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

All right. Great. Thanks, everybody, for joining. We're really happy to have JPMorgan Chase's Chairman and CEO, Jamie Dimon, return again to the conference. Jamie, thanks so much for joining us today.

Thrilled to be here. Thank you.

So you hosted an Investor Day last week for your investors and analysts, a lot of generalists in the audience today probably didn't get a chance to listen in. Maybe you could take a few minutes to summarize the key takeaways that you and your team wanted to convey at your Investor Day last week?

Yes. So we did have an Investor Day. It was long. It went from like 8:00 to 3:00. All the major executives made presentation, including one on tech, one in CCB, CIB, asset wealth management, payments, markets, et cetera. And the point was is that we really haven't spoken to investors in detail for 2 years. So some had complained that we're spending a lot of money, a lot of issues out there. We've done a bunch of acquisitions, and they were right. So we took the time to explain it in detail about why we're spending $6 billion more in 2022 versus 2021, how we look at investments. And there was a lot of detail on that, like how we look at application investments, how we look at acquisition investments, how we look at new branches and bankers and hardware and software and modernization, all that. And so you got to go through the detail, but that's how you have to run a business is at a very detailed level. We gave some updates on things which don't surprise people very much on NII for this year and kind of a first view about kind of a benchmark for maybe next year. And we obviously spoke about the economy and stuff like that. I think it's a great chance for you all to see our senior management team in person, answering questions up on stage, explaining their business, why they're doing what they're doing. A couple of things are different. A couple of things are not completely normal. And we didn't describe everything. I think sometimes we describe too much and give away too many things that help investors. And after I went to Fidelity and Wellington. I went up to Boston, did kind of a Boston tour and a couple of people were asking some really great questions, which are exactly the ones we didn't want to answer, and because we're not going to. But there's other great stuff we're doing. We're quite comfortable with the company, and we're quite comfortable with how we make these investments and such so.

Yes. I mean traditionally, JPMorgan has been a stock for all seasons. It's done well in good markets and tough markets, and particularly in down markets have been defensive. Do you think the characteristics of what's built the company historically, the balance sheet and the diversity are still true today and could make it perform well in a tough day?

Totally. I mean what protects the company in a downturn is virtually you're prepared. We always talk about through the cycle. So we acknowledge when we're overearning on credit and that that's going to normalize. We're quite clear about that, and that might be $3 billion of charge-offs more a year. And we have to prepare for things like CECL and AOCI and downturns and all that. But your best preparation is that fortress balance sheet. It's conservative accounting. We don't have a lot of -- not a lot. We have almost no onetime gains or losses. Our MSR -- even if you look at like MSR, that's conservative, too, because there's very little FHA service in there. When things go bad, FHA servicing is very expensive when the delinquencies hit 5% or 10%, which is guaranteed to happen in the downturn. And it's changed, look at our real estate portfolio, mostly the ones you worry about are mostly Class A., fully leased up, no spec, all these various things, which is hard to look at, but that protects you and those margins, when things get bad, we'll still have margins, still be making money. And the reason we want to do that is we can serve clients in the toughest of times. And we have plenty of capital to play a balance sheet. There's a lot of capital uncertainty because we still don't know SCB. We don't know if there will be any adjustments of G-SIFI, which we're not counting on. We did some acquisitions, which took away from some buyback capability. So I much prefer to do really smart acquisitions and stock buyback. You may not like that so much sometimes because you want consistency and all that. But -- so yes, we'll be a fortress balance sheet in the next go around, too. And we're quite concerned about the environment. So I try to separate for the analyst community what -- right now, if you have a benign environment, like you all have forecast, what's in your forecast. What's your forecast as a benign environment? I don't know what it's going to be like by the end of the year. I'm prepared for a non-benign environment by the end of the year. So to me, it's -- we try to explain all that as best we can, and I think it's important we do that. But we'll be prepared for bad outcomes.

And on that front, what degree of difficulty do you attach to the task at hand in front of the Fed right now? And you mentioned storm clouds.

I'm going to change the storm cloud because I said there are 3 things that we're going through, which are -- I hate the word unprecedented, but you're kind of unprecedented. And you got to put this in back of your mind when you haven't -- when you've seen things that have never happened before, then you have to question your ability to predict, okay? One is huge growth in this country, driven by fiscal and monetary stimulation. That isn't a normal recovery, okay? And that fiscal stimulation is still in the pocket books of consumers. They're spending it. They're spending at very strong levels. And the data is completely distorted. Distorted by inflation, distorted by -- they went from goods back to services. It's distorted by all the things, but jobs are plentiful, wages are going up, consumers are spending, the lower income folks, not quite as much as before, but everybody else, it looks like they have $2 trillion more savings rate drop. I don't think that's going to stop the spending in 6 or 9 months. And so that to me is the bright clouds out there. But it's different, the Fed has to meet this now with raising rates in QT. And the new part of this isn't the raising rates, it's the QT. The QT has -- we've never had QE before like this. Therefore, we've never had QT like this. So you're looking at something they're going to be writing history books on for 50 years. What was QE, what worked, what didn't work. I think a lot of parts of QE backfired. I think the negative rates was probably a huge mistake for a whole bunch of different reasons I won't bore you with now, but they have to raise rates. It might be they have to do QT. They do not have a choice because there's so much liquidity in the system, they have to remove some of the liquidity to stop the speculation, to reduce home prices, stuff like that. And you've never been through QT. So all the major -- if you go back to 2010 and say, who are all the major buyers of treasuries, all that time, it was central banks, foreign exchange managers, banks who are topping up their liquidity profiles because we had to for regulations, all 3, it won't happen in the go around. Banks are topped up. Foreign exchange matters have topped up. The Central Bank would be selling, not buying, and governments have much more fiscal deficit to finance. That's a huge change in the flow of funds around the world. I don't know what the effect of that is. I'm prepared for -- you talked about minimum huge volatility. And the third thing is Ukraine that you've not had a European land war since 1945, okay? And you -- and the complexity of Ukraine is we don't know the outcome. I always make a list, you predict the outcome. Well, you couldn't predict the outcome of Vietnam, Korea, Afghanistan, Iraq, 10 other configurations, all wrong. Wars go bad, they go south, they have unintended consequences. And this happens to be [ ruining ] the commodity markets of the world, wheat, oil, gas and stuff like that, which, in my view, will continue. We're not taking the proper actions to protect Europe from what's going to happen in oil in the short run. And we're not taking the proper actions to protect you all or cap the oil in the next 5 years, which means it almost has to go up the price. We're not investing enough money to keep oil number. And for all those who love climate change, if oil prices go to $1.75 or $1.50, which I kind of think is in the cards to tell you the truth, not in the immediate run, but down the road, then CO2 won't go down, which is everyone predicts because people buy less oil and gas, it's going to go up because all those other countries out there, the poor countries who need oil and gas to feed and heat their citizens will turn off -- will not buy oil and gas, they'll buy coal. That's what's going to happen. CO2 will go up. It won't come down. And we're not dealing with these challenges. So those 3 things fiscally induced growth, QT, Ukraine war. So I'm going to change the storm clouds out there because -- look, I'm an optimist. I said they're storm clouds, they're big storm clouds. It's a hurricane. Right now, it's kind of sunny, things are doing fine. Everyone thinks the Fed can handle this. That hurricane is right out there down the road coming our way. We just don't know if it's a minor one or Superstorm Sandy or -- yes, Sandy or Andrew or something like that. And you got to brace yourself. So JPMorgan is bracing ourselves, and we're going to be very conservative in our balance sheet on -- with all this capital uncertainty, we're going to have to take actions, and I kind of want to shed nonoperating deposits again, which we can do in size to protect ourselves, so we could serve clients in bad times. And so that's the environment we're dealing with. And I'm -- I think it's okay to hope that we'll end up okay. I hope it. That's my Goldilocks, I hope. Who the hell knows?

What do you think it means for the potential credit cycle that might ensue and the preparedness of the banking industry?

The banking industry is in great shape and credit cycles follow a norm, okay? And even in the great financial recession, it followed a norm with a couple of little exceptions. Mortgages, there was $1 trillion actually to be lost. We all woke up sometime in '08 or '09 said, my God, it's $1 trillion. And it was everywhere. It was in derivatives. It was in CLOs. It was in banks. It was in insurance companies. It was -- but that caused panic because people woke up, investors. And they said, my God, it's everywhere. What do you do? You sell. So it's panic selling and stuff like that. And I think you may see that again, by the way, too, because I don't think the bank intermediate in the markets that we're used to. So when all this liquidity gets run down, we're going to hit a wall. And then when that wall gets hit in terms of intermediation, you're going to see very volatile markets again. And no one's going to be able to step in other than the Fed, which maybe they can't do this time. So -- but the credit cycle follows a norm normally. And that's the minimum we should expect. And we've shown people, credit card, it's all-time lows today, but in the Great Recession, it peaked at 10%. We would have told you before that 8%, often not that much. What surprises people is it won't be mortgage this time. It won't be -- we don't see it there. It might be something in the private credit markets, [indiscernible] I mean, when things happen, it will -- someone will get hurt somewhere. And sometimes it's industries you just least expect. And so you have to be very careful on that, like in the '00s, it was telecom and utilities, the ones that were the most stable. In '07, '08, it was Warren Buffet and newspapers. I mean, so there's underlying changes in credit you have to be very careful about, very hard to spot. And therefore, the discipline is you never put all your eggs in 1 basket. You're very careful that no matter how people think real estate or something like that. And so anyway, you'll have a normal credit cycle. Charge-offs will go up. We'll still be earning money. CECL makes it very volatile. Like I think I pointed out at Investor Day, we put up in 2 quarters. So the first quarter of 2020 and the second quarter, $15 billion of CECL. And then the next 4 quarters, we took it down. I mean I don't know what kind of accounting that is, I think it's crazy. I don't know who invents this s***, but we have to deal with it regardless.

There's been a big expansion of credit outside the banking system. You kind of referenced that. Is that a concern in your mind in terms of the...

It's hard to tell. This is the private -- I mean, look, I think some of these direct lenders are very smart people. And you had Blackstone here, you have Ares and they're all very smart. It's huge numbers now. The issue for the world is that those borrowers may be stranded when this s*** hits the fan because these people cannot roll over that credit at 13% or 14%. They're going to have to charge 13% or 14%. And so they're going to call up JPMorgan, can you -- will you have us back? In some cases, we'll say no because we'll have tapped out what we can do too because we also had our own red lines and stuff like that. So is that systemic? I don't know. There's a lot of leverage lending out there. Will someone get hurt? Probably. Will that credit dry up in that segment of the market? Probably. Are there other things we see out there that are particularly bad? No, but we have this little report we have called shadow banking. And we put it all together, from repo to money market funds to commercial paper to CLOs to mortgage banking, the mortgage businesses have moved away from banks for good reason. The capital and liquidity requirements are so high that the bank -- it really doesn't belong in banks anymore. And will they be able to make mortgages when they [ should spin ]? Maybe not. I mean even today, if you look at private label mortgages, there are 50 to 75 basis points what retail banks are doing. And -- because the only way the other folks can finance it is by securitizations. I don't know why a retail bank is issuing something at [ 4.25% ] when you can buy it in the marketplace at [ 5% ], right? You have to question that logic a little bit. And so you're going to see this stuff is going to get worse if the markets get tighter, and liquidity dries up a little bit. We will be prepared for it and so should you if you were smart.

Talk about some of the industry issues that you're dealing with. In terms of expense pressures, how much of the inflation burden are banks likely to see? And where are you seeing that now?

It's no different than everywhere. It's -- I mean, you see it every day now. But this -- when we told you old numbers, we kind of embedded that in. I don't know what other people did when they told you their numbers. We were embedding in -- you can embed in your own number, 4%, 5%, but it's relentless. And so you're going to see a lot of people making adjustments. And by the way, I want to keep our best people. So like we have to pay well to keep our best people. We're quite religious about that, and it will be what it is. Remember, there are benefits from inflation, too, like NII is going to be much higher. And it's not a one thing, but you're going to see it, and I think you'll see a lot of banks, tech companies -- I think a lot of companies are facing it, and...

Yes.

But you -- when you guys do your own estimates for 2023, you should tell me what you think it should be. Because I could be thinking 5%, you're thinking 2% or you're thinking 2% and I'm thinking -- I'm thinking 2%, you're thinking 5% and it will be what it is at that point. We will deal with it intelligently. We'll manage our expenses like we always have and...

For banks...

And in 2023, remember, if you have a -- if a severe recession starts sometime in 2023, inflation -- wage inflation can go to 0 like literally overnight.

And how about capital? The capital pressures are growing on yourself and other banks from a combination of the macro environment and also the regulatory rules. How does that influence...

It's mostly accounting rules. AOCI and CECL and so it'll [ constrict ] but we do a little bit in [indiscernible] , and you got to predict -- project forward and all that. And so...

How does that affect your plans for growth and how you allocate capital?

Not -- it doesn't affect our plans for growth in terms of growing our company or those investments we're making, it will affect how we deal with nonoperating deposits, what we put on the balance sheet or not, what we sell or not, we can be much more aggressive about what's on the balance sheet and what's not. There are a lot of things we simply don't have to keep or don't have to do. Some are to facilitate markets, some are to help clients. And so you're -- if we have to, we'll tighten that up too and we're probably going to.

But earlier in the year, you laid out a medium-term ROTCE target of 17% at the Investor Day.

It was never a medium-term target. That is what we expect to earn through the cycle. I'm getting rid of the medium. I don't even know what medium-term means. I remember when I first got to Bank One -- no, at JPMorgan, I said we aspire -- maybe it was Bank One, we aspire to earn 15% intangible equity. Inside the company, it was like an aspiration and people thought I didn't mean it. So I eventually said, no, that's your frigging target, buddy. That's what you got to earn, like that's what you should be earning. Let's not pretend. So we said 17% is what we expect to earn through the cycle, and we have. And -- but the way I look at it is through the cycle. So this cycle, we're underearning NII. We're overearning in credit. We still got 17% last year or better. I don't really include CECL in there because that just swings around just too much, but I obviously include charge-offs and stuff like that. And next year, NII is going to be a nice [ kicker ] for us and expense is going up a bit and all that. So it's still 17%. And if you have a recession, well, we'll be 17%. It will be something lower, like that's life. And I also told our CFO, Jeremy Barnum, to do a little calculate -- anyone have a 12c in front of you? HP 12c, whatever it is, do the calculation that JPMorgan earned 17% in capital and grows at 7% a year for how many years does it take before 50% of the GDP of the United States of America? I mean I would take 17% all day long, okay? That's pretty good. Now you all don't earn 17% of your capital.

One of the drivers this year is loan growth, and you're looking for loan growth to be kind of growing in the high single digits. How broad-based is that? And then how does the hurricane kind of factor into that?

Again, you have to separate the hurricane from running the business day to day. And that hurricane is making us be careful on how we're running the business day to day. Loan growth is an output. If you run a bank and you think a lot of loans, you do not want loans. A lot of loans have a suboptimal return. If I generate a loan, and I put it in my balance sheet, which you can buy the same loan in the market, okay, without any overhead, why would I have 240,000 people doing that a year? Why don't you just have no people and buy the loan? That's called a fund. And so the reason you do a loan is because you're building a business that for every loan and for the most part, loans are priced at the market. And of course, with regulations -- and one day I'm going to show you all a chart, if I have to hold twice as much capital as somebody else, somebody else should own the loan. Now I may not be able to do it overnight, d*** straight I'm going to do it over time. Why do we own loans that you can hold much more profitably than me? So to me, it's going to -- you've got to recycle your capital, and it happens in some markets and not in others. But loan growth is an outcome. If you don't have the whole business, you wouldn't probably be in the business at all. And the whole business is -- and think of the subscription businesses, cash management, custody, other flows, fee businesses, the relationship. So one of the benefits of JPMorgan, we make -- and this is why we're doing unitranche lending now. Like in unitranche lending, they're bigger loans, they're priced better than our Term A, Term B and sub and all stuff like that, you're getting paid more per dollar risk. And -- but that's all they get. And you -- and then people invest in that. We get that plus all this other stuff. That's why we do it. I wouldn't do it just to get that. And so you got to be very careful when you're a bank about why you're a bank at all, and so loans are an outcome of -- and obviously, an outcome of growth in the economy and all that. So we see a lot of today, middle market companies are taking -- they kept the revolvers, they need more to finance their inventory, the receivables and CapEx, which seems to be going up a whole bunch of different places. So it looks right now, you got a pretty decent loan growth this year. We may very well reduce what we hold in the balance sheet, which is a different issue. That's more of a best execution issue to us or managing the balance sheet. So -- but the loan growth itself, it looks to be pretty robust right now.

How about the demand on the consumer side? Are they revolving a little bit more on cards? And what are you seeing in terms of consumer demand and...

Honestly, I haven't looked at it since Investor Day, so I don't want to update that. But I've been clear from then, I expect that to happen. Now you can guess when it's going to happen, but it's like a given. And you already see it in subprime. So my guess is it will just happen in prime a little bit later, but it's the same basic thing.

You mentioned managing the nonoperating deposits...

But also Marianne always points out that you got to look at 2 things. Well, NII went down because [ revolve ] went down, charge-offs went way down because revolve went down. So they had some relation between the 2.

In terms of industry deposits, do you expect deposits to leave the banking system as QT gets going? And you mentioned managing nonoperating...

I want to push them out. I mean I'm on the other side of this one. I want to -- we have a lot of [ nonoperating ] deposits we keep as a service to clients. I don't know. I mean -- but the issue for the industry is what happens when they reverse QT? And what does it come out of first? And we don't really know. Like I said, we've never had QT. If I had to tell you my current thinking, it's at first, you're going to see a reduction in money market funds kind of wholesale-related deposits, the Fed RRP facility is now an astounding $2 trillion, but eventually, you're going to see it filter into consumer. Because when we had QE, if I remember correctly, and actually, we should get this data because we did some real work way back when that first QE showed up in wholesale deposits, but eventually morphed into consumer deposits. And so you're going to see that. So we -- again, we have to be prepared for both. Like where is the runoff going to be? So we -- I think Jeremy gave you guys a number about expected deposit growth of all of our assumptions, and that number is probably still pretty good. And I gave that it could be plus or minus $300 billion or $400 billion. But again, it is $400 billion, and it comes out of nonoperating deposits. It doesn't really mean that much to us.

And maybe you could talk a little bit to these folks here today about the investment agenda that you laid out at the Investor Day. Just, I mean, you've got a leadership position in most of your businesses. So where are the opportunities you see that are...

What the team showed, which I think is really important, not just where we're a leader, but where we're not. Like you could be #1 in fixed income trading, but we're #4 in Asia, we're #7 in this country, we're #10 in FX in this country, we're number -- so if you look at all the weak spots where we don't have big shares, we don't -- like even our Chase Wealth Management because Jen and Marianne showed the huge growth opportunities, but we have like a 1.5% share from $100,000 to $5 million of assets under management. Why not $10 million? And Jen mentioned that -- I think [indiscernible] got a 20% share in deposits. I'm talking about 10 or 15 years from now, because that's almost every other country has that as you add services and products. So -- but anyway, the way we look at branches, bankers, and these could be -- and we don't -- we're not going to give you all the numbers. Some are embedded in the presentations. But opening a branch, we know exactly the profitability pretty much is going to be down the road. And we've been positively surprised. And now we're in 48 states. Hiring bankers in middle market or Chase Wealth Management bankers, we pretty much know what the outcome is going to be, and we've been positively surprised. Marketing is -- that can go up or down. So we sit here and Marianne answered a number, $7 billion of marketing. Another accounting ridiculous thing is in a lot of the credit card business, it's expensed against NII in 12 months, so you don't see it. The only thing you see -- we tell you about that. But I mean, I don't know that doesn't seem to be matching revenues and expenses to me, just like CECL does and AOCI does and banks is like the only industry where all the losses are upfronted and everything else is [ on to come ]. And which hurts capital, by the way. It hurts capital formation in banking, which I, again, think is a minor mistake. But that -- those numbers could double. You could have $1 billion of opportunity that gets very high returns or can disappear right away. And the other lesson -- probably secret lesson is sometimes when things get bad, that marketing money is worth more, not less because you get far more bang for the buck. So you got to be a little careful. That's why I don't like making promises on expenses at all. We could spend $500 million more on marketing, credit card or marketing, something like this. And the returns are extraordinarily high, we're going to seize it, and then explain it to our shareholders. Just like you would if you owned 100% of the company, and then we went -- the harder ones are -- and every business went through stuff they're doing some of the -- and we gave like very specific things, just some examples of AI, okay, where we know we're spending -- we didn't tell you how much we're spending, but there's $1 billion of identifiable benefit. We gave one -- I'll give you one example on risk and fraud. Our risk and fraud in the consumer bank -- losses are coming down while volumes over the years have doubled. And you all know how much fraud is out there today. That's AI. A couple of other examples like that. And AI does things like hedging a lot of our equity portfolios today, which is astronomical in a way you couldn't do as a human being. And then we gave specific examples on software we're building that has identifiable returns and some of that doesn't really, some of the modernization stuff and data center stuff. But even like the data center stuff, we know when we move some of the new data center that the operating costs for that application dropped 20% to 30%, and it becomes accessible to far more services. It's kind of invaluable, but -- so we try to give people a taste for all those things. And of $77 billion, about $15 billion is what we call investments. And we try to have rigor around those and...

And in terms of how the investment agenda gets set at JPMorgan, it's not Dimon says from the top down, right? It does come from the bottom up and people come to you with ideas.

It's a little bit of both. So -- and it should be, like so people we ask them, what do you want to do? How do you want to do it? What are your opportunities? And they -- that service is up. Some things -- and we don't tend to -- if they're obvious, we tend to let them do it, okay? But there are certain things that have to set at the top, modernization is going to be set at the top. Certain things we have to -- like I've been in a lot of companies where operations is always underinvested in because no one sets a budget for operations. If you have operations, but it's in the CIB or the company, the rebuild and fixing and technology that supports operations has got to be budgeted essentially. If it's budgeted in a fight, front office will always win. And the new data centers will never be built. So the new data centers were top down. Some of the monetization is top down. Some of the other stuff that's in -- like if you ask Daniel Pinto in the CIB, it's top down. And then other stuff bubbles up. It's both.

So from the outside, how should we gauge the success of the investments over time? I mean, just in terms of how it plays to your operating metrics, ROE?

Well, we -- I mean, we try to show you tons of examples that should give you comfort in how we go about it. But the end of the day, do we earn 17% on tangible equity through the cycle? And do we grow? Do we compete? Because it's very easy not to grow. It's very easy not to invest in your future and have higher margins. I also think -- I've always been opposed to this concept of ever-increasing margins. I don't know what people are thinking. We live in a capitalistic world. So when people -- I remember that when Citi was under, they're constantly increasing their margins and they're increasing operating leverage. Well, what do you increase operating leverage to? Jeff Bezos says, "Your margin is my opportunity." So we take very often, we're giving the customer a better deal. That's what we do. It's called capitalism. You all do it, [ required ], to think that you can honestly always increase your margin is a mistake. As long as you're building a great company with great returns, great customer results, good growth and stuff like that, you should be happy with your company.

In addition to the organic investments...

But the other thing to keep in mind is if we don't think this stuff is working, we can cancel it. We're not like the federal government started a program that doesn't work and it's there 30 years later. We can cancel it. And we apply rigor looking backwards about some of the stuff we did that didn't work or did work or...

You've been using fill in bolt-on M&A a little bit more in the past couple of years, in addition to the organic investments, what's the change that led to that?

Well, I think for a long time, we wouldn't have been allowed to do acquisitions for a whole bunch of different reasons. And the other thing, which I think is very important. I think every company -- I grew up in an environment where every time a business wasn't doing well, at the management meeting, you quickly start b*********** about M&A. Well, we need to have size and scope. I think every business should have your own plan, how you can build it, how you're going to compete organically. And organic growth is the hardest growth. Adding to sales force is hard, adding research is hard, adding branches is hard, and you can't turn them on and turn them off. And so I always tell people, no, you have a job, organic growth that's a huge discipline, at bankers and clients and services and products, and it's the best growth. It's your culture. It's consistent and you know what it is. It's like our opening branch. Doug Petno showed a chart, since WaMu, where do we open? We're now in all 75 -- I think all 75 major cities. We were in 25 of them when we started before WaMu. Getting him to open in every -- not getting him, he wanted to, but to open in every place, to hire bankers, to add the credit officers, to add the treasury services product managers, it's a lot of work. And -- but it's great work because the returns are enormous. And I could have bought -- we couldn't buy another bank, but acquisitions are also very hard. They shouldn't detract [ organic ]. So years ago, I was -- told you all we wanted -- I'd rather invest in our own business organically, M&A after a dividend and then buyback. And so I think acquisition opportunities opened up, and we started to take them. And I want the management team to be looking and they're disciplined enough that they can grow organically and look as opposed to it distracts -- sometimes it does distract from growing organically. When you do a big acquisition, also all your teams are focused on consolidating and putting things together and the management team and the kind of innovation and organic growth drops by the way side. It doesn't have to, but it often does.

Is there any kind of common denominator or a thread of the type of things you'll do inorganically versus build?

No. If you -- in asset management, you all understand as we bought company that manages timberland. We bought a company that does tax -- it takes single accounts, MSAs and those tax-advantaged investing, so it automatically adjusts for it and a company that does ESG open invest where you can basically say, "I like this index but I want to over-index to boards that have more women on them or that have -- do a better job on scoring on this climate score or ESG." So you can run a portfolio and then direct it the way you want. In payments, we -- you got to look at Viva, its capabilities are extraordinary. So it's just kind of a fabulous add-on for us. And a little bit -- the one that's a little bit different is the stuff we did in travel. cxLoyalty, a rewards company and Frosch, a travel agency. But it's fabulous stuff, and we expect it all to pay back. And not only pay back and defend the business, it will also defend the business. So we have to execute, but the fact is, I think it was a fabulous strategy, and I congratulate them for even coming up with all of that. And we've got some very competitive folks there who want to win big time in travel. The other amazing thing, and we -- I always say, is there a reason you win? 1/4 of all U.S. travel goes through our credit card. That's a huge number. And only a portion of that goes through our own travel-related stuff. And if we can increase that portion even a little bit, it's fabulous for the client, it's fabulous for the company and it's hugely competitive, offensive and defensive.

And in terms of the competitive environment, as long as I've been doing this, you've always said as a financial institution, there's competition everywhere, from every angle always. But with the rise of fintechs and maybe big tech looking at financial services, is the nature or intensity of competition changed in recent years?

Well, I think in the recent months, it has come down a little bit. Look, I think there's going to be a lot of winners and losers in this. And what I was trying to point out is that 20 years ago, if I was sitting here, our competition was mostly other banks around the world. U.S., around the world, stuff like that. And now you have very intense shadow banks. Think of Citadel, the mortgage brokers, direct lenders, a lot of payments companies, exchanges, data companies. But they're skimming off a lot of profit from the financial system, and then you have fintech. And they're good ones, Stripe and PayPal and Adyen and Square and they're all doing interesting stuff. And then you got big tech -- so big tech, you've all seen Apple has made their announcements about they want to do P2P. They've already got the Apple Wallet. They want to give you some kind of credit journey experience. They're going to do merchant processing. They're going to do merchant lending. It may not be their own balance sheet, but that's a bank. That's a bank. I may not have insured deposits, but it's a bank. If you move money, hold money, manage money, lend money, that's a bank. And then everyone is going to try to embed payment systems in their ecosystem, just makes sense. It could be as a bank, it could be white label, it could be -- which we're not going to do, but someone will do it or it could be they'll give you a marketplace. So there's a lot -- I think there's a lot of competition coming. And the reason I talk about it is not -- I'm not afraid of it. I'm in favor of competition, and there are strengths and weaknesses for banks, but you better not put your head in the sand. I mean the worst thing a CEO can do at a company is have this ABC: arrogance, bureaucracy or complacency. If you put your head in the sand, you die. And I think that -- I'm just trying to note that. I think JPMorgan is in pretty good shape. I think the competition is going to be brutal and fun to watch. And I think there'll be a lot of losers in there too, by the way.

You've written about the need for a level playing field between banks and new entrants, how much...

I didn't say that. I simply -- because we're not going to get a level playing field. I just don't expect -- the regulators aren't going to change anything on banks at this point. But what I was pointing out is that among the things we have to deal with is we have capital requirements, some of these people don't. We have liquidity requirements, some of these people don't. We've got social requirements, some of these people don't. We've got AML, KYC, which they have in some capacity, but they don't. We've got insurance requirements, they don't. We've got resolution requirements, they don't. We've got -- that's -- I'm just pointing out the truth. It is what it is, just acknowledge it. That's all. And if they ever want to change, change it, then let them change it. I can't rely on any of those things being changed. It's been 10 years since Basel and they're still talking about Basel IV, and we still don't know what it is. So that creates uncertainty for banks. It's not what I like, but that's my lot in life. I got to deal with it.

On the consumer side, Marianne and Jen touched a bit on this last week. You reached over 66 million American households, got a dominant footprint in retail banking. What's the strategy to connect with younger generation as they begin to build wealth and connect with them on broader levels?

Yes. Well, I think I've got the numbers they put up there, but -- we already have a huge share of Gen Z and Millennials. So it isn't like we're missing anything. And they like our products, like our service, like our Sapphire card, and then we added things like self-directed investing, which we acknowledge we didn't have the best platform of all, but it's already up to $50 billion or $60 billion. So it's there. So you can now go on your phone -- and we got to make it easier for you. We've got to add a bunch of stuff that other people have. So we have your account, we've got your deposits, you get your credit journey, you get free bill pay, you get free risk rewards, you get free offers, you get free this, you get free trading, it's pretty good. So we're trying to offer the customer more and more, which will appeal to customers in general. We're not trying to gamify or anything like that, but we want to be there for customers younger and older. And so -- and I think we've been quite successful at it and more to come. I think some of these things, Marianne just gave you a snippet of travel and offers, more to come.

Could you touch on the credit card environment and how you differentiate as a credit card issuer and a payment provider in a very competitive environment and maybe what you're doing with travel and some of the engagement stuff?

Yes. So payments, I think payments is kind of probably the most challenged. And people talk about like it's all -- it's not all challenged. JPMorgan moves $10 trillion a day around the world, very cheap, very effective through our AML systems, our BSA systems, our risk and fraud systems, 99.9999 accuracy and all that. But some parts are challenged when you try to move money overseas. So people looking at that whole ecosystem, trying to reduce the cost, the price to merchants or consumers and we have to make sure we do that, too. I just -- I think it's a whole thing. And obviously, credit card on the consumer side, credit card, debit card and all the other payment systems, ACH and wires and all that, make it easier and better for our customers, which we intend to do. So in credit card, we've got the brand, our brand, Sapphire, Chase cards and things like that. And then we've got wonderful co-brands, Southwest, United, great partner companies that kind of enhance our system with travels and stuff like that. So what we want to do is give you better travel packages and better rewards programs and better offers that are more targeted to you, more personalized in a way that you really like using those platforms. And we're convinced it's a great strategy, and we have to execute, but I think you're going to see that early -- late this year, early next year, some really neat stuff coming.

And then just more broadly on technology, the cost of it and the benefits of it, right?

That's the other thing, by the way, about data. We protect people's data and privacy. A lot of other people out there in the financial services, they're selling that data all the time. We don't, we're not allowed to, but we can use it to help you on risk or fraud or marketing. And we can partner with someone without giving away data where we can offer you something better. And so that is both a plus and a minus how you look at how banks get to use data and stuff like that. So -- and that will be a big asset, I think, hopefully, one day.

And you touched on this in the past, but could you help us kind of demystify a little bit what moving to the cloud means for JPMorgan?

Yes, we've been writing about it for years. Digital, cloud, and AI are -- they're all related and they're real, okay? The cloud allows you to do enormous compute. I think Lori Beer gave the thing, you could go from like 1 server to 14,000 servers to do a bunch of calculations all the way down to 1. We can't even do that in our big data centers. And it's unbelievable compute. That compute when you can access multiple databases in a split second to do something for you for risk or fraud or marketing is extraordinary. That compute power, whether it's in the private cloud or the public cloud. So you have to put -- you could put stuff in the public cloud [ that you need unbelievable compute ], stuff which you don't need it, it's very steady. You don't have to. It's all different, but you have to spend the time to refactor and replatform data and apps, so they're cloud-eligible, it's in the private cloud or the public cloud. The new data sets we have, we're going to reduce the operating cost, the actual operating cost of running something by 20%, 30% or 40% and make it accessible to machine learning and stuff like that because we can do machine learning in our own data centers or in the public cloud. So that's a journey. I tell people you really want to do is to constantly innovate. A lot of stuff is already in the cloud, already has AI/ML. And some of the stuff you may never do. Like there's certain mainframe applications, you're going to run it just that way. And you retire it one day or build a new cloud-eligible one. But a lot of it -- the stuff from [indiscernible] already been put in the cloud. So you may not change the mainframe, but all the stuff with digital, compute, AI/ML, you're slowly moving to cloud, too. So I'd say innovate, but it's a slog. It's like hard work to get all the stuff there. You could talk to any company that does it, and -- but you need to do it. And if you don't do it right, you'll be at a huge disadvantage down the road.

How hard is it for smaller banks to compete? And as we've seen the consolidation of certain products like mortgages and credit cards, do you see deposits getting consolidated into the hands of bigger banks and other products as well? And is there still a role for smaller banks?

Yes. Look, I think you guys see a lot of consolidation. And I think they need it. I mean I think you need to kind of scale. As you know, consolidation is really hard, social names and consolidating systems. And then you're going to have a lot of people, third parties who offer cloud-based type of benefits to smaller banks. So it isn't like they can't have them at all. They're going to get them from a third party. Some of those third parties -- [ I'm not going to mention ] any names or stuff like that are ahead of others. Some of the banks are doing it, some don't. I always think a very well-run community bank, a regional bank can do well. It's just going to be very well run. You've got local knowledge and local people, local authority and they sit in the local boards and -- but they have to accommodate it too because clients do walk with their feet. They've got to offer some of these great services and products to their clients, too. And it's not possible. I mean, if you look at the world out there, all these fintech companies, if you combine them all, have 400 million, 500 million, 600 million accounts in America. There are only 150 million households. So you would take them all. They've got -- they're -- so JPMorgan may have 66 million, we may have all these deposits, but there's these people chipping away at every single piece of it. We can't all win. It's not possible. And what you see now is like -- and you see people like fintechs are deepening. Some -- it's very easy to cherry pick. So I remember when SoFi was first coming out and said, "Oh student loans, the price was 1 -- was the same for everybody, but I'll take your student loan if you went to Harvard, Princeton or Yale." Little did they know how little that meant. But seriously, they were just cherry picking credit, that's [ happening in life ]. Now they want your investment account, your checking account, your debit account, your this account. That means they have to compete with us, too. That's a whole different ball game for them, and we'll see. Some will do it well and some won't. I think Square has done a great job and a whole bunch of different stuff. But then is if they charge customers to take your money out, their revenue stream is charging you 1.5% to take your money out. We don't charge you to take your money out or put it in. So we have huge competitive advantages. And I have enormous respect for them. I'm not sure that's -- how sustainable that model is. Some of it, they're building so much stuff so quickly. They're just -- they're out there, bobbing and weaving and they're very good at it. My hat's off to them.

Great. We have a couple of minutes left. A few questions here from the audience. The first one was, could you talk broadly about how you're thinking about your business and footprint in Asia over the next few years? And what kind of growth investments you're making there?

It's the same. And I think we put some charts up there. In commercial banking, we've opened offices in Asia to do more, think of not middle market, but corporate type of banking businesses, which I would put in the low-risk category, by the way, but it's country by country. There are plans for every country out there, and we want a certain share of corporate business and the financial institutions business and payments businesses and trading businesses. It is country by country. Obviously, the big one is China and India, the big ones, Greater China and India. So our plans in China are pretty much the same. We've got our full licenses. We're growing carefully. And same with India, though it's hard to do business in India too. So nothing much changed. We're just continuing to grow there. And I think a huge opportunity over time. And obviously, Asia is going to grow faster than the rest of the world for quite a while.

Just from an ESG perspective, you were Chairman of the Business Roundtable a few years ago and kind of led the effort to reconceptualize corporation [indiscernible] serving all stakeholders. Are banks -- how are banks doing on that? How is JPMorgan doing on that?

First of all just I am a red-blooded free market capitalist, and I'm not woke. And I think people are mistaking the shareholder stakeholder capitalism thing for being woke. All we basically said for stakeholder capitalism is when you say to me -- when you say the America -- forget you all, okay? There's 325 million Americans. And when you say shareholder value and fiduciary responsibility, they hear short-term profit taking at the expense of employees or customers. And fiduciary, they hear white shoe, high-paid lawyers protecting CEOs. All we're saying is when we wake up in the morning, what we give a s*** about is serving customers, earning their respect, earning their repeat business. And we do that through employees, and that's what we do. And obviously, we want to earn shareholder value and stuff like that. So it's just why should we get buttonholed into a stupid legal debate. So all your general counsels, you're a fiduciary, [ you buy -- ] yes, so what? Explain to the American public what you do and why you do it. And of course, and when we do things like climate, we're quite serious about climate. I don't think America is getting climate right. I think the chance of us getting it right is virtually 0. I don't think we remotely understand the complexity of this. And we can't turn on electricity from hydroelectric power much less, and then we're going to reduce oil and gas, which is going to cause more CO2. And we're just -- we're not getting it right because it's an uncoordinated, we're confused between hugging trees and yelling lending and it's just way off base. There's no -- we need real leadership in this area, and we're not getting it and so -- and then other stuff. We -- like we want, if you're an employee of ours and whether you're a black or white, Jewish or Muslim, Indian, Asian, disabled, LGBT+, we want you to be treated with respect in our company. We want to give you opportunity. That's not woke. That's what I want for my -- what we want for you, that you can contribute to the company to the best of your ability. So any Senator or Congress that says that's woke, they're not thinking clearly because I want to win in the marketplace. I want the best employees, I want happy employees. And so -- but some of the other stuff we don't get involved in, it is woke. I don't think people should get involved in some of these issues where it's far more detailed than you think and people just getting jazzed up about you got to do this, you got to -- no, you don't. No, you don't. So I agree with it. I think some people are overdoing it. And I think like I mentioned the hurricane part, that hurricane is the higher oil prices, which I think are in the cards. And I just -- I'm watching that train coming down the tracks, and I'm very sad about it. I don't know -- I wake up every morning, I'm quite sad about it.

Just this last question in terms of succession, succession planning. It sounds like you're going to be in the seat as a leader at JPMorgan Chase for 4 plus more years. How is the Board using that time to prepare your succession?

So it's totally -- remember, it's totally up to the Board. And so whatever -- anything I say, it's up to the Board. I have 10 Board members who decide every day whether they want me in this job or not. I'm an employee at will, they can fire me tomorrow. I think when I went up to Fidelity and Wellington, I explained to them that the most important thing, and I think sometimes the press misses this, too, is does the Board meet without the Chairman and CEO all the time? Not is there a Chairman and CEO, the lead director has all the authority of a Chairman. They meet every single time since I got to Bank One, it's not required by law. Now it's required, I think, once a year under Dodd-Frank. But I have insisted every single time they hear -- they get full access to the management team, full access to everything. They go and play golf with them. They go have lunch with them. They meet, not just my direct report, they know them well, but they meet the next layers down, and they meet every single time without me and they have since 2000. And they have an open conversation about what's working, what's not working, what feedback should we give Jamie, what we are we happy with, we're not happy with, and that's what they do. That is the most important thing. And while I'm making a pitch to you all, you -- corporate America has a problem, okay? And the problem is that I think investors have to do this, I can't. So think of asset managers. We've gone from 7,200 public companies in 1996 and this may be a real problem. I'm begging you to pay attention to it when you go home, okay? We've got 72,000 [indiscernible] like 4,200. Now that number should have gone from 7,000 to 14,000. And what happened? Well, private equity, I'm only talking about the big ones because I can't even add up all the smaller ones has gone -- I'm not against private equity. I'm just pointing out some facts, has gone from only 1,000 to 10,000 companies. And all this other capital is moving private. I'm not against private capital, I'm not against private equity. I'm just wondering why that's taking place, and you think some of you would be thinking about what do you want in America. You want active public markets, and we're driving companies out of the public markets because of litigation, regulation, press, cookie cutter governance, oh, you got to have this amount of directors and this amount of that. Who said so? What's wrong with the free market system where you see companies -- I mean, what's independent mean? Warren Buffett would say independence is independent-minded. There's not anything else. If you rely on fees, you're not independent. So we -- but private equity, management team is focused on the business. Board's focused on the business. They're not -- they come up with the comm schemes, they think work the best for that business. They don't have to deal with Glass-Lewis and ISS, which shame on you any of you -- if that's how you vote, shame on you. I mean seriously, you should be embarrassed, okay? And do your own homework. And this s*** I hear from people about, well, you know there's too many -- no there's not. If you own 100 companies, the average proxy has got that 6, that's 600, there may be 10 to matter. And like even that, so we talk to our investors and we send up -- I don't do it, the lead director does and stuff like that. So the lead director goes up there, and they talk to a 27-year-old compliance officer, who writes a memo and then votes Glass Lewis. I think if we send up a director of ours, who's a decision maker, they should sit with someone who's a decision-maker. And you should be able to say to that person on the spot, you got my vote or you don't. I suppose we have to wait till the proxy day. And I just think we're just slowly destroying corporate America for all the wrong reasons. And if you don't fix it folks, you better go private too because no public companies -- I don't think it's good for America because I think our active transparent markets are great. They have been engines -- with all the flaws we've had, they've been one of the engines here. So I'm begging you, I'm begging you, don't allow this to happen with no forethought. Figure out what it's going to look like in 10 years and see if that's acceptable because in my view, it's not.

Jamie, thanks so much for joining us today. We appreciate it.

Thank you very much. Appreciate it.