00:00Joining us now is Baird Senior Research Analyst David George. He has a neutral rating on J.P.
00:04Morgan with a price target of two hundred ninety dollars. And David, let me just start with the net
00:09interest income. What is it? A competition? Is that the hold back here?
00:17Yeah. Good morning, Matt. A couple of things. Loan growth is maybe a little bit slower. Deposit
00:23costs may be a little bit higher. I think markets revenue and the tightening of spreads is also
00:29having an impact. I would caution market participants or viewers of the show this morning
00:35to not get too worked up about a billion dollar N.I.I. swing. I mean, the bottom line is
00:41this is
00:41over a two billion two trillion dollar balance sheet. They could they could print any net interest
00:47income number they want. I think they're just trying to be conservative and thoughtful as it
00:52relates to kind of capital allocation going forward. But overall, Matt, the quarter was pretty good.
00:58And I mean, huge trading numbers across the board, David, for all of the banks in the media call.
01:04We heard from the CFO of J.P. Morgan saying I wouldn't extrapolate these out. We don't know what
01:08the environment is going to be like. How are you viewing the trading desk in these trading revenues?
01:13Obviously, there was huge volatility in the first quarter. Given the macro stresses,
01:18we're still expecting. How does your outlook appear?
01:21Well, we feel pretty good, Danny, about the capital markets outlook. There's a lot of M&A
01:28that's been announced in very large scale and very diverse from a sector perspective. And with the
01:33markets coming back, equity capital markets should also be relatively robust. You know,
01:39the trading numbers, to your point, probably aren't sustainable. But nonetheless, they were very good
01:45in the first quarter. It seems like many, many moons ago. But we had significant volatility in gold,
01:52silver, oil, rates, equity markets, vol. And, you know, the money center banks, J.P. Morgan
02:00specifically really benefited from that this quarter.
02:04In terms of the war and the warnings on geopolitics, I mean, are there does that really provide any
02:11headwinds to J.P. Morgan? Is it only, you know, the weakening of the consumer for slightly higher
02:16prices at the pump?
02:19Yeah, I think I think you just nailed it. From my perspective, at least, I think the major
02:25kind of lingering issue today and it's seen and I'm clearly not a geopolitical expert.
02:32But to me, the biggest concern that I would have in terms of the macro from a credit perspective
02:38is how long do oil prices stay here and the related impact on the consumer, but also
02:45supply chains and just kind of how, as you know, as you both know, higher oil prices kind of manifest
02:51themselves in a number of different inputs. And to the extent we stay elevated, to what to what degree
02:58does that have an impact on inflation broadly and corporate profit margins as well?
03:03David, just a minute here, but some of the other headline risks that we've been watching for the
03:07banking sector. And a reason that shares have been weighed down earlier was private credit exposure.
03:13We had some details from banks sitting out saying that they have $22 billion worth of exposure to
03:17private credit. Wells Fargo goes even into more granular detail, $36 billion. They say only 17%
03:24is software. Is there any reason to be concerned around private credit exposure?
03:29We're always concerned about credit, Danny. But from my perspective, the private credit, and I'm not
03:36trying to be dismissive. But the private credit fears that market participants have, I think, are,
03:41I would say, overblown, particularly given the size of these exposures and really the nature of these
03:48exposures. A lot of these are among the lowest risk loans on these balance sheets. These could be to large
03:56insurance companies. These could be capital call lines to private equity companies, which are extremely,
04:02if not zero risk. So it's not something that we spend a lot of time worrying about. Again, oil and
04:09the related
04:10impact on the consumer and corporate profit margins is really where we're a little more focused at the moment.
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