, whether that's net interest income or fees? And I guess linked to that, if interest rates remain low for a long period of time, do you think the industry is going to go back and revisit some of the pricing structures, especially around consumer products, and start rethinking the balance between fees and spread income on those products?

So for NII, the way we basically do it is we just forecast it right now using the implied curve. I think we told you all, it would be $54 billion in 2021. It's still $54 billion. That hasn't changed. And there are probably some ins and outs in that, but that's the same. We're a little -- with NIR, we're a little bit different. Like on markets, we don't assume market is going to be good all the time. So we go back to like a more traditional, and we don't want to run the company like it's always going to be a bull market in markets or investment banking. So when we look at it, we kind of budget more of a normal like it was 2020. And what was your last question again about?

Whether or not the industry is going to revisit pricing structures in a low rate environment.

I think it's very hard to do. And if you look at the consumer business, I mean if you just take one side, take the wholesale business. For the most part, people in wholesale businesses price for the drink. Like so many tickets, so many trades, so many dollars, so many -- for the most part, this is an exaggeration, but in the consumer business, you price and you give a lot of services. You may remember people say banks haven't done anything new for years. It's just not true. Banks added bill paying, debit cards and mobile and ATM to take deposits and checks and all these things. So I don't really know. I think you have to find a way to serve that customer to earn a fair return. And yes, you might start to charge more fees, but you had to do something before. It was like prime. They rated prime from what it was 9 9 to 1 29. People didn't mind because they got free streaming. So I can -- if I just try to compete, get my revenue by charging it, I think I'll lose clients. If I can do something better for them, I think I can keep the client and maybe get paid in one way or another for stuff like that. But it's hard, and you look at around the world, you haven't really seen it. I think if you go into negative rates, you definitely see people resetting how they want to do business, what they want to do, which will change how big the bank is, a whole bunch of different stuff. But I mean we're not going to be sitting there running negative losses in all these accounts even at the margin. That we won't do.

So let's talk a little bit about the markets businesses. I mean they did very, very well this year, not just for you, but for the industry. I mean we think FICC and equity revenues could be up as much as 50% this year. This is actually the first year, though, that those revenue pools have grown in a long time. Do you think this marks the reversal of a trend? Or do you think that some of this increase in fee pools is going to stick? Or do you think it's just reflective of the extraordinary environment that we saw in the first 9 months of the year?

It's reflective of the extraordinary environment. I think if you look at FICC -- I can't remember the exact numbers, it came down probably 40% over a long period of time. So I do kind of feel it at the bottom, and then you're going to have normal organic growth. And that normal organic growth driven by more assets and management, more need to trade and just the fundamentals with always a little bit of decreasing margin. There's always been the spreads you get. It's always been a bit less every year, but volumes can make up for that. And when the value of the stocks and bonds, the worlds go up, that's more things that people buy and sell and stuff like that. So I do think we hit the bottom, and we're growing. I think the huge number you saw this time were because of the extraordinary environment. It wasn't because of return to some kind of normal. So in our own mindset, we're looking at next year as being -- not going to 2020 but a little more like 2019. But we -- that's not a prediction, by the way. We just don't know. Therefore, I'd rather just put a lower number in.

Sure. So maybe we can talk a bit about operating leverage. So you've done a really good job, again, in terms of improving the efficiency of the franchise as you have grown. And it's very clear that, that has not come at the cost of investing in the long-term value of the franchise. As the revenue environment gets more challenging, as credit costs could remain higher for a period of time, how are you thinking about the balance in terms of driving operating leverage versus investing in the franchise over the medium term? And are there investments at the margin that you think you will deprioritize?

Yes. No, so the way I look at it is, I mean, at one point, when your margins are good and your returns are good, to think you can increase that forever is probably a huge competitive mistake, and so we don't necessarily try to do it. Now a lot of our investments are adding very high returns to the margin. But of course, you're losing somewhere else. There's always compression somewhere. There's -- so no, I don't expect to have operating leverage, meaning that somehow our margins are going to go up. I think that's just a fool's errand thinking that you can just keep on doing that. And on the investment side, we're different. So our -- I'll say now our cost next year are more likely to be a little north of $67 billion. I think a lot of the [indiscernible] have $66 billion because we are finding things that we want to invest in, and we try to have real rigor on is it a real investment, we'll have a real return. And sometimes it's just a skunk works. We're just trying something, [indiscernible] something, and you're all going to see us do that, too. Some work, and some don't work. Some we'd tell you about, some we don't. But I think it's important that a company like JPMorgan is always trying to think a little bit out of the box a little bit creatively. I also think you should be taking acquisitions, too. Organic growth is hard, and it's part of acquisitions, believe it or not, in terms of getting people to add sales force, add branches, add products, do a better job connecting our products together. That doesn't mean we should be looking for things we can acquire at the adjacencies. And so we're going to do a little bit of both. I would love to spend more money. I mean we're not like -- I never look at saying it's going to be $66 billion. In fact, even though we have a budget, when we sit around these tables and go through plans of stuff, if you could say why, this -- we could put a lot more money to work at these kind of returns, I would do it.

Have you learned anything this year, specifically around having 90%-plus of your employees working from home from an efficiency standpoint? Do you think there are things that you'll be doing different?

Yes. It was amazing that all the banks can go do it, right? And so work from home is a real thing. You can track -- in some jobs, you can track the productivity, and some of you can't. It's amazing we have to manage the company and get them the dollar communications kits and you can do trading and accounting and customer service. So that's the lesson. The speed with which certain things took place, that's a lesson, and the efficiency of Zoom to do certain things. But on the other hand, Zoom doesn't work for -- all banks are based in apprenticeship model, where you learn by sitting next to people and going to trip with them or seeing mistakes being made. Very well being a lot of collaboration in the room to go through straight processing, it's hard to manage. You miss all the creative combustion that takes place from having a meeting by having immediate follow-up. So I did took a trip to California, and I know that 100 people outside all say venture capital, private equity, tech companies, et cetera. And you just -- you're constantly learning, and you're not going to learn that way by sitting at home. So yes, we've learned. There'll be more -- probably be some permanent work from home or rotating work from home. That'll change when we look at real estate a little bit, but it's not going to change the world, and we still need the collaboration with people working in a room together. And some of our folks sent me a note, they're staying in China, their people are 90% back to work and without masks, and they like it. And that 90% of domestic travel, both business and personal, is back up to 90%. So basically, China was -- they can go back to regular way, they went back to a regular way. And they've learned also that you can work from home. So yes, there are a lot of lessons, but I just don't think they're earth shattering.

So let's talk a little bit about credit, and I guess a couple of questions here. The first is underwriting standards. Did you feel the need to change your underwriting standards over the course of 2020? And as a result of what you've learned over the course of this year, are you thinking about risk/reward or even risk management broadly differently going forward? And any areas of where you operate?

Yes. Look, we're pretty disciplined in all types of credit exposure, stuff like that. And you have to separate a little bit. Taking care of clients is a little bit different than extending new credit. So we go -- we take care of clients like you wouldn't believe in the wholesale side and on all sides. But then -- but for new credit on the wholesale side of certain industries, of course, you got to take in consideration of the future prospects of that industry. And the consumer side, basically a little bit of tightening in credit card and mortgage. And if we tighten 100 points, we've probably untightened 50 to 75 points already because, obviously, unemployment is way down. The government took action and stuff like that. That was just prudent risk management. I don't think any of that changed how we look at it. This recession, I think it's important to point out that if you look at job losses in most recessions across all income classes, in this one, it was predominantly at the low end. So we -- if you today, you see safeties balances are way up, okay, and the people that could afford homes are buying a lot of homes and mortgage prices way down, and you see the activity that creates. But for the bottom quartile, the extra cash that came in because of the unemployment checks, that's gone. They're now at the point where they may have to start kind their spending. So when it comes to credit and underwriting also are hard, who we think needs help, they're going to need help. And so we look at it a little bit differently. And as you know, we try to go out of our way to support our communities in bad times. I would tell people, we would rather lose money in some of these communities and help through bad times than save the money from losses but have them hate us for the rest of their lives. And so when you're a bank, you got to be very clear about how you treat industries. We stuck with the oil industry when oil went down to, if you remember correctly, like negative 20 or 30 shockingly, but we stayed with them. Those clients are hugely appreciative, and we probably lost a little bit more money than we should have, but that's life.

So maybe you can just talk about the reserve level. So the reserve, I think, peaked at around 3.3%. In the context of what you've seen so far this quarter, do you still think that's around the right level? And then the reserve was set at the end of the third quarter before the vaccine, I guess, was effectively confirmed as being effective. How does that feed through in terms of how you think about the appropriate reserve requirements?

I mean you do know that was crazy, right? So let me give you the big numbers, okay? We put our reserves of $34 billion. If you said, what would they believe -- and this is based upon probabilities outcomes, it's not based upon what you believe. If you said do a forecast, that would be a different number. But the $34 billion -- if you said take the Fed's central case and given that 100% probability, our reserves would probably be $20 billion to $24 billion. So we're way overreserved for that. If you said take the Fed's severely adverse case, like the case of the CCAR case, where unemployment's 12% or whatever the number is, we need $50 billion. Now by the way, we can easily handle going from $34 billion to $50 billion. So to me, that's not a big deal, but that's all about how you set those probabilities. And in those probabilities, you look at effective unemployment, what the government going to do, how's the COVID, but it shows you the ridiculousness of what we're guessing. So I just look at -- we -- charge-offs look great. They're not really going up at all. We do expect to go up next year, but -- and then we said that, and we're going to fully disclose in a totally transparent way to the shareholder how we said it, why we said it, but it's ink on paper. My guess at those probabilities is no different than yours. And you now, when you do your models, have to look at probabilities too and guess what we're going to guess. And so -- but it is no question that things are better than people thought 3 months ago and 6 months ago. So whatever your base case is, it's now better. Do I expect people to take down reserves because of that? They might. People might look at it's a little premature. We're still about to go into the COVID winter, and so people want to be comfortable, and most banks don't want to be in a position where they swing those reserves up and down every quarter like just in a way you can understand. So we expect charges to go up. But if you -- if the base case happens, you're going to be taking reserves down next year, too. And then the net, we don't really know yet.

Okay. So let's talk a bit about capital. So even assuming that you need all the reserves that you have, you're in an excess capital position. You're 100 basis points above the range that you set out at least at the start of the year. When the Fed lifts some of the moratoriums on distributions, buybacks in particular, how are you going to think through the attractiveness of increasing the dividend versus buying back stock? How are you thinking about that, just given the sharp rebound in your share price in particular?

So the first thing we'd like to do is invest our money. That's number one. And then have a steady dividend, which is not too high because I think that is a -- matter of fact, it's on [indiscernible] batteries, it's a little bit of yolk on the neck of banks. But being forced to buy back stock is also a bad thing. So if I thought that our stock was cheap and there's no way we can use the capital, I might make the dividend too high for a while and let -- we can grow into it to use up the excess capital. We have tons of excess capital. You see banks now paying the dividend. That capital numbers, they're going up and up and up and up. I just gave you the worst case on reserves. It would be a drop in the bucket. Now if that happened, and then I tell the regulators don't make banks cut the dividend now because it doesn't make any difference this quarter and next quarter. If the bad case happens, by the way, my Board will consider cutting the dividend. I'm not contradicting myself because if the bad case happens, it could be worse. So you're just trying to prepare yourselves for -- at that point, you prepare yourself more for Armageddon or something like that and the dividends. But right now, the dividend is very sound, and I would love to buy back stock. But again, just every time we get a chance to buy back the stock, it's always at the higher price because we're not allowed to buy it at the lower price, which I'm not sure is good for the industry. And so I think people have to be a little cautious about that. And also the absolute level of capital is extraordinarily high. I mean I think G-SIFI is so flawed in how it looks at things. And like CCAR, I've already pointed out, our earnings, we would make money every quarter probably even in the CCAR scenario, not -- and we would never dip down like that. It's just not even remotely possible. And even with our own people. I feel like we have a Stockholm Syndrome. I said the other day, "Well, in '08, well, we never lost money or the Fed." No, no, the Fed -- remember, [indiscernible] failed in '08, okay, the Fed really didn't do anything. We bailed out [indiscernible]. WaMu in September, we bailed out WaMu. Fannie failed, Freddie failed, broker-dealers failed, Lehman failed, the Fed didn't really step in until later, and we still have didn't have a loss in those quarters. I mean so people have got to be a little rational. Now it's far better because you won't have a Lehman, a disorderly failure of a major financial company. It will be an orderly failure, and they have a lot more capital liquidity. And they should be allowed to fail. I had a conversation with one of the Fed governors. He said we cannot allow any bank to fail because if even -- if Lehman failed, there would be a disaster, and you kill it, the bonds go. I said, "No, that's not true." Lehman failed, didn't take that any of the banks. The derivative contract didn't hurt anybody from Lehman and the $80 billion Lehman debt. Lehman was basically just fell apart. So it wasn't an orderly. They didn't run as a business. The $80 billion of Lehman debt, they originally collected $0.30 to the dollar, haven't collected $0.30 to dollar. My view is had it been orderly, it'd have been 100 cents to the dollar. Under the new regime, that -- they would have like $120 billion or $150 billion billable debt, they have all that equity at the point of failure, and my guess is that company will be worth more than $150 billion. It will be good for the system and bondholders or [indiscernible]. They can afford losses. They take them all the time. Remember, the banks lost a lot of money in the Fannie and Freddie preferreds. And so we have to get back to a system you allow failure, and that's form of discipline. So there's a lot to look at, and I hope that after all these crisis, some people take a deep breath. And the other problem, it's all been politicized. So how do you make intelligent decisions when politics gets involved in the way of things. Anything which is a change, it looks like it's favorable, it's treated like they're favoring the banks. No, actually, they're favoring America. They're actually favoring the economy, and you may actually have a bank failure one day.

So before I take a couple of questions from the audience, let me just ask you about your view around inorganic growth. And I think, look, you've been open to the concept of M&A for a while. I mean, obviously, you can't buy a depository institution, but there's a lot of other assets that, in theory, you could buy. I mean which part of the franchise do you think would benefit the most from an acquisition? What will you be looking to get from an acquisition? And how open do you think regulators would be? Do you bind something which obviously doesn't have deposits?

Yes. I think I'm very open. I mean at one point, you have to do business. Morgan Stanley, I think Morgan Stanley has done a good job with a couple of deals they've done. So asset management, my line is open. It's a scale business. It's a distribution business. It's a brand business. It's got to make sense. Asset management deals would be difficult sometimes. We just bought 55 IP, which does tax managed separate accounts. And so there will be others. We're looking more at adjacencies. We bought InstaMed, which is health care payments. WePay, which helps purchase services to ISBs. So I always -- we're trying to think about it as everything we do. If you look at what Square did, it was the adjacencies that dongle that made a difference, the data and the ability to process on one iPad cash, checks, debit, all -- so the personalized store can do all that in one place. And so there will be stuff, and it might be software, it might be fintech. We do -- we have lots of investments in some fintech to partner with. There might be something overseas. But yes, we're open minded. We've got brilliant ideas. Give me a call. And if you're a competitor investment bank and you bring the idea, you get the fig.

There's some people probably on this conference call that might call you afterwards. But so let me take -- there's a ton of questions from the audience. Sadly, we don't have time to get through all of them. So let me just pick and choose a few, which I think are very relevant. So here's one. You spend a lot of time with management teams and with Boards. How does that tone compare to the optimism and euphoria that we've seen in parts of financial markets today?

It's not like the markets, okay, it's considerably less than that. But it's growing confidence. Again, it's really different in different industries. It's just exactly what we expect in travel, retail, stuff like that. But in general, there's confidence that the country is going to get through this. The vaccine is going to be there. The people are talking -- we do get surveys from businesses that base is talking about that 75% think they'll be fully recovered, the bigger ones, by the way, fully -- these are public, fully recovered by the end of 2021. You don't get the same data with small businesses, and that's why we have been very sensitive about small businesses.

So as a follow-up, do you think that markets are appropriately pricing credit risk today, given everything that you can see across your franchise and given your view of the world in 2021?

I'm not really, but I don't know why it's such a surprise. The central banks of the world bought, I forgot the number, $12 trillion of assets. There's something like 275 global train. That's a lot of assets. And when they buy assets, those assets have to be reinvested and list up prices and reduces bond yields, et cetera. But when you look at markets, and this is a very important thing, if you said -- if you sat around a table right now and said, "The base cases, the case is going to happen," I'm highly confident we're going to get back to growth and unemployment under 5% by such and such. Bond spreads and most equity prices will be justified. If you said, "Oh, no. It's going to get much worse than that," they will be. And since neither you and I know it's going to happen, so the market is an accumulation of all these probability of folks thinking through what's going to happen and stuff like that. I think there may be a bubble in a small part of the stock market, not all of it. If you actually analyze it by segment, by this, that's not true. And I'm not -- I would not be a buyer of treasury. I think treasury is at these rates, I wouldn't touch them with a 10-foot pole. And the other thing, which is very important, there's also 10, 11 or 12 train of fiscal stimulation. Fiscal stimulation is completely different than QE, okay? So it's like QE if -- but QE -- fiscal stimulation is putting money in people's pockets to spend, and they spend it. Maybe not right away, but they spend it. You still had here, that's why the GDPs data and stuff like that. That, by its nature, is inflationary. QE, by its nature, may not be. And it's also even more inflationary when you give money if the government finances it and the Fed buys the bonds, so basically financing a deficit. And now, of course, that interplay is in global recession, COVID, high unemployment. Of course, you're not going to see the effects of that right away, but you might down the road. So I wouldn't be a buyer of rates at these rates. And unfortunately, we are. We have no choice about how we do that. And credit spreads themselves are all-time tight. I'm not sure it's ever justifiable if you want to be paid for risk.

So here's a second question, which I think is an interesting one, which is, look, every retail industry that has digitized has consolidated at the same time, with the top 3 or 4 players ending up controlling 70% plus of the market. Do you think that retail banking will follow the same route?

Yes. I wouldn't necessarily tie to digitized. I mean for all the folks on -- listen, this thing, the American banking system is hugely fragmented. We still have like over 5,000 banks, 6,000 banks. And it's going to be consolidating. It's been consolidating my whole life. It's going be consolidating for the next 50 years. There's too many. Very hard to be efficient in that business. If you take a quick tour around the world, most other countries, developed countries, have a much smaller banking system. Australia, Japan, France, U.K., Spain, Canada, parts of Latin America, not Germany. The countries that didn't have because of regulations. In the United States many years ago, you couldn't have interstate banking. Some places, you can't even open more than one branch. Bank -- the old first Chicago had one branch in Chicago, not by law. So once they -- as you know, merge at the top, it's really hard. You start to see them in the banking field. I think you'll see a lot more, too. It's just going to consolidate. And yes, the digital part will be a really important part of that because that's a way to generate customers at a lower cost. And people are going to come up with different schematics and what's the best way to serve the customer. While we think branches are important, you may have a hub-and-spoke strategy, and this may one have small branch strategy without tellers. This one may have blanket with ATMs in a central bank -- central branch. And several strategies may work, but we test a lot where we're thinking about that, but we do expect that, and so you'll have bigger and bigger banks here. But of course, the bigger banks can't acquire, so the acquirers are going to be the middle-sized banks.

So look, we have time for one last question, and I think this is a very good one to end on, which is what is the 2 or 3 most important attributes you think JPMorgan's Board will look for in your successor? And what is the single most critical piece of advice you would give him or her? So we'll finish with that one.

Oh, that's a tough one. I had my Board meeting today, by the way, and we spoke about this very thing. Look, I think there's some very basics about analytical skills and detail and facts and analysis and work ethic. Character's [indiscernible]. But there's also part of character that you got to be tough to make decisions. I mean I love that song about the Boy Named Sue, which talks about the ground and the gut and the spit in the eye. I mean if you're like a deer in the headlights, you can't make those decisions. You have to be able to serve the client and not panic when you have bad times. You've got to be able to see around the corner a little bit because you know you're going to have bad times. So I think the most important thing is -- and this is true for all you out there, you want to work for people you respect. You want to work for people who have a little humility to know that I don't know everything that you know. I mean I would tell you, Richard, before we started this formal session, what a great job you did in that research report talking about SLR and effects on markets, et cetera. And so the leaders, we become more like the coach. And when you have a coach, you -- the coach may kick out, but they also celebrate your victories, take blame for the bad plays. I asked myself a question now that I always use and ask when I was much younger, would you want your kid to work for that person? And it's not how smart they are or some -- it's about whether that person is -- want you to succeed and wants to help you and not artificially, not like stuff like that. So I think it's a full spectrum of values. Fortunately, JPMorgan has tons of quality people. So you didn't ask me, so I'll tell you anyway. Trading and investment banking numbers, up about 20%, maybe a tick more. But -- and I've already told you that expenses are higher than in your models. So I would give you the good news and the bad news at the same time.

Okay. Look, Jamie, with that, we're out of time, but we really do appreciate you coming. So thank you very, very much. And hopefully, we'll get to see you in person next year. So thank you.

Absolutely, Richard. Thank you.

Thank you. Thanks, everyone.

Keep the faith, folks.

Thanks.