Please standby. We are about to begin. Good morning, ladies and gentlemen. Welcome to JPMorgan Chase’s Fourth Quarter 2020 Earnings Call. This call is being recorded. Your lines will be muted for the duration of the call. We will now go live for the presentation. Please standby. At this time, I would like to turn the call over to JPMorgan Chase’s Chairman and CEO, Jamie Dimon; and Chief Financial Officer, Jennifer Piepszak. Ms. Piepszak, please go ahead.

Thank you, Operator. Good morning, everyone. The presentation as always is available on our website and we ask that you please refer to the disclaimer at the back. It’s slightly longer this quarter, given we are not having Investor Day, and so after I review our results, I will spend some time on our outlook for 2021 as well as touch on a few important balance sheet topics that are top of mind for us. So starting on page one for the fourth quarter. The firm reported net income of $12.1 billion, EPS of $3.79 on revenue of $13.2 billion, and delivered a return on tangible common equity of 24%. Included in these results are approximately $3 billion of credit reserve releases. Before we get into more detail on our performance, I will just touch on a few highlights. First off, our customers and clients continue to demonstrate strong financial resilience in the face of an unprecedented pandemic as evidenced in our credit metrics thus far. We saw continued momentum in investment banking and grew our share to 9.2%. In CIB markets, revenue was up 20% year-on-year, driven by strong client activity and elevated volatility in the quarter. And in AWM, we had record revenue of 10% year-on-year. On deposits, we saw another quarter of strong growth, up 35% year-on-year and 6%, sequentially as Fed balance sheet expansion continues to increase the overall amount of cash in the system, while loan growth remained muted up 1% both year-on-year and quarter-on-quarter. On to page two for more on our fourth quarter results. Revenue of $30.2 billion was up $1 billion or 3% year-on-year. Net interest income was down approximately $900 million or 7%, primarily driven by lower rates and mix partly offset by balance sheet growth and higher market NII. Non-interest…

Certainly. [Operator Instructions] Your first question comes from the line of Steven Chubak with Wolfe Research.

Hi. Good morning, Jamie. Good morning, Jen and Happy New Year.

Happy New Year, Steve.

Thank you.

So I want to start off with a question on the NII outlook. The 2021 guide implies rather healthy step up versus the $54 billion, Jamie, that you had reiterated just last month. And your updated NII guide for ‘21, what are you assuming regarding the deployment of excess liquidity given some of the recent curve steepening? And separately, what are your assumptions around the trajectory for Card balances and overall growth in ‘21, especially in light of the expectations for additional stimulus, which we saw at least this past year could drive further consumer deleveraging?

Sure. So, I will start with excess liquidity. So I think there the theme is we are being opportunistic but patient. So, as you think about the recent moves that we have seen in the yield curve, in the grand scheme of things, those could be small moves, and as we think about managing the balance sheet, it’s not just about NII, of course it’s about capital. And so, there is risk in adding duration at these levels in a further sell off. So we are being very patient. But we have been and we will continue to be optimistic, and you will have seen that we did add $60 billion to the portfolio in the fourth quarter, so that’s what we are assuming in the outlook is a very balanced view on deploying the excess liquidity. And then…

In the implied terms.

Yeah. In the implied terms. Yeah. And then on card balances, it is quite extraordinary what we are seeing in terms of payment rates in the card portfolio, which of course is very healthy as consumers use this opportunity to deleverage, so there is an offset in the -- on the credit line, but we are expecting that to normalize in the back half of 2021 as spend recovers, but it is certainly a risk for us if they remain elevated. So that’s why everything listed on that page is a plus/minus because everything could be an opportunity and a risk.

Okay. Fair enough. And just for my follow up, I wanted to ask on capital, both the slides are really interesting highlighting the impact of QE on the leverage ratio and G-SIB scores. You have been critical of G-SIB surcharges and the need to recalibrate these coefficients for some time. We haven’t really seen much progress there. It kind of feels like waiting for the [indiscernible]. I think the Fed is slow to recalibrate the minimum leverage ratios to account for this QE-driven deposit growth. What mitigating actions can you take to ensure you are not capital constrained as balance sheet growth continues? And maybe any revenue attrition we need to contemplate as part of those mitigating actions?

Sure. So I will start with G-SIB, if we take that in turn. So starting with G-SIB, as I said, we do think that we have opportunity in the SCB. Of course, that’s scenario dependent and based on the Fed models, but we do think we have opportunity there based on the work that we have been doing. It will be very difficult for us to get back to 3.5% with the current expansion. So, we are expecting to remain in the 4% bucket. But as you know, that’s not effective until early 2023, so that gives us time to manage SCB, as I mentioned, as an offset. On the leverage issues, we have -- we can cure this through issuing preferreds, but we haven’t made that decision yet, as I said, because it is a critical decision for us to think about. And as you think about capital return, it would depend on where our stock price is as we think about the economic value of issuing preferred to buy back stocks. So there’s a lot for us to think about over the next couple of months.

Because you said the G- SIB fees, it’s very important. If we were on the international standard, our G- SIB fee would be 2%, not 4%. And we have been talking about they were supposed to adjust G-SIB before the growth of the economy and effectively the shrinking size of the banking system. Because the banking system itself is getting smaller as mortgages go to non-banks and private credit goes elsewhere, and the rest of the international, Chinese banks are growing, et cetera. So these adjustments should be made. We pointed out there is $1.3 trillion of liquid assets and marketable securities on our balance sheet which shockingly reached G-SIFI 2. G-SIFI has no risk weighted measurements to it, no diversification to it, no profitability to it. It just kind of these very gross measures, and it needs to be recalibrated and same with SLR. I mean, so do we expect it to happen? Probably not in our lifetimes, because we have politicized bank, detailed bank numbers and so on, and we can live with it for now. But in the long run, it’s not good for America and had been that much of a disadvantage to our competitors overseas.

Your next question comes from the line of Jim Mitchell with Seaport Global Securities.

Hi, Jim.

Sorry. Sorry. Hi. Sorry, I was on mute for a second there. Maybe just talking about loan growth? You saw a pretty nice improvement in the Wholesale side. You talked about some opportunities in ‘21. It seems to be mostly coming out of the CIB. Is that sort of acquisition finance? What’s driving some of the improvement on the Wholesale side?

Yeah. I would say acquisition financing is the opportunity on the Wholesale side. When we -- there may be some opportunity in the back half of 2021 in C&I. That feels like it’s returning to BAU, but I think that’s going to take some time. But as I said, we are at historic levels of cash on corporate balance sheets, and so outside of acquisition financing and C&I, it will be challenging C&I in the back half of 2021.

Okay. Fair enough. And then maybe on your expense assumptions for the $68 billion, you don’t really mention at all any of the CIB. You would think that if we are, as everyone assumes, we had a record year in 2020, 2021, maybe markets and IB fees are lower. Is there any kind of -- are you building in some lower comps -- revenue based compensation expense in that $68 billion or is that potential a positive?

So we capture that in the volume and revenue related, Jim. It just happens to be more than offset by volume and revenue related growth elsewhere.

I just point out the $68 billion. We don’t make commitments or promises, so that $68 billion, I would love to find $2 billion more of investments, literally. I mean, we are seeking every year find more to do to help clients around the world and stuff like that. So that’s kind of our current forecast. And fortunately, we found some more to do, including cxLoyalty and opening more branches and some of the technology we are building, et cetera. But I’d like to find more. It would be the best and possible highest use of our capital.

Your next question comes from the line of John McDonald with Autonomous Research.

Hi, John.

Hi, Jen. Given the outlook for net interest income and expenses, it seems like the efficiency ratio is going to pick up a few 100 basis points this year in ‘21 versus ‘20. And I know you don’t manage it necessarily year-to-year, but just kind of overtime you seem to have a mid 50s efficiency target. Just kind of wondering how you put guard rails up for yourself in terms of expense discipline in managing over time to have positive operating leverage and an efficiency corridor?

Sure. So I will start by saying you are absolutely right that we don’t manage the efficiency ratio in any quarter or even any year and but operating leverage is very important to us. And then, we gave last year at Investor Day at about a 55% efficiency ratio. I will say in a normalized environment, we haven’t had anything that structurally has changed and so that should still be achievable for us in a normalized rate environment and otherwise normalized environment. And then as it relates to expense discipline, it is a bottoms up process. And so everywhere around this company, we are looking to get more efficient and holding people accountable to do just that, which is why I call out on the slide that structural is basically everything that is an investment or volume and revenue related, isn’t necessarily a representation of all of our expense efficiencies. So the discipline is everywhere and it’s the way we run the company, and we do believe in the importance of operating leverage through time, no doubt.

Okay. And then as a follow up, on the NII walk, you have got a $1 billion incremental NII expected in ‘21 versus ‘20 from markets -- CIB markets. Can that be true if markets revenues is down year-over-year? Can they both be true? Just maybe explain that?

Yes. It can absolutely be true. So markets is, I mean, in most of our businesses, we don’t run them NII versus non-interest revenue. It is an accounting construct. But markets is particularly true. So, yes, that is possible. In NII, the markets business, you can think about is liability sensitive. So you are going to see the benefit of lower rates in NII that doesn’t necessarily imply anything about the overall performance.

We have positive carry, the trading profit goes down and the carry goes up, the number -- absolute numbers are same.

Your next question comes from Erika Najarian with Bank of America.

Hi, Erika.

Hi. Hi. Good morning. My first question is on the outlook for Card losses. The 2.17% net charge-off rate was certainly eye opening relative to what’s happened in 2020. And the discussions actually that I have been having with investors on the trajectory of Card is, do you think that the bridge that the government built is strong enough that we may not see a spike in losses in Cards like we are all expecting, and Jen, given your comments earlier, what would you need to see to feel more comfortable about releasing reserves from your Card portfolio?

Sure. So it’s interesting that you brought up the bridge being strong enough. It does feel like at this point in this crisis, that the bridge has been strong enough. The question that still remains is, is the bridge long enough. And so, while we just had recent stimulus pass, that makes us feel better about the bridge being long enough. But we have to get through the next three months to six months. So it feels like we have been saying that, since this crisis started, but I think it is particularly true at this point, obviously, given the vaccine rollout. So, consumer confidence is still low relative to pre-COVID levels. You can converse that with -- compare that to the Wholesale side, we are seeing confidence is up. That’s not true on the consumer side. And so the next three months to six months is going to be critically important for us to assess whether or not only is it strong enough, but is it long enough and do you see consumer sentiment pick up a bit. There’s also possibility for payment shops as some relief programs, whether it be student loan, forbearance or tax -- taxes owed on benefits received. There are things that could hit a consumer in the next three months to six months that we need to think about.

Right. I would just add, very different for subprime and prime. And if you look at our portfolio, it’s mostly prime. And the folks in the prime category have a lot more income, a lot more savings, housing prices are up. They did not lose their jobs. So the news there is actually rather good. On the lower quartiles it’s the opposite. Even now when we just did all the stimulus checks and we did about $12 million of them, which have already been processed.

$12 billion.

$12 million. $12 billion, $12 million for 12 Billion approximately and there’s the bottom. But the folks who had $1,000 in their accounts, where the accounts are coming down and they just got $1,000, they obviously needed. The folks in the higher end, they obviously don’t need quite as much. So it’s positive -- we expected to go up, but it’s possible somehow that doesn’t happen in some dramatic way.

Got it. And Jamie, my second question is for you.

I’d say, we are making this point very important.

Yes.

We do not consider taking down reserves recurring or low income. We don’t do show across. We don’t consider a profit. It’s ink on paper. It’s based upon lots of different calculations. Obviously, we want real loss to be lower over time. But just if you Card reserves like $17 billion, we took it down next quarter, because we have more optimistic outlooks, we are not going to be sitting here cheering about that, but we are cheering they are much [ph] doing better. But we don’t want to consider that in earnings. I think you all should look at a little bit differently now, particularly with the change in accounting rules.

Yeah. I think your investors appreciate that. And the second question I had for you, Jamie is, in last -- on last year’s Investor Day, it was clear to your investor base that you were looking to inorganically enhance your scale in AWM. And what interesting is that, the discussion that I have been having with your investors more recently is them wondering whether or not you would consider a larger deal maybe in payments, given that a lot of investors and banks are thinking that that’s the part that seems to be potentially more vulnerable to technology competitors? What are your thoughts there, and I guess, my own thought process has been tempered by Jennifer’s presentation on capital, but we wanted to get your thoughts there?

Again, we have -- I mean, our capital [inaudible], okay. We have so much capital we cannot use it. If you look at what happened this year, our capital went from 12.4% to 13.3%. And by I think advanced is more representative of real risks it will be 13.8%. That’s after doing $2 trillion of loans, $12 trillion of reserves, $12 trillion -- $12 billion of reserved, $12 billion of dividend. I mean, we are earning, if you look at pretax -- pre-provision $45 billion or $50 billion a year. So we are in very good shape to invest. The most important thing we said to management, we says that we grow that every business organically, every single one opening branches and accounts, doing payments, and we put a lot of time and effort in payments. We are quite good at it between credit card, debit card, Chase merchant services. But I agree with you and but we are open for inorganic too. Inorganic shouldn’t be an excuse not for growing organically and it’s not just Chase, it’s not just asset management, it will be any area where we could do that, I don’t think cxLoyalty was neat thing, [inaudible] was neat thing, we bought 55 IP, which is a special way to manage money, tax efficiently. And so we are going to build it ourselves or buy it. We are open minded. Anyone you have good ideas for us, let us know. We have the wherewithal, but we thought we will also look at buying it. Like I said, we are always looking for a way to invest more of our money intelligently. We have got a tremendous set of assets. We also have a tremendous debt of competitors, particularly in payments, consumer land now and a bunch of other areas. So you saw Google Pay. You saw Wal-mart is going to try to spend a bit more time is expanding. And we like competition, we believe in it. But we have to be really prepared for that and that is deeply on our mind and how we run our business.

Your next question is from Betsy Graseck with Morgan Stanley.

Hi, Betsy.

Hi. Good morning. Jamie a question on cxLoyalty, because I thought your loyalty program and capability set there in your payment space and your consumer facing space was quite good. So I am just wondering what the rationale was and is there an expectation that you are going to be leveraging that into non-Card portions of your business, was that part of the so what was this deal?

So, Betsy, I will take that one. So this -- we are really excited about this one and really with any tech platform scale matters. So combining our scale with cxLoyalty’s innovative technology will be a win not only for our Chase customers but for cxLoyalty’s existing clients and suppliers. And then you are right to point out our existing UR platform, but that today is predominantly used as a point production portal. So there’s a huge opportunity to capture a greater share of our customer spend on travel, which is $140 billion both on and off us. So in addition to capturing the full economic value of the existing redemptions on the platform, we also have an opportunity to really turn it into a great place for our customers to book travel.

Okay. But still focused on the Card space as opposed to moving into other parts of your relationship with consumers?

It’s consumer, this thing was consumer.

Okay.

Has no [inaudible]. It has to be Card only. Yeah…

Jen, mentioned the number, like more than 30% of travel expense goes through our Cards, something like that. And so we want to give a far better experience to our own customers when it comes to what we offer them to travel. You are right, ultimate reward always does a good job. But why would you try to double that overtime or triple it?

And we think we can do a better job for their existing clients and suppliers. So it won’t just be about Chase customers.

Exactly.

Okay. And then the follow up question just on the technology budget increasing, I mean, I know this comes after a year of being somewhat stable year-on-year. And just wanted to dig into the comment you made on the page around data analytics, cybersecurity and artificial intelligence capabilities. Again, you have been a leader in this for a while. So the question is what -- where’s the whitespace that you are moving into? And can you give us a sense as to how important this is for some of the expansion that you are doing geographically in U.K. digital and some of the European footprint that you are expanding into?

So, first of all, cyber we are going to do -- we have to do whatever it takes and we are going to do that in everything we do. But you mentioned, we built a brand new data centers pretty much around the world, which are a lot more efficient. They are going to be effectively not cloud base, but they have all the cloud, technology, et cetera, for our own private cloud. When we move other stuff to the public cloud, we are refactoring applications to get there, where we are doing all the data, you all know the issue with data, not that banks were bad, but data was held in all these different accounts, you are trying to build these data links, you can use AI and machine learning better and it all do haste. The cloud is real. The cost is real. The speed is real. The security is real. The AI is real. The machine learning is real. So every single business and with every single meeting we go through is talking about what are we moving to the cloud, whether it’s internal or external? What are we adding AI machinery on? Are we getting the data analytics right and it is global. It’s -- and we don’t spend that much time on it. But every single business is doing it. You have a tremendous amount of AI being used in asset wealth management, CIB, in trading, in Commercial Banking prospecting and it’s literally the tip of the iceberg. Whatever we say today, 10 years from now, it will be probably 50 times more than we are doing today. And I would spend anything to get it done faster.

Your next question comes from the line of Ken Usdin with Jefferies.

Hi, Ken.

Hi. Thanks. Good morning. A question on capital return and capital usage, in the deck and in your press release, you mentioned that you are looking to get back into more return of capital, you mentioned $4.5 billion net and there’s still the net income test. And I just wanted to ask you to kind of walk us through how you think about full usage of that $4.5 billion and then how do you think forward vis-à-vis the comments we just talked about with regards to potential external opportunities and what’s the best use of that incremental capital, given that you still have a healthy amount sitting there?

Sure. So we always start in the same place, which is we would much prefer to do the things that Jamie’s been talking about when to buy back our stocks. So we would much prefer to deploy it to organic growth or acquisitions. Having said that, we do as you point out have significant excess capital at this point. When we look at the first quarter, the Fed capacity was defined by the trailing four quarters of profits and so when you back out our dividend, that’s where you get to the $4.5 billion. So that is the capacity that we have for this quarter and we will do up to that amount, obviously, I don’t know that we will do the full amount, but we will certainly do, obviously, can’t do more than $4.5 billion. And then we are certainly hopeful that we can go back to the EU under the SCB framework beyond the first quarter as we think about buybacks. But we will wait to see what the Fed says at the end of the first quarter.

Okay. Great. Thanks.

If you can manage your capital down to the 12% or whatever we said, with that regards have been getting permission from the Fed. They have already implied that’s what they can do. That’s the way it should be done eventually one day.

Yeah. Understood.

Another way to point out is that, we have been consistent in 2 times tangible book, but our earnings power and dividend and all stuff like that, it still makes sense to buy back stock. But that diminishes every point, 2.1 or 2.2, or 2.3, we would much rather use our capital to grow organically or inorganically.

Yeah. I mean, we will always look at the effective return of us buying back our stock for our remaining shareholders and if we think it makes sense relative to the alternative we are going to keep doing it.

Yeah. Consistent with what you have said in the past. Thanks. And just a question on the Card business, you mentioned how much of that spend goes through Chase and just you are -- given that we still have some uncertainties with regards to a true return to open. Yeah, your Card segment revenue yield actually did improve a little bit. I am just wondering if you can kind of help us, just think through, just the pushes and pulls you see on the Card business with regards to your expectations of spend improving, balances improving and competition underneath? Thanks.

Yeah. So competition remains very, very strong. As it relates to the revenue yield, it’s a little bit of noise there, because balances are down so much and that’s what that’s derived from. So there’s a little bit of noise there. Importantly, we do, if GDP is back to 2019 levels by the middle of the year, we expect them to continue to recover, and perhaps, significantly, so in the second half. As it relates to travel, whether it’s the second half of ‘21 or ‘22, we are confident that our customers will continue to travel and there’s pent-up demand on shore for travel and so we are excited about those opportunities, whether they come in ‘21 or ‘22 or beyond,

We take very seriously the new entrance like the Goldman Sachs Card and there are a bunch of other folks who are doing similar things that we expect to see more of that.

Your next question comes from Glenn Schorr with Evercore ISI.

Hi, Glenn.

Hello, there. Thank you. So I think it’s good time of the year to get your mark-to-market on, your thoughts on the competitive landscape and I know every business is competitive. But I am more curious on the new side of competitive and maybe I am talking more about the Consumer & Commercial Banking right now. But between all the neo banks that either want to pay much more than you guys on deposits or charge no fees, or the pay -- buy now pay later models, or things where you also even play in banking-as-a-service in trying to provide banking products to big technology companies with big client footprints. I am most curious to see, is this just normal evolution and not changing things or is there something bigger going on here that you want to comment on? Thanks.

Yeah. So I am going to -- in the Commercial Bank it is probably less than you think. I do think there are alternative credit providers. But we will just do a lot of things for our clients, they can quit investment banking, FX swaps, cash management custody, asset management, et cetera. So it’s slightly different. I got a consumer saw me and we wrote in the Chairman’s letter years ago that Silicon Valley is coming. And I think it’s just more and faster and better and quicker. And we have to just be very conscious that includes pay now, pay later and we have some of the products ourselves, but our job is to make sure we use our unbelievable strength and client base and capability and Gordon always points out, when you have that kind of products that goes to keep it simple, clear, basic, what the customer wants, to just to deliver more and better and so we are quite conscious. And I would also add, by the way, it’s not just that, we have -- the team looks at and financial and early pay and all these other competitors. I expect one day, you can see other big foreign banks back here again, including the big Chinese banks, the biggest ones were bigger than us. And I am -- that may be five years or 10 years out, but we better be thinking five years or 10 years out. And so they are all coming, we were comfortable, but we are still exercising and taking our vitamins, okay?

And it’s another reason our investments are going up as much, yeah, because we are very well aware of it.

Fair enough. Keep taking those vitamins. Maybe along the same lines, I think, you spoke -- spoken about the power that the data of your own client footprints and franchises have. I am just curious, we haven’t heard that much lately about what you are collecting, how you can use it, how you can use it to enhance the customer experience accelerate growth. You have all this at your fingertips and people talk about data as being the new golden. I am curious on how you are thinking about it right now?

Yes, yes and yes. That’s all we are going to tell you. I mean, I have talked about how important AI is, obviously, the data in that. AI is data directly related and some of it gets used very well. But if you shut down, some of it doesn’t get used well. We have restrictions, far more restrictions than some of our Silicon Valley competitors. But still there are ways to use our data to do a better job for our clients. And we do a tremendous amount already in marketing, risk, fraud, cyber, you name it. And we use a lot of that -- like a lot of that stuff also protects our clients in cyber.

Your next question comes from Mike Mayo with Wells Fargo.

Hi. I will ask my question and go back in the queue. Just, I guess, I miss your Investor Day. We have four slides to talk about that. I guess, if your capital cup run us over, maybe your expense budget could run us over too. I mean, spending is certain, returns are uncertain. So seems like there’s more questions this year than in the past. You did get positive off the leverage last year during the pandemic. So, yes, you have earned the right to go ahead and spend more. I think most people would agree. But there’s still just so many questions, so I will just ask on CCB. It looks like slide 16. You mentioned going to all 48 states by mid-2021. I didn’t really get all of that. So what -- how many states have you been in and by the time you get to 48, how much spending is that? What’s the game plan? What’s your plan with branches? Others are shutting branches after the pandemic, you are expanding. If you could just give some color on that or if Gordon’s on the call, we can hear from him too?

Gordon’s not, but so we have -- we started this a while back to expand the branches and stuff like that. We are still -- we are closing plenty of branches. So if you look at what we are doing, we got the number of leads, we have closed like 1,000 the last four years or five years and we have opened like 1,000 or something like that. But -- and I think we did the Bank One JPMorgan deal, we were in 21 states, 23 states. And when we started the expansion originally, the -- we were very conscious that the world needs less branches and the shape of the branches differently and you made hub and spoke and we are always testing new things and stuff like that. But we still have almost a million people today who visit branches and it’s down, but it’s a million people a day, I have got the number, 60% to 70% accounts still open in branches, small businesses still need branches. And the new branches that we opened in Boston, Philadelphia, D.C., they have been doing quite well. And the shocking thing is doing quite well in Card, consumer, investments, small business. So as we go to the all the other states, we just want to be and we know we have to have certain size, not going in each state with one just to plant the flag. That would be kind of waste of time. We look at the major markets, number of people already know us through Chase and stuff like that. And so we are optimistic that the strategy will pay off and it will enhance our businesses and our capabilities and other things, I am not going to tell you because it’s very competitive. I think we have shared too much with our competitors in the past. So I am going to kind of shut myself up a little bit.

No. But, Mike, I can just add a little bit of color on the numbers. So we had said that we were going to open up 400 new branches in market expansion. So we have done 170 So far. Importantly, in 2020, we did fewer than 90, and in 2021 we are going to do 150. And so, of course, we -- by 2022 or 2023, that’s going to start to sunset. So there are in the numbers multiyear investments that will -- they are ramping maybe in ‘21, but they will ramp down now that obviously gives us capacity to reinvest those dollars. But we have a lot of capacity within the numbers you see on the page to continue to increase investments without necessarily the absolute number going up. In tech as an example, 10% or 20% of that number in any given year is completed. So that gives us more dollars to reinvest. And then the only thing I’d add on branches is this like the franchise value that comes with opening up these branches in new states is extraordinary and I think underestimated, because it give us the ability to do state and municipal business that we wouldn’t have otherwise been able to do. So it’s not just about consumer banking.

Yeah. And it gives me a chance to North Dakota, which is the only state I have never been in. But believe it or not, we already do a lot of middle market, credit card more in North Dakota. We just didn’t do Consumer Banking. So I do the second where I am allowed, I am on my way to like Bismarck or Fargo or something like. Okay, we have just the new Head of Investor Relations, who is sitting in this room right now, Reggie Chambers, who I am sure you will get to know. This was part of what he did for Sun Belt, which is the all branch expansion, though we don’t really restrict them how much you can tell you. But -- and including looking at different formats. We are not blind to the nature that you have the world changing and digital all that. So we can very quickly, just so, I have got the number change the fleet, like if you said, you have got the world changing more rapidly, we are completely comfortable that in a five-year period, you can dramatically reduce the size of the fleet or the cost of the fleet, et cetera, while serving clients.

Okay. So this is kind of like what you did with Commercial Bank few years back going to every state, I guess, but 48 states, where were you, say, a year ago or three years ago, just to give final context to that.

48 states three years ago. I mean, by the way, Commercial Bank, same thing. We talked about expansion. So we bought WaMu, it took years, but we said we are going to do $1 billion in the WaMu states, which is mostly California, Florida, Atlanta. So we got -- what we are very close to hitting that. I thought governor was like $908 million this year or something like that. I told the teams we reviewed it yesterday that when we hit $1 billion, I want to send a case of really expensive why we are, like, why the guy called Steve Walker, who did it for us and have great. And we told him, right, like great bankers, great capabilities, stuff like that. We were doing $400 million of Investment Banking business when we did the Bank One deal JPMorgan through the Commercial Bank. We set a target of $1 billion and $2 billion and $3 billion, we exceeded $3 billion. I think we did $3.5 billion. The new target is $4 billion. It’s now 25% to 30% of domestic U.S. Investment Banking, which DCM, ECM, M&A through that network and the Investment Bank -- the Commercial Bank expanded into healthcare, technology and we have a couple other areas we are going to be rolling out soon. So these expansions really makes sense. They pay for themselves. They are relentless. They are hard to do. They are obviously right?

Okay. I will read to you.

And remember the Commercial Bank deal in these branches. It’s very hard to judge and we have done it. But it’s very hard to build the quality business without a retail branches when you are a Commercial Bank. But you will see very few Commercial Banks that don’t have retail branches.

Your next question comes from the line of Brian Kleinhanzl with KBW.

Hi, Brian.

Hey. Good morning. Just a quick question on the expense outlook. I noticed there was a small piece in there related to the workforce optimization, but I guess thinking in the broader context, as we get through COVID-19 and move to the post-COVID-19 world, the general thought process was that there would be this big expense save opportunity coming from that, work-from-home environment. But it doesn’t really show in your expense outlook. Is it something that you didn’t expect to see beyond 2021? Is this a…

Yes.

…step down expenses.

But in the big picture there are people expenses $33 billion, for real estate expenses, I am going to say $3 billion.

Yeah.

So, yeah, even -- and I do think it can be much more efficient than that, but I don’t think it’s like a game changer.

And we can’t move our footprint that quickly anyway. So we do have time here to make sure that we do it really thoughtfully.

But Jen is thinking about moving the finance function to Florida.

Hawaii. Yes.

Hawaii.

Hawaii, that’s right.

And then just a follow up, but maybe on the international, I saw still the billion hopes of additional revenue on the international. Just give an update on how that’s tracking so far?

Sorry, I didn’t catch that.

The billion what?

On the international revenue expansion that you were looking for?

Okay. The -- firstly, Investment Bank is expanding globally everywhere as best we can and so as asset management and because we already spoke about China and stuff like that, the Commercial Banks started an international expansion effort to cover companies overseas that we do business with here that we are not covering and it’s doing fine. It’s mostly expense right now. We added bankers and products and services and legal and compliance and we didn’t add -- we have been adding clients as we were quite happy with it. I should point out that we just had the best year ever in Asia. I mean, I think, it was up like 20% or something like that. So and Asia is still will be one of the fastest growing markets in the world. So our -- and that’s kind of country-by-country to make sure we get that right.

Your next question comes from Gerard Cassidy with RBC Capital Markets.

Hi, Gerard.

Hi, Jennifer. Hi, Jamie. Can you guys share with us, obviously, there’s been a change in the administration in the Senate and a number of our regulatory body heads are going to be replaced this year, including the FCC and the Consumer Protection Bureau. Can you guys give us some color what you are thinking about what may change from a regulatory standpoint with the different political party controlling Washington now?

Yeah. Our focus is always the same. We have got 60 million U.S. clients. We have got 6,000 investment clients around the world. We have got -- we run this company to serve clients, communities, hospitals. We financed $100 billion in states, cities, schools, hospitals each year. That’s what we do. And obviously, we want to satisfy all of our regulators. So I do expect that, there will be a new set of regulators. We will have a new set of demands. Some we agree with. We want to do a better job in climate for the world. We want to be more green. We want to help the disadvantage. We rolled out an enormous amount of progress in racial equality and things like that. So, yeah, but they will be tougher. That’s life. It’s life around the world. We are going to -- we have to do a whole bunch of new regulators, which we are trying to satisfy in the ECB, et cetera. And so, it’s -- I don’t need to change our life that much and competitively, everyone’s in the same kind of boat and so it will be fine. And we want the new president to be successful.

And then following up, Jennifer, you talked about on page 17 of your slide deck, the issue with deposits and the marginal benefit of these deposits and you guys are wrestling with this issue? Can you share with us, yeah, and you already have talked about the branch expansion in all 48 states could save you U.S. states? How is this going to be managed is best you can over the next 12 months to 24 months, because obviously, long-term you want that branch expansion, but simultaneously, as you have pointed out, you may be getting a negative ROI, if you don’t get relief on the SLR? And is there a chance that you will get that extension on the SLR from the regulators?

So I will start with, we certainly remain hopeful that we will get the extension. Importantly, as we think about branch expansion near-term rate headwinds, we certainly consider that, but at the margin there not a factor given the long-term franchise value associated with the branch expansion and the fact that it’s not just about deposits for any one consumer anyway, because we have the opportunity to have a much broader relationship with them and all of that is factored into the branch expansion. But we do consider in the analytics there the near-term headwinds from rates. But there is a steady state number which is more of a normalized level of rates. So it doesn’t -- at a margin it might change some decisions around marketing, but it doesn’t have a big impact on us.

Yeah. The bigger decisions on that which we have a lot of leeway on is out of the investment bank. It’s repo, deposits, corporate clients, trade finance, all those other things. So the -- this is managed very, very closely. Remember GSIB uses one of, say, 20 constraints we managed by business, by product, by area, by region, by…

Yeah. And we bring it up, obviously, it is an issue for us in the near- to medium-term, should we not get the extension and it’s one that’s important for people to understand. But we bring it up more so because it should, another example of where lack of coherence around these rules can have an impact, not just on JPMorgan. So we don’t bring it up just because of the impact on JPMorgan. We bring it up because it is perhaps one of the better examples of the need for recalibration. You have to have the right incentives in the system for it to work through time and we are just seeing that’s not the case.

Look we were able to reduce deposits $200 billion within like months last time.

Yeah.

So we don’t want to do it, it’s is very customer friendly and say, could you take your deposits elsewhere, but…

Right.

They do have -- a lot of this larger corporate client who have other options and bunch of deposits, but money market funds or something like that. So we are mad. It is not -- none of this is going to be an issue for 2021, folks. I mean, fundamentally, it is just how we were a company and even if that temporary relief goes away. And I am always against temporary relief, because for this exact reason, it creates another cliff, even if it goes away we are fine, we just have to manage it much tighter.

The next question comes from the line of Matt O’Connor with Deutsche Bank.

Hi Matt. Matt O’Connor: Hi. Maybe a bit of a basic question, but why is markets revenue are trading so good still, not just for you, but the overall wallet? I gather it to be investment banking business, the feeder businesses still very good, there’s lots of liquidity, banks have lots of capital, but of course rates are near zero, budget tight, volatility is low. I will take away some of the answers. But just conceptually it’s been very strong. It sounds like the hope is it will remain strong. What’s really driving it?

There is $350 billion of global financial assets, $50 trillion -- $350 trillion, and probably, in 10 years or 20 years that number is going to be $700 trillion. People have to buy and sell to hedge, finance, with money around the world, FX, currencies, our pension plans. Obviously, volumes go up and down. Spreads generally over time has been coming down, what you would expect in a competitive market. So with the expansion of the balance sheets of the central banks around the world that Jen showed you, the $3 trillion or $4 trillion in the Fed, but globally it is $12 trillion. And companies have a lot of financing to do. And of course, when you have higher DCM and higher ECM and higher M&A that also drives a lot of trading and so you got to kind of put that all in the mix. Matt O’Connor: And obviously, the question is how sustainable is this, and I guess, one argument could be that technology has allowed banks to increase the velocity. You can talk about this for some time. Do you think that is a structural change that will benefit the businesses and specifically for you guys over a long-term time period?

Yeah. The way we look is we kept our share of what things we are trying to find digitized and the business has done a kind of the way we expected them to do it. So, yeah, we think scale matters, technology matters, and hopefully, we think we can even grow our share. This is just trench warfare. So we expect to grow it, but we -- I don’t -- it’s a very hard to say, what the base level is and we thought that the base level kind of revise down sometime last year, but will stay as high as it stayed in 2020 then I doubt. It may not go back to what it was. It may be higher than that.

Your next question comes from the line of Charles Peabody with Portales.

Hi Charles.

Good morning. I have a couple of questions related to fintech and unfortunately I was born in a wrong generation, so I need a lot of help. How dependent is the fintech world on the banking system, as I understand they lay on top of the pipes in the plumbing of the banking system. Do you have any leverage in a competitive world against the fintech world? And then, secondly, I noticed that the OCC gave banks the green light to use public blockchain networks and stable points. Can you explain how -- what important that has to JPMorgan?

Yeah. You go ahead with blockchain there.

Okay. Sure. So that guidance enables an offering of stable going on a public blockchain. So that doesn’t impact JPM point. JPM point, you should think about as the tokenization of our customer deposits. So it’s obviously very early. We will assess use cases and customers demand. But it’s still too early to see where this goes for us.

And we are using blockchain for sharing data with banks already and so we are at the forefront of that which is good. The other question was about fintech. Look first of all, they are very good competitors. I pointed out to a lot of people, PayPal were $250 million, Squares were done in $20 million, Stripe is worth $80 billion, Ant Financial is down quite a bit now. But they are there. They are strong. They are smart, some effectively ride the rails. So we bank a lot of them. We help them accomplish what they want to accomplish and you have. So my view is we are going to compete, we will need to and we have to look at our -- look inside about what we could do better or could have done better and things like that. So I am confident we will be able to compete. But I think we now are facing old generation of newer, tougher, faster competitors who -- and if they don’t buy the rails of JPMorgan, they can buy rails of someone else. So you see, I have told you before, everyone is going to be involved in payments. Some banks going to white label, which makes which makes fintech competitors white label the bank and build every sort of thing on top of it and we have to be prepared for that. I expect it to be very, very tough competition in the next 10 years. I expect to win. So help me God.

Thanks. So did they need the banking system to complete their loop of service or can they work completely outside the bank?

Well, the most will do for now, but I think it’s a mistake because it’s going to be forever. The game of bank licenses, Utah is giving industrial licenses. Like I said, banks are white labeling. So it’s effectively the same thing. If a fintech companies uses a white label bank just to process their business, they are basically a bank. When -- what the regulator will do, I don’t know, but we have to assume that they are going to do it. And that some don’t need, will find ways, not to use their banking system, which they have done. I mean, if you look at a whole bunch of the things they have used stuff around the banking system, which is fine, I am not against that. The regulators may have a point of view about that one day, but I am less worried about that. I am going to worry about us.

Your next question comes from the line of Andrew Lim with Société Générale.

Hi Andrew.

Hi. Hi. Good morning. And so…

Look, Charles, one other point, if our examples unfair competition, which we will do something about eventually. People who we will make a lot more on debit, because they activate under certain things, the only reason they compete is because of that. People basically don’t do KYC AML and create risk for the system. And I can go on and on, but that part we will be a little bit more aggressive on, people who improperly use data has been given to them by client, okay? So you can expect that there will be other battle to take place here.

Hi. Sorry. It’s Andrew Lim here. So I just wanted to pick your brains on inflation and hopefully inflation metrics are picking up. If we look at rates, if you look at the inflation indicators and that’s like a lot of people are jumping on this replacement bandwagon. But I just wanted to see what you are seeing on the ground in a real world as to how this might be manifesting itself even in Commercial Banking or in Investment Banking in terms of like the month, products or volatility. Is that something that you see as a theme developing?

I mean, look, we don’t have that much more insight than you do. You do see signs witnessing in commodities and certain products and consumer goods and stuff like that. It’s hard to tell that supply lines that can’t keep up with demand or you have long-term trends, China is no longer ending the world. That can change inflation. I think and we looked at when Jen gave those numbers, she always using implied curve. I think the best way to think about it is, I think this should be a much bigger conversation next year because we have good growth. I think we have good growth and part inflation, but that will become part of conversation, how bad, what I am going to do and things like that. Just so the risk management thing, you got to build into your mindset that you have got to look at there has been a possibility. So I think a year ago, people have said, not possible before COVID and now because the world has done $12 trillion of QE and something like $10 trillion to $12 trillion of fiscal stimulus, you have got to put on that thing a scenario where you have higher inflation and not 2%. That would be great. It is like Goldilocks. But like 3%, 4%. Just so you understand what the risk is that and how we manage through that. It is not the worst thing in the world by the way. The worst in the world is no growth.

Great. Okay. And for my follow-up question, you talked about how you resolved the issue of excess deposits by pricing way about $200 billion of those. So I am just wondering why you don’t do that now or is the quantum of the problem that much bigger?

We don’t have that all, Jen.

Yes. We don’t have to. It’s also -- it is slightly different in the sense that there was capacity in the system then to absorb it. This is an issue for everyone. So that could be a challenge. We can’t make them go away.

Your next question comes from Betsy Graseck with Morgan Stanley.

Hi. Just a couple of quick follow-ups, one, Jamie, on the topic of payments and competition, Libra’s -- Facebook’s Libra is back out there getting rebranded as Diem and their goal is basically to be global payment network or at least to create one. I am wondering does the OCC stable coin approval do anything for you. You already have JPM coin obviously that’s internal to your own footprint? But I am wondering is there any benefit of the OCC stable coin approval, is there anything with regard to Libra competition that’s coming that would drive changes that you are making in your own platforms?

I don’t think so. But -- I don’t think so. We expect stable…

Okay.

And obviously there is this talk about several banks having digital currencies and stuff like that, right? Their currency is digital when we move around the world. It’s in central banks where it will move by electrons and stuff like that both. So I do expect that stuff is coming and it may not change our world that much. But some of the competitors we want to do, they want to be in payments. They want the payments data. They want to move the money. Again, it’s going to be a regulatory issue about what that means and…

And then if I make sure…

Although, it is not unfair. That’s the only thing I can point. So as long as the competition -- as always we can do it safely and competition can do then it’s hard to argue this -- that’s unfair.

And Betsy, I mentioned earlier, you might have missed it, but it does not impact JPM coin, JPM coin is different. You should think about that as tokenizing deposits to make payments easier for client.

Right. Yeah. No.

Yeah.

Yeah. No. I totally get that. I was just thinking hey, if OCC is allowing stable coin maybe they are trying to help move the center of this back into the banking system. That was kind of question. The follow-up was just on back to slide 14 and the other purple area, were the non-technology expenses are moving up year-on-year and part of that is the $30 billion commitment to the path forward initiative. And Jamie, I wanted to understand, like, how you are thinking about that $30 billion? What kind of time frame is that over and where that money is going? I mean we put a note out as you know, this past quarter on housing and on housing inequality and wondering how you are thinking about how you are going to be investing that $30 billion in kind of output that you want from it?

Right. So we believe that inequality is a real problem and people don’t always know, but like, 40% of Americans make $15 an hour or less, which is $32,000 a year something like that. 50 million don’t have employment and people at the lower end are dying quicker than they die before. So first time in our lifetimes, our grandparents lifetimes Americans mortality is getting worse, not better and society have to fix these problems. Now we need healthy growth, healthy growth I mean like, but you also need education, infrastructure, healthcare and formerly the racial problem has been around for hundreds of years and with all the things that took place after even -- after the civil rights, we haven’t made the progress we should have made. So we -- and fortunately, lot of other people and companies take this really seriously. How can we help all of American citizen in particular the black community who has been left behind for so long. So our effort is five years, the $30 billion includes, exact numbers we published $8 billion of mortgages to lower, middle income neighborhoods, black neighborhoods, primarily black neighborhoods it includes affordable housing, building affordable housing includes billions of dollars for entrepreneurs of color, it includes defense education. We recently went over a million secure card which is what we expected to do, because these are cards that have all the benefits of banking ATMs, online bill pay for $4.95 a month for lower paid individual who are doing more, more education. Of those 400 branches we are opening, 25% or more will be in LMI neighborhoods. We are financing MBI’s and CBFI’s. So it’s a serious effort, it costs hundreds of millions dollar a year. There are hundreds of people work here. So we have a…

Your next question comes from the line of Mike Mayo with Wells Fargo Securities.

Hi. Just following up more on the market expansion. In Commercial Banking, could you just drill down deeper on the international part of that expansion and what’s left to be done in U.S.?

I think I will answer U.S., but I think the U.S., again, we are not going to share so much information from now on. But it’s the same thing we looked at all the major SMSAs with the middle market companies, we are doing deep dive in how many there are and I think we are now in 75 of the top 75 roughly. So that expansion is now just going deeper not maybe more at this point. They will be helped little bit by the retail expansion. I think overseas, I just don’t the number of hand…

I don’t know either.

Okay. But you are talking about that will eventually cover and I could be dead wrong in this, 1,000 more clients overseas. These are headquarters or subsidiaries of foreign companies that we probably do business with headquarters subsidiaries in U.S. and we could share more of this with you later down the road.

And I would just.

I will tell Charlie, he can’t imitate me on this one.

Mike, I would just add just from an expense perspective. It is important to remember on the international front that we are riding existing rails that are already there in the CIB. So we can -- this is an extraordinary opportunity to hire bankers and we already have the infrastructure.

And we usually jelly bank in the U.S. subsidiary…

That’s right.

Our U.S. headquarters.

So it’s not the list you might think from an expense perspective.

Okay. And then just a follow-up on the other questions that have been asked related to fintech. Jamie, you said, you are going to win, right. But based on valuations of the PayPal, Stripes and Visa, Mastercard anything that fintech related. I mean they trounce valuation of your stock. I think the market saying that others are going to win. So how is JPMorgan is going to -- I mean you said, Silicon Valley is coming what, that was like six years ago or something and then each year we say, yeah, we missed it, we missed it, we missed it, well, it’s still?

No. No. No. We never said we -- Mike, we never said we missed it. We have been doing fine over these five years. But we are just lucky. But I do agree with you, I gave that to the management team. My whole operating committee a little deck that show Visa 500 billion, Mastercard 350 billion, PayPal 220 billion, Ant Financial 600 billion, Tencent 800 billion, Alibaba trillion, Facebook, Google, Apple, Amazon, you go on and on. But absolutely, we should be scared chillers about that.

So how are you going to win, I mean, just what -- like what…

I am not going to tell you. But we have plenty of resources, a lot of very smart people. We just got to get quicker, better, faster and that’s the -- which we do. We have got -- we have done an exceptional. If you look at what we have done, you would say, we have done a great job. But other people done a good job too. Some have monopolies virtually it is a whole different issue, but.

Your next question comes from the line of Gerard Cassidy with RBC Capital Markets.

Hi, Gerard.

Thank you. Hi. Just one follow up. Obviously, Jennifer, you pointed out that your mortgage production revenue was quite healthy in the quarter and you have penetrated the correspondent champ. Can you guys share with us on the servicing side, with the new -- with the forbearance programs that the government has put into place, is that a positive or negative for servicing revenue as we go forward?

Okay.

Jen will have that one.

Yes. Yeah. I don’t we know exactly how to answer it, Gerard. All I can say is that, when we give customers the help that they need, if that’s what the bridge them to the other side of this thing, for sure it is good. So I don’t know precisely what the math is, but there’s no doubt it’s good if it helps get our customers to the other side. We service their mortgage.

In the past when loans go into delinquency obviously and there is -- in a mortgage-backed security, obviously, you guys have to advance the funds and stuff. But the deferral loans are not in that -- I am assuming they are not in that category, is that correct?

Yeah. You are absolutely right.

Okay.

Yeah.

The cost of servicing the default of loan is like 10 times the Silicon service [ph] and non-deposit loans. So Jen is right. Although, we don’t prudently default, there is probably a small benefit.

Okay. Okay.

I got you. We are talking about advancing the servicing cost. Got it.

That’s not an issue either.

Yeah. No.

Okay. Thank you.

At this levels.

I appreciate it.

Folks, thank you very much for spending time with us. We will speak to you all soon.

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