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

Good morning. I think we're going to get started again here. A little public service announcement. Could everyone turn off the buzzers on their cell phones and so forth? That will make Gerard a little bit happier. So I'm pleased to be on the stage with Jeremy Barnum, JP Morgan's CFO. This is his second BAAB conference, so congratulations, you're now an alum. Thank you for being here, and let's jump in.

Great. No, thanks for having me. It's really fun to do this, fun to do it with you, Dick. So looking forward to the chat.

Great. So last year, we started our session by asking about JPMorgan's priorities, challenges, opportunities as you look out for the next year, and a lot has changed over the course of that year. So maybe you could talk a little bit about what you're focused on and what may have changed.

Yes, sure. So maybe a good way to do that is starting kind of through the budget lens because it's budget season, so obviously the whole company is going through that and my team is particularly involved. And so when you think about what are the questions that surfaced in the budget, revenue. And so in that context, it's really NII and what do we think and what's going on with the deposit franchise and all of the relevant factors that are part of that. So a lot of focus on really understanding what we think the grade pay trajectory is going to be and the balance and the CD mix and all that type of stuff is obviously quite important for the company and for the industry right now. Expenses, obviously, so making sure that we are using the budget process to continue our long-standing tradition and cultural priority of expense discipline in BAU and extracting efficiencies, but then also making sure that we're doing the investments that we need to do and that those are both the critical sort of tangible short- and medium-term ROI investments, highly measurable stuff, but also the things that we consider mandatory and fundamental to secure the future of the company that have less obvious or not worth measuring type of ROIs. And then finally, but arguably, most importantly, obviously, capital and in particular, not only continuing to build capital as we have been in anticipation of the Basel III endgame needs but analyzing the Basel III endgame and the likely implications of that and flowing that through our planning and our budget process. So that's like one building block. And then, of course, it's a complicated moment in the world right now, so both macroeconomically and geopolitically. So the company is very focused on being on top of all of that across all of the relevant dimensions. And finally, maybe a little bit more narrowly in my team, but also one of the folks in CCB in particular are quite focused on proceeding a pace with the First Republic integration and hitting all the milestones there, which are going well. So that's the focus at the moment.

Great. And we will drill down on several of those.

Touch up, I'm sure, yes.

Okay. So you reported earnings just about a month ago as another solid quarter. You upped the NII guidance, reduced your expense outlook going forward. What are sort of the key takeaways for people post earnings as we head into the end of the year?

Yes. So I mean, let's sort of start with the good news before I go all sort of doom and gloom on you. So it is worth noting that it's like, I think, the fourth consecutive quarter of returns over 20%. So that's really something we're quite proud of and reflects truly exceptional financial performance in the current periods. And also, when you move away from sort of reported financial performance and look at some nonfinancial metrics, it's quite noticeable across the company the way we seem to be taking share and growing accounts. So CCB, #1 deposit. Retail deposit share, very robust account growth across both card and deposit accounts and business banking accounts. So it really seems as if the thing that we've been saying for a long time in terms of the importance of making necessary investments to grow the franchise and improve the customer experience and deliver products and services across the whole landscape is actually paying off in the form of both very noticeable customer loyalty and significant customer growth and some share gains. And we even see that as we move over into wholesale, where we actually see really nice share gains in Investment Banking actually, which to the extent that these things can never be measured precisely, it does seem to be reasonably correlated to the sectors where we made conscious investments in banker hiring as we've been talking about over multiple investor days. So that's nice. That's good. But obviously, pivoting a little bit to what we've been talking about for the last several earnings calls, we want to recognize that there's a significant -- sometimes, I don't like to use the phrase, over-earning, but let's just use it, that there's some amount of over-earning. We're over-earning on NII, we're over-earning probably a little bit on credit, although there is a relationship between the NII and the charge-off there, which means that it's not always necessarily true from the bottom line perspective. But we don't believe our 17% through-the-cycle return target is there for a reason. And therefore, these four consecutive quarters of over 20% of returns, we fundamentally do not believe are sustainable, and we've been very clear about that. And so we just don't want people to get used to it. And we're going to continue to run the franchise through the cycle and do what's right for the shareholders. But we don't want to get into a place where we make bad franchise decisions because we're desperately trying to hang on to recent performance, which is -- was never kind of something that we were counting on, if you know what I mean.

Yes, I was getting used to it, so...

I mean look, we'll take it. I mean if it keeps going, that will be great. But we just want to communicate clearly with all of you about what we think is sustainable and what we think is reasonable and remind everyone that we manage the company through the cycle.

Great. So you touched on earlier all of the uncertainties surrounding the environment at JPM, the macro backdrop, the worsening geopolitical regulatory. Jamie said, and I'm looking down here to make sure I get the quote right, maybe the most dangerous time the world has seen in decades, which makes his hurricanes comments some kind of quaint. But -- so how do you manage the firm during such a challenging kind of backdrop? Like what sort of risks do you worry about that are sort of unusual risks? And do opportunities kind of pop up from this type of backdrop?

Yes, it's a good question. So I mean, I think that it starts with sort of being clear with yourself about what you can control and what you can't control and sort of it's like anything in life. It's not worth spending a lot of energy focusing on the things that you can't control. So I think that, obviously, with respect to elements of risk, which are controllable, we are especially focused on controlling those and analyzing and doing the stress testing that we always talk about and looking at all the various risks of the company through every consumable lens and scenario to minimize the chance of surprises. But of course, some of the risks are very much out of our control, some of them are external factors. And also, it's important to be humble about what's knowable. No matter how much we analyze things, no matter how much we dig, there will always be surprises. And that's why we talk about fortress balance sheet and fortress controls. So that's part of the reason why in addition to the Basel III endgame, why we're building capital because it's in order to prepare for the unexpected, recognizing that often as a company, we have seen opportunities during difficult times. And so we want to be prepared to sort of deliver on some of that traditional countercyclicality should opportunities come up. So yes, and then yes, leave it there, I guess. But definitely a lot of focus and some real challenges in the current environment across a range of dimensions, obviously.

So let's switch gears and drill down on the outlook for NII. You bumped up your guidance famously in the last two quarters, I believe. And you've warned us yet again that, that's not sustainable. Could you maybe drill down on the concept of sustainability, how do we get there? Just sort of like what does it take to get back to a sustainable level, although we're enjoying it right now.

Yes. No. So look, I think -- I mean, I guess, implicitly, you're asking me about the famous sort of $80 billion sustainable, conceivably sustainable...

It used to be $77 billion, I think, and now it's $80 billion.

Well, yes. And to be fair, I think that we said, if you remember, we started with sort of the mid-70s number, and that was before we did the First Republic acquisition. So at Investor Day, I talked about how obviously the First Republic acquisition was going to increase the NII run rate. And so that mid-70s number was realistically higher. But at the time, I wanted to caution people about the fact that at some level, some of what we were doing with the First Republic acquisition was kind of spending resources that we would have otherwise assumed would have been deployed and contributed to NII in that sort of medium-term run rate, so it wasn't like totally additive. But anyway, nonetheless, with the benefit of time and a bit more clarity, we thought it made sense to put a new number out there, so we put out the $80 billion. But it's important to be clear about what the $80 billion is and what it isn't, right? It's not a promise, it's not even really a prediction. And we're not really saying when. And also, we might be wrong, obviously. We might be right, too, by the way. So -- but I think more than anything, the way I think about it is just a concept of what do we believe is a more sustainable deposit margin for the company. And when you think about it that way, it also helps to understand, it helps to contextualize why I've also commented in the past that it's not a particularly rate-sensitive number, obviously as long as rates don't go back to the lower zero bound or something like that. So it's just a recognition that we have had very rapid rate of hikes, lags have manifested themselves in quite a real way. We've seen a fairly dramatic expansion of the deposit margin. And we recognize that, that's probably above what is reasonable to assume from a through-the-cycle perspective. And we want both internally and externally, people to be realistic that so that it doesn't produce poorly considered decision-making.

So could you comment specifically on what your thoughts are on a higher-for-longer environment? Sort of what are we wishing for? Do you want to -- like the forward curve does have cuts coming in later, but there's a lot of talk about higher for longer. Is that a good scenario for you? Or do you want some cuts? Or do you want to move on to the next question?

I mean it sort of depends on whether you're going to get to any of the other questions, because that particular answer I could go on about for like an hour. It's a very interesting and complicated and nuanced question, but let me try to give you a concise answer, which is sort of the narrow answer to the question, are cuts or hikes good or bad for us? It's probably, for now, best answered by looking at our EAR disclosure, and which I think currently has us at around plus $2 billion for a parallel shift up 100 basis points. So in theory, relative, with all the caveats about what's in that EAR methodology, in theory, what it's saying is that all else equal, relative to the current expectations of what we would earn on the forward curve and that baseline, a shift up would make us an extra couple of billion dollars. So that would suggest that we want hikes. And I think that in terms of the short-term marginal impact on current income from hikes or cuts, that's probably a reasonable gauge of what would happen. I would remind you, if you haven't been following this closely that, that number used to be negative. It was negative a couple of billion dollars a couple of quarters ago before we changed the methodology to include the impact of reprice lags on the deposit franchise, which obviously links back to the prior question, and it just highlights that this sort of in this particular environment, given everything that's going on and given the particular nuances associated with EAR methodology versus structural interest rate, deposit complexity, business mix, rate environment, it's quite dynamic, this whole question. As you've heard us talk about, we've tried to make a point of positioning the company both from a balance sheet and from an earnings perspective to be comfortable in a higher rate environment, and that's sort of what's happened. Obviously, today, we're seeing a big rally in the curve, and it's a reminder that there are two sides to this thing, and we've tried to stay balanced. So it's not about being sort of totally skewed to one side, but it's about recognizing that we've had a consistent view that there were risks to the upside in terms of rates and inflation, and we wanted to be comfortable in that type of environment.

Great. So let's switch to credit, the other category that you're saying that you're over-earning but now just by a little, I noted that. Let's start with the consumer side. You changed the central tendency for your outlook, and that affected reserves. You've been growing credit card balances in the high teens for a couple of years coming off of a ridiculous period, of course, and losses also coming off of a -- but rising. So just kind of your thoughts on consumer credit implications to reserves and how you feel about the last couple of years of vintages. Are they behaving? Or...

Yes. So a couple of points there. So I think just to reiterate some of what I said at earnings. So this was the year where we were expecting to see normalization, and we talked about that. And that's more or less happened, although depending on what number you look at, you might sort of get a little bit confused. So we talked about early delinquency bucket, entry rates normalizing roughly in the middle of the year, which more or less happened. And that would basically have charge-offs normalizing at the end of the year, which is still more or less what we expect, which was then going to create a full year average charge-off number of, we'd said earlier in the year, 2.6% and we realized that down to 2.5%. So obviously, that's well below a 3.25% type of number. But from an exit rate perspective, that does represent normalization. Now to your point about the vintages, it is worth noting that in recent years, we've been underwriting vintages to significantly higher loss rates, something more like 4.5%, albeit still highly profitable. And that gets a little bit to the point about when you think about card and charge-offs and the relationship to NII and revolve, you really kind of have to look at it on a bottom line basis. We saw that through the crisis where we had very low charge-offs and very depressed revolving balances. But on a bottom line basis, it wasn't actually that different because I mean, there are lags obviously, but the two are closely linked. So therefore, the point of saying that is that arguably, continued normalization should actually bring us above a 3.25% type number, which was what we historically considered normal just by virtue of those higher loss rate vintages aging over time in a very profitable way. And therefore, we personally would not be alarmed to see loss rates go above the 3.25% as long as all the next layer of analysis and the rate of change and the whole acceleration dynamic isn't giving us cause for concern. So that's kind of how we see it. And then in terms of the allowance, I think there's kind of not much to see there. We just flowed through the updated views of our economist, which removed the recession from the outlook. That meant that our weighted average unemployment rate that we reserved to dropped from 5.8% to 5.5%, but obviously still well above current unemployment rates and even well above central case unemployment rates. So therefore, some of that conservatism that we talked about in the skew. And yes, looking forward, we don't forecast changes in skew or the market environment variables, but we are, as you pointed out, growing card balances still quite robustly. And so all else equal, you're going to see the allowance build as a function of that loan growth.

That was great. And can we maybe do the commercial side? I mean obviously, the numbers are very pristine, but everyone is worried about commercial real estate and specifically office. I know that's not like a big deal for JPMorgan, but let's hit that and then we'll move on.

Yes. I mean I'm personally hardly an office expert, I'm sure there are many in the audience who are. And as you pointed out, we, as a company, are not particularly -- we just don't have a very big office footprint at all. And what we have is generally quite high quality. But I will say that just whether it's internally with respect to our own portfolio or more importantly, our Markets people who engage in the marketplace of office. I have not heard anyone say anything remotely good about anything in office in some time. So I think that no one should be surprised if that space continues to be difficult. It seems like it's really quite difficult. But as you point out, we're probably not the right place to look for meaningful financial challenges there. So -- and the rest of the commercial space, obviously, we're particularly concentrated in multifamily, which has been a great asset class for us. We got some more of the same asset class as a result of the First Republic acquisition. So that was quite comfortable and consistent with the existing portfolio that we have, the sort of multifamily, multifamily housing, reasonably priced in supply-constrained markets, which also has meant that with respect to some of the declining prices that we've seen from some oversupply like in the Sunbelt, for example, we're not particularly exposed to that either. So of course, never say never. Like in my previous answer, we're looking at this from every angle, running stress test, thinking about the potential impacts of higher rates as some of these loans switch from fixed to floating. But it's worth noting actually that even in a city like New York famous for its really draconian rent control paradigm during the period of high inflation, I think they allot a 3% rent increase for this type of housing stock. So when you think about the NOI of some of these investors in these properties, it seems like it's probably sort of fine when you think about the mix there. So again, we worry about everything, but our multifamily portfolio is not one of the top concerns right now.

Okay. Great. Before I open it up to questions from the audience, let's just take a couple of hours and talk about Basel III. So on the call, you gave a lot of great description about its impact on the company sort of overall. And maybe just to start in this broad topic, let's talk a little bit about the impact on the CIB and the Markets business and sort of how you think that might change in response to the proposal. But of course, hopefully, there's going to be a lot of modification on the proposal, but let's just talk about.

Yes. And I made some fairly extensive comments about this on the call. So for those of you who haven't had a chance to look at the presentation or review the transcript, there's some interesting stuff in there, and I think we made a point of putting some fairly -- I don't know if punchy is the right word, but specific views out there. So on the Markets front, I think the first thing to say, which the agency has acknowledged in the release and the preamble, is that it's a very significant increase in capital for the Markets businesses. So that raises like a series of questions about optimization, advocacy impacts, reprice and so on. So if you go through that in a little bit of detail, if you look at the operational risk aspect of this for markets, that's more or less just a tax on revenue. So there's not a lot you're going to be able to do about that one way or the other. If the marginal impact of adding operational risk capital cost to a given piece of business is to make it sort of unprofitable on a capital-adjusted basis, then you're just going to have to either reprice or stop doing it. It's sort of not that complicated, unfortunately. So then you go into other buckets, like there are some areas where we've talked about potential technical changes or -- I don't know if mistakes is the right word, but areas where maybe the agencies didn't quite realize what the impact of the proposal would actually be. So maybe there's some hope for some of those things to change. We can maybe talk about that more. Then there's areas where even if it doesn't change, we think the thing I've sometimes described as costless optimization might be possible. You change the structure of the product, you change the collateral a little bit and then sort of more or less solved the problem from a capital perspective. But in the end, it's going to be pretty hard to escape the impact of this on the Markets business. So then what are you left with? Well, you reprice, obviously, you reprice everywhere that you can, but it's a competitive landscape. And the European banks are not going to experience these headwinds to the same degree. And obviously, some of the activity can go to outside the regulated perimeter in different ways. And so in the end, I think maybe we succeed in repricing. Maybe there's a few pockets where the business still works at slightly lower returns, but a lot of it may go to European banks. A lot of it may go outside the regulated perimeter. And in the end, when you recognize that for the industry, the starting point of the returns for people's Markets businesses wasn't great. There's not a lot of cushion there in terms of clearing the cost of capital, and now you're expanding the denominator quite dramatically. So one way or another, there are going to be pretty significant impacts here, and that's part of why we made the point about how this feels like this kind of unrelenting assault on the market-making business model dating back 10 or 15 years. And it's an easy space to go after for, I guess, relatively obvious reasons, but we like to remind people that the U.S. has the broadest and deepest capital markets in the world and they work quite well, and they're a pretty important part of a robust and dynamic American economy. So you probably want to be a little bit careful about sort of radically changing that through a 1,000-page rule release that people are still trying to process.

Could you help me with what's at the root though of the European banks not being at the same rule set or capital levels as you guys would face? And I'm not -- like why would the U.S. regulator want U.S. banks to be at a structural disadvantage to European banks?

I mean to be fair to the regulators, I think what they would say is that look at the performance, look at the returns, the U.S. banks are not actually at a structural disadvantage. I think you get into a little bit like correlation causality stuff. Just the fact that the U.S. banks have had pretty good performance over the last decade or whatever is a true statement, but it doesn't obviate the fact that they might still be at a capital disadvantage relative to the European bank. So maybe what the U.S. regulators are saying is that the American banks can afford it in some sense. And from their perspective, more capital in theory. If they're thinking narrowly about things and ignoring the potential impacts on the economy as a whole, more capital is always better as long as the banks can sort of afford it. And I don't want to caricature their positions, obviously. As critical as we have been of the regulators, these are serious people doing serious work. And what we hope for is a serious technical level engagement to try to get to the right answer. But the point a little bit is like past performance doesn't predict future results. And just because it was sort of okay for the last 10 years to gold plate everything all the time and keep sort of making it tougher on the U.S. banks doesn't mean that, that's going to be the right answer for the next 10 years. And it's important to take a breath and say like what is correct here, what is actually the right way to run things?

It seems in the -- listening to the Fed commentary, I guess, they're voting on the proposal. And the FDIC, there's a fair amount of debate within the institutions. Could you comment a little bit about how open they are to commentary and just like where your major points of advocacy are? Like where do you -- kind of where are you planning to crowbar in trying to make change in prospects for them? Are they listening to you and so forth?

Look, I mean, they're obviously listening. It's their job to listen, and I think they take that seriously and they've invited comment. And I think various officials have been very public about welcoming and inviting comment. And of course, we will be commenting and everyone is doing a lot of work to do comment letters and do analysis and do efficacy. So on the question of what do we expect in terms of changes? I think you'll be aware that Jamie has made some relatively pessimistic comments about this, so I'll leave that to him. From my perspective and from my team's perspective, it's our job to do the analysis and do the advocacy as forcefully and as robustly as we can. And so we're doing that. And we're not going to kind of handicap the likelihood of success there. One way or the other, we need to try, and we need to try really hard and really forcefully, and that is exactly what we're doing. So on the areas of advocacy, again, I would refer you back a little bit to my comments at earnings, but maybe I can do a couple of big-picture things and then some more specific things. On the big picture, what you will have heard us talk about is kind of the relationship between the way everything is interacting and the need to calibrate on the basis of that. So just to give one reasonably specific example, when you add the amount of RWA that's being added through both operational risk and all the other elements that are flowing through, well, you're then multiplying a G-SIB bucket times the entire G-SIB buffer or the entire G-SIB surcharge is getting multiplied times RWA. So as a result of that, if you use a 4.5% G-SIB surcharge and roughly $500 billion of RWA, you're talking about, as we said in earnings, $22.5 billion of extra capital on G-SIB. I was like, well, wait a second, whatever you're doing on like operational risk RWA and like risk weightings and FRTB and all this other thing, are you saying that as a result of that, we've become $22.5 billion worth of capital more systemically important than we were before the rule release? And that completely ignores the fact that of our long-standing objections to the calibration of G-SIB in the first place, like including the fact that it's continued to grow as a result of economic growth contrary to the recalibration. So it's sort of like you're really piling on. It's like we never really agreed. I mean forget about also method 1 versus method 2, obviously. So reasonable people can differ on that. Then it's like we never really agreed that the building blocks of G-SIB were an accurate indicator of how resolvable or systemically important we were. But fine, forget about that. Then it's like, oh, the coefficients haven't been recalibrated. And so G-SIB has grown from 3.5% to 4.5%, not to mention the fact that G-SIB, even before this rule release was getting multiplied by the [ SAC ] or RWA that everyone forgets about. So that was not -- so yes, there's been a fairly steady buildup throughout and now so that entire thing with all of that history is getting multiplied by a huge new slug of RWA. And so -- and throughout all of this time, all of the post-crisis work on resolution and recovery and central clearing and all the things that were meant to make us more resolvable and less interconnected. So it just begs the question a little bit like how do you reconcile this type of stuff with all of the statements before the rule release about how the system was robustly capitalized and that we're safe. I'm like -- it's got -- which of these things is true. So that's kind of like the soapbox speech.

Well, I mean the system does have enough capital. It's just all at JPMorgan.

Well, I mean, I know you're joking but I think it's worth saying that I do think...

It didn't feel like that in the spring.

Well -- I mean, we can -- we don't really have time to have that conversation, but it's really not obvious that, that was a capital issue fundamental, right?

Right, right.

And so I think that's important to say.

Well, I promised to open it up to the audience. And I'm surprised to see Mike Mayo throw his hand up there. He's waiting for the mic. What's happening? Oh, I see, okay.

Jeremy, your second priority was expenses, and no good deed goes unpunished. I think it's going to be tough for you to grow revenues faster than expenses next year. So what else can you do on expenses? You seem to spend a lot of money and it's paying off per your words. Will you have another investment cycle? Or will it be squeezing management layers using technology? And if you can comment on AI's role too because JPMorgan ranked pretty well in some recent surveys on that.

Yes, sure. So a lot there, Mike, and I don't want to burn too much time, so I'll give you a relatively short answer to that question, which is we manage our expenses with a baseline of discipline that we try to make sure is equally intense, more or less independently of the revenue environment and investments, which are calibrated to what we believe is our through-the-cycle run rate profitability. And therefore, to the extent that like revenue pops during this particular period for reasons that we've discussed, we didn't spend it on the way up. And therefore, we're not going to like magically come up with expense cuts on the way down. Like this is fundamentally a through-the-cycle thing. That's not the same as saying that we're not very aggressively trying to manage every dollar of expenses to make sure that it's being spent properly. It's just being realistic about the fact that a thing that we like to say is that the overhead ratio is an output, not an input. Like in the end, there are some decisions which there's a few very small examples where a marketing decision goes in the money as a result of the rate environment, which would make us spend the money in this kind of like expanded margin environment and would make us not spend the money in a tighter margin environment. So that is a thing that does happen, but it's really quite small in the scheme of the overall expenses. So the expenses that are variable will continue to be variable. The discipline will continue to be there. And the investment is going to be what we think we need to secure the future of the company. And on that front, on AI, I have a lot to say here, actually, including some fun personal experiences that I've had playing with these tools, which are really pretty cool. But we don't really have time for it. So I think, as you know, as you alluded to, we were pretty serious about this and spending a lot of time and energy on it with some very serious people that we hired well before the kind of LLM is getting really hot and the release of ChatGPT. But of course, having all of that happen has gotten everyone really energized and a lot of focus. So there's a lot of interesting use cases. I will say personally, despite my sort of enthusiasm about this, I tend to be kind of skeptical of these types of things. And I think that probably at this point, in some respects in the ecosystem as a whole, it's a bit overhyped. But for us, like we think there's real stuff. We think there are real applications. And you can be sure that we're going to be putting our energy and our effort and our money on stuff that's actually going to have an impact, either in terms of improving products and services, improving customer experiences, improving employee experiences and/or saving money one way or the other.

That's great. Well, we'll circle back to that next year.

Jamie, you said several times that the world is not ready for 6% to 7% interest rates. I was wondering if you could possibly elaborate on where the stresses might emerge. And as a second question, like how could JPMorgan benefit from that? I mean I'm hoping no more failed banks come up for sale. But like what are the potential opportunities there?

Yes. I mean I don't want to speak for Jamie, but when I think he says the world isn't ready for 6% to 7% interest rates, part of the reason he's saying that is to try to improve the probability that the world will be ready for 6% to 7% interest rates, you know what I mean? I think philosophically, his point is people tend to get a little bit overfocused on what I refer to as modal outcomes when they look at the world. And we need probabilistic thinking. And I think that when we're at the beginning of 2022 with the rate hiking cycle kicking off, it was kind of like, oh, 2%, 3%, oh my God, like the 10-year note might actually get to 3.25%. And it's like, hello, there's a probability distribution here, and you got to think about the tails. And so I think that, as much as anything, is the point of the way he talks about this stuff. I hope that -- I mean, we're seeing a little bit of stability now. Maybe people have taken steps in various ways to be more ready. Yes, I agree with you, we don't want banks to fail. So I don't think we would see that as an opportunity. But in general, we have always been a somewhat countercyclical company. And part of the reason that we run ourselves and are so prominent about fortress balance sheet-type stuff is to make sure that we're ready to take advantage in downturns. So that's part of the reason our pace of buybacks is reasonably modest at this point. Obviously, we need to build for Basel III endgame, but also in the current environment, it seems reasonable to try to have a bit of a cushion.

Let's see, we've got a couple of questions.

One in the back, one over here. We got Charlie.

You've got two minutes.

Ryan Kenny at Morgan Stanley. So you've been very clear and consistent at JPMorgan's over-earning on NII. When we think through the catalyst to get to the potential $80 billion range, it feels like the industry has already seen a lot of repricing in wealth and in institutional. Is it fair to conclude consumer as the big catalyst there? And would JPMorgan ever be proactive in repricing there? Or is the goal more to take market rate?

I didn't hear the tail end of your question, but I think I get the point. So I think it's fair to say that the majority of this effect is consumer at this point. Obviously, wholesale reprices first. So I think the larger end of wholesale is pretty much fully repriced. And then as you go down the continuum and you get closer to consumer, there's more of a lag. So I think that's a reasonable mental model. In terms of the rest of your question, I'm going to go back to what we always say about this, which is we're trying to give you some information about what we think is sustainable sort of on a through-the-cycle perspective. But when it comes to actual pricing decisions about actual in the field with our customers, those decisions are always going to be a function of the people that run those businesses and the data that they get from the field and what they think they need to preserve the franchise and stay competitive. We say often that we didn't lose primary banking relationships in the last hiking cycle, and we're not planning to lose any this cycle. And that is kind of the core philosophy of how we think about this. But importantly, part of what that also means is that we're not going to like Chase yield-seeking balances. We've done well with our CD strategy. And you see that in our numbers, our sort of CD mix increases, and we're just going to continue to run the business in a competitive marketplace and respond to signals in the field.

Great. That's pretty much the time that we have here. Chris, I apologize you always ask great questions, but we don't have time for it. So thank you very much, Jeremy.

Thank you, Dick. Sorry, that we've run out of time. I always am happy to run long, but I don't want to screw up your conference here.

We appreciate that. Thank you.