JPMorgan's Investment-Banking Fees Drop

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00:00Thought the quarter was was solid. You saw, you know, growth in loans and deposits and just margin

00:05expanded. Costs were controlled and, you know, credit quality really benign. So, you know, I think

00:10everything in the quarter kind of points to economic expansion. And, you know, after, you know,

00:16a couple of years of good results, that should persist into 2026. Are costs a concern at all,

00:21Jason? I noticed Marianne Lake disclosed numbers that were a little bit higher than the street

00:26maybe anticipated. You know, last December they signaled, you know, expenses for 2026 would be

00:31$105 billion. And today they reiterated that. I think at the time, you know, last month, the numbers

00:37did catch people maybe a little bit off guard. But keep in mind, a portion of that is to just help

00:43fund better than expected revenues. So those are, quote unquote, good expenses. And then a piece of

00:49it is to just kind of continue to stretch its lead, both in kind of building new branches as well as

00:53technology investments. So while a big number, it's a number it should get an ample return on.

00:58Right. Those technology investments specifically, Jason, because if you look at the head counts,

01:03a little bit higher for J.P. Morgan, but more or less flat cities aiming to let go of 1,000 people

01:09in the next week. Are we about to witness a big productivity boom for these investment banks,

01:14for these big banks, Jason? Is there need for employees, especially in back office, about to lessen to

01:20a really large extent? There's definitely a need for employees, but there's no reason why these banks

01:26can't be more efficient. So input measures like, you know, revenue per head count, for example,

01:32that's steadily increasing. But there's no reason why you can't see an acceleration of that

01:36as banks look to use leverage technology and AI to better automate processes and procedures to reduce

01:43fraud and ultimately to help drive additional revenue. Is there any concern about loan loss provisions?

01:49I think they may be creeping higher. And I saw that they already put on loan loss provisions for the

01:55Apple credit card business, even though they don't take that over for a couple of years here.

02:00I wonder, because he's upbeat, Jamie is, on the economy, what's the concern about not getting

02:07back the money they loan out?

02:08Yeah, no, no. Credit quality is really, really benign. And in fact, if you exclude, you know,

02:13the purchase of the Apple card portfolio, where it's just in the accounting of the book,

02:17the provision up front, even before you buy the loans, they actually released a little bit of

02:21loan loss reserves. They're not performing assets declined. Their net charge-offs declined.

02:26And if you look at their credit card net charge-off forecast for 2026, it's only slightly above,

02:32you know, 2025, despite the fact they've actually grown that book at an above-average clip the last

02:37few years. So, you know, by all indications, obviously, we're only one to two banks into the

02:42earnings season. But credit quality, very stable.

02:45Jason, I was listening to the media call, and unsurprisingly, the first question they got was

02:49about the president's proposal, desire, order, call it what you will, to cap credit card interest

02:54rates at 10%. The CFO, Jeremy Barham, took that question saying, you know, we're not going to

03:00quantify it because there are so many uncertainties there. But for an avoidance of a doubt, if it were

03:05to happen, it'd be bad for consumers, bad for the economy, bad for us. Jason, can you quantify the

03:11impact that this might have? Yeah. So there's, right, there's the first order impact of, you know,

03:16you can't raise, you know, your NPRs over, APRs over 10%. And, you know, banks would react to that,

03:23whether it's reducing rewards, increasing annual fees. But, you know, the thing they would most

03:28likely do is just restrict access to lower-end consumers because they can't get compensated

03:33for that. And I think if that occurs, that's a much bigger impact than kind of the profitability

03:40of product because that has the potential to, you know, adversely impact the economy. And, you

03:46know, a lot of different industries, in particular, whether it's retail or travel and the like.

03:53And so there's much, much more broader macro implications that I think need to be considered

03:57than just the P&L impact of not being able to have, you know, APRs at an appropriate level.

04:03Jason, the shares, I always look at a five-year snapshot just because the Bloomberg comp screen

04:08defaults to that. And I think it's a fair performance window. They've done better than Citi and Bank

04:15America, but not as well as Morgan Stanley, not nearly as well as Wells Fargo and Goldman

04:22Sachs. Does that make sense to you in terms of the performance when you look at all the

04:26big banks?

04:27Yeah, it's great. And sometimes it depends when you pick your starting point, right?

04:30Yes.

04:31Well, that's that cap sell-off and then bounce. But, you know, listen, on average over time,

04:36you know, they've been a superior, you know, performer. I think the shares were up,

04:40you know, 35 percent or so in 2024. They're up 40 percent plus in 2025 as they kind of continue

04:48to take share across every business they choose to compete in. At the same time, putting up,

04:52you know, 20 percent plus, you know, return on tangible common equities, which is well

04:55ahead of peers. You know, looking out, you know, we expect those tenants to continue and

05:00the shares to continue to perform.

05:01Yeah. I mean, you are speaking to a high bar, which is maybe part of the reason shares are

05:05dropping around 3 percent this morning, Jason. Some people have also pointed to their

05:09investment banking underwriting fee miss. J.P. Morgan, for their part, said it was because a

05:15lot of deals were being extended. They're being pushed out into 2026. Jason, is it a concern for

05:20you that they missed on investment banking fees?

05:22You know, not at all. You could have the government shut down for part of the quarter,

05:26and that did delay some issuance. You know, predicting if an M&A deal has been closed on

05:30D31 or Jan 1, you know, is sometimes tough to predict. But by all indications, the outlook for both

05:36kind of corporate M&A activity really across all industries, as well as fairly large IPOs remains

05:43quite, you know, robust.

05:44Jason, though, if I can just jump in because, OK, so you get a delay initially last year

05:48because of Liberation Day. You get a little bit of softness and delays at the end of the

05:53fourth quarter because of a government shutdown. These are all policy-driven things. Very quickly

05:59here, Jason, like 30 seconds. I mean, that's not going away. There's still so much uncertainty.

06:02Who's to say it won't be delayed even more until 2027? Yeah, it's certainly a risk,

06:07and the offset to that is that uncertainty is kind of aiding your trading businesses. But,

06:11you know, there's a definite desire by corporates really across all industries to

06:16achieve economies of scale, invest in technology, and consolidate. So I do think you'll see robust

06:24M&A activity in 2026. There's a lot of companies that express their desire to go public. You know,

06:31I think you'll see that over the next several months. And at the same time, you know, sponsors

06:35of private equity, which haven't really participated as much, are starting to come off the sidelines

06:39and be more engaged. You know, so we do think while 20.5 was a good year, despite Liberation Day

06:45and the government shut down, then we think 2026 would be even better.

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