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業績會第一現場

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摩根大通2026Q2業績直播

Key Takeaways (AI-Generated)

Financial Performance

- Net income of $16.9 billion with EPS of $6.14 and ROTC of 23%

- Revenue up 15% year-over-year driven by markets revenue and higher asset management fees

- Expenses of $27.3 billion, up 15% due to volume/revenue-related expenses and hiring

- Credit costs of $2.5 billion with standardized CT1 ratio of 14.1%

Business Highlights

- Added over 500,000 new checking accounts demonstrating strong consumer resilience

- Refreshed Sapphire Preferred Card following successful product launches in June

- AWM reported $2 billion net income with $50 billion long-term net inflows

- Implemented AI across almost 1,000 use cases in risk, fraud, and operations

Financial Guidance

- Full year 2026 NII ex-markets expected at $96.5 billion, total NII $105.5 billion

- Markets NII increasing to approximately $9 billion for the year

- Adjusted expense outlook of $107.5 billion due to higher volume-related expenses

- Card net charge-off rate expected at 3.2% reflecting better consumer performance

Opportunities

- European digital banking expansion with Chase UK reaching 2.5-3 million customers

- AI implementation expected to drive 30-40% efficiency gains in discrete areas

- Strong equity underwriting performance with 30% year-over-year fee growth

- Continued organic growth opportunities across all business lines with M&A potential

Risks

- Intense competition from fintech companies including Stripe, PayPal, and traditional competitors

- Economic fragility concerns with potential rate increases affecting consumer spending

- Basel 3 regulatory implementation creating capital requirement uncertainty

- Industry-wide credit underwriting deterioration with weaker covenants and assumptions

Full Transcript (AI-Generated)

Operator

Good morning ladies and gentlemen. Welcome to JP Morgan Chase's Second Quarter 2026 Earnings Call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation.

Information concerning forward-looking statements and non GAAP financial measures included in this presentation can be found in JP Morgan Chase. This is earnings press release and investor presentation posted on the Investor Relations website. Please stand by.

At this time, I would like to turn the call over to JP Morgan Chase's Chairman and CEO, Jamie Dimon and Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead.

Jeremy Barnum

Thanks, Amanda, and good morning, everyone. Including the significant items noted on the page, the firm delivered net income of 16.9 billion, EPS of $6.14 and an ROTC of 23%. Excluding the significant items, revenue was up 15% year on year, predominantly driven by markets revenue, higher asset management fees and AWM and CCB, higher investment banking revenue and higher deposit and loan balances, partially offset by the impact of lower rates.

Expenses of 27.3 billion were up 15% year on year, largely driven by volume and revenue related expense as well as growth in front office hiring and labor. Inflation. And credit costs were two and a half billion with net charge offs of 2.4 billion and a net reserve build of 149 million.

And in terms of the balance sheet and we ended the quarter with a standardized CT1 ratio of 14.1%, down 20 basis points versus the prior quarter as net income was more than offset by higher RWA and capital distributions. This quarter. Standardized RWA increase of approximately 103 billion is largely driven by increases in financing across our markets business as well as growth and traditional lending.

As you saw in our SICAR press release in June, the Board intends to increase the quarterly dividend to $1.65 per share effective in the third quarter. Now moving to our businesses. CCB reported net income of 5.3 billion. Revenue of 20.3 billion was up 8% year on year, predominantly driven by higher Card Nii, largely on higher revolving balances, as well as higher operating lease income and auto and asset management fees and wealth management.

A few points to highlight, Consumers and small businesses continue to show resilience despite elevated gas prices and inflation with higher tax refunds and a solid labor market contributing to strong spend growth In banking and wealth management. Average deposits were up 3% year on year and 2% quarter on quarter, driven by strong net new checking account growth of over 500,000 accounts this quarter.

Client investment assets were up 21% year on year driven by market performance along with strong flows in card services. We refreshed the Sapphire Preferred Card in June following the successful refresh of several other products over the last 12 months. Next, the CIB reported net income of 9.7 billion.

Revenue of 24.9 billion was up 27% year on year, driven by strong performance across the businesses. Ivy fees were up 30% year on year, reflecting double digit growth across all products with particularly strong performance and equity underwriting well. This quarter's performance was supported by both some large ECM deals and the acceleration of the closure of some M&A transactions.

The pipeline remains quite robust and the current activity levels seem to be encouraging more activity as a result. While conversion will obviously be dependent on market conditions, we expect activity levels to remain healthy in markets. Fixed income was up 6% year on year with solid performance and credit currencies in emerging markets and rates partially offset by lower revenue and commodities.

The equities business delivered an exceptionally strong quarter with revenue of 86% year on year, reflecting the highly dynamic market conditions. We saw strength across products and regions. Flows were strong and trading was favorable in both derivatives and cash, and prime benefited from higher client activity and balances.

Turning to Asset and wealth management, AWM reported net income of $2 billion with pre tax margin of 38%. Revenue of 6.9 billion was up 19% year on year driven by growth and management fees on higher average market levels and strong net inflows as well as investment valuation gains, higher loan balances and higher brokerage activity.

Long term net inflows were 50 billion with continued. Strength across fixed income and equity AUM of 5.1 trillion was up 18% year on year and client assets of 7.7 trillion were up 19% year on year, driven by higher market levels and continued net inflows and report.

Turning to the outlook, Corporate reported net income 4.2 billion on revenue of 6 billion, which includes the significant items noted in the presentation. In terms of the full year 2026 outlook, we now expect NIIX markets to be about 96 1/2 billion and total Nii to be approximately 105 1/2 billion as a function of markets on AI increasing to about 9 billion.

And the new adjusted expense outlook is about 107 1/2 billion with the increase primarily due to higher volume and revenue related expenses driven by the activity levels and associated revenue of performance. Finally, we now expect card net charge off rate to be approximately 3.2% reflecting better than expected consumer credit performance.

With that, we're now happy to take your questions. So let's open the line for Q&A.

Operator

Thank you for participants dialed in on the analyst side of today's conference call. If you would like to ask a question, please press *1 to be entered into the queue. We kindly request that you ask one question and only one related follow up. If you would like to ask an additional question, please press *1 to be re entered into the queue.

For our first question, we will go to the line of Ken Houston with Autonomous Research. Your line is open.

Ken Houston

Thanks. Hi, good morning. Jamie, I was just wondering if you could start by just evaluating on the recent management changes and elevation of Doug and Troy to Co presidents and just anything we should be thinking about in terms of the ongoing development of the leadership team and anything it may mean in terms of your your tenor as a CEO from the board's perspective? Thanks.

Jamie Dimon

So it's it's exactly I think we try to be totally clear in the press release, which is so like Marianne is an exceptional individual as a human being, as a leader and is obviously an executive. And but you know, the board made a decision to go ahead with making two Co presidents. You know, we should we'll be preparing them to do far more at the company to be prepared.

Hasn't changed the timetable anything and obviously wish Marianne the best as a result. She decided she when she knew about the plans that she'd rather retire than stay here. So that's it, no mystery.

Ken Houston

OK, very good. And then just on the Jeremy, on the follow up to the strength and that you're seeing and across investment banking and markets, just you know, you know, it depends on conversion opportunities and just the environment, but this is clearly, you know far higher level of activity than anyone who would have expected. How do you judge the sustainability and how do you judge just you know, how risk on are we, you know, across the various businesses? Thanks.

Jeremy Barnum

Yeah, good question, Ken. So I would actually bifurcate that a little bit between investment banking and markets in the sense that by historical standards, investment banking fees were fine, but they weren't at super peak level. So they had some room to come up a little bit. And one of the things we looked at is like, OK, how much like cannibalization of the future pipeline might have happened through the acceleration quarter and or to what extent were the score of results like particularly elevated as a result of some of the large high profile IP OS and other capital raisings in particular.

And I think you know, clearly there was some pull forward and clearly you know, the large deals contributed meaningfully to the score of results. But at the same time the pipeline is actually quite robust and to some degree it feels a little bit, I mean guessing here obviously, but it feels a little bit as if you know, the the high profile nature of the activity this quarter and just a generally robust environment is itself be getting more activity.

So you know, I obviously don't want to get into like guiding you and in any case, we're just guessing. But you know, that's maybe just a little bit of context about how we're thinking about the trade off between, you know, the robustness of the pipeline and the fact that there there was some pull forward and some kind of exceptional events this quarter on the market side.

You know, I would probably separate between fixed income and equities. I mean all the normal caveats like we don't know anything can happen and clearly markets revenues in general have been quite elevated and strong for some time. Although as we pointed out that also is associated with much more financial resource deployment and support of our clients.

But you know, I think the particular set of things that happened in equities this quarter, so little bit hard to imagine that being repeat. We did, but you know, the background environment is quite supportive. So we'll see, we'll see what happens. But in the end, you know, we're just trying to serve the clients and manage the risk and get our pressure of the business and and you know, overall, obviously the environment feels pretty good.

I guess you did say something about risk on and you said how risk on are we? And not to be pedantic, but I think the question the we matters, right? So the market is clearly extremely risk on and we're kind of takers of that. And we're, you know, trying to strike the right balance between supporting all our clients and being appropriately cautious in an environment that, you know, has some complicated dynamics in it so.

Ken Houston

Does that conclude your question all set? Thank you.

Operator

Thank you. Our next question comes from Chris McGrady with KBW. Your line is open.

Chris McGrady

Good morning. Thanks for the question on deposits, what stuck out was slide 4 to me the growth in CCV in the quarter, interested in kind of the progression towards that 15% retail market share that you've talked about in the past, you know and really how higher for longer may may impact the the pace of market share gains over over time. Thanks.

Jeremy Barnum

Sure. So let me just do near term deposits for the company quickly. So and let me actually start with wholesale. So wholesale deposit growth was quite strong this quarter actually and has been for the first half of the year. You know, if you recall last year was particularly strong. I think this year we were expecting it to be sort of fine, but slightly less strong. And so far the first half of the year has outperformed our expectations.

You know, obviously a lot of that is the strength of the franchise and winning deals and taking share, but some of it is also the kind of lending environment, particularly the sort of FDFI space and a lot of the data center stuff. Like however you look at it, you have a little bit of the dynamic of loans creating deposits and that's going to disproportionately show up in wholesale. So that's probably a little bit of a tailwind for wholesale on consumer.

You know, we talked about, you know, expecting low single digit growth this year and that expectation is still in effect. It's unchanged, which is good because I think there were some different moving pieces there and you know, they could have played out differently in some sense. But if you look at what those pieces were, it was fundamentally the balance between ongoing very robust net new checking account growth and you know the question of yields you can flows and the impact that that was having or not having on average balances per account.

And you know, you saw obviously very strong net new checking account this quarter. And you know in light of the fact that the rate environment is a little bit more hawkish, the yields you can flows are still a factor and probably a little bit of a risk. But on balance you know the the pictures is in line with our expectations for this year which is good.

And so then the question is how does that all feed into the 15%? And what I would say about that is, yeah, we feel great about the franchise and we feel great about how everything is going. And you know, there's no change to that sort of hope or aspiration. But I would think about that as a kind of natural long term consequence of executing the strategy that we believe in across all the various components of it, you know focus on primary bank relationships, branch expansion, deepening product value proposition, etcetera.

And so you know the view is that the 15% will be an outcome of that and we still feel good about it.

Chris McGrady

That's great. And for my follow up, bigger picture question on the expenses, really the the returns that you're getting from the branch build out the investments, the higher the bankers ultimately, I guess the question is where are we in the investment cycle and, and really how does it play into the operating leverage outlook over the medium term? Thanks.

Jamie Dimon

It's, it's, I would say it's a complete continuation we've been doing for years, but you shouldn't really expect any change.

Jeremy Barnum

Yeah, I mean that's what I was going to say too. I mean, obviously there are other expense dynamics this quarter, which maybe I'll save for another question. But in the end, you know, we're investing, we're always going to invest. It's been working. And obviously the returns so far speak for themselves.

And I think, I think that we've been saying for a long time is that the power of this franchise is such that we are able to aggressively invest for the future, for the sake of generating future returns and to solidify the competitive position of the franchise while still delivering exceptional current returns. And I think that would be true if we were delivering, you know, 151617 percent of returns. Obviously, when we're delivering these types of returns, you know, it, it's really is firing on all cylinders.

Chris McGrady

Thanks so much.

Operator

Thank you. Our next question comes from John McDonald with Truist Securities. Your line is open.

John McDonald

Thank you. Good morning. Jeremy, I was wondering if you could talk a little bit about the drivers of the upward revision to the ex markets Nii on perhaps the cadence to and third quarter, fourth quarter as we think about the exit rate, you know, heading into next year?

Jeremy Barnum

Yeah, sure John. So yeah, revising out from 95 to 96 1/2 for the full year and you see our first half actual so you can infer the second-half. And as Jamie always likes to say, what matters is you know the run rates and the exit. And if you sort of do that math, it does suggest a higher exit run rate, which you know in the central case assuming the yield curve plays out. Out as before, it's currently forecast and the deposit and other drivers are in line with their current expectations. That's what we would expect.

Just mechanically in terms of the drivers of the of the upward revision, the the biggest signal factor is deposit balances I would say across both wholesale and consumer both sort of the overall quantum of it, but also like mix shift inside of that in favor of slightly higher margin overall. And then you know rates are like a little bit higher than when we previously guided both in the short end and in the back end.

And as you know, we've got sensitivity to both and probably our actual sensitivity is a little bit more than the EAR suggests right now because of the outperformance of the consumer betas relative to the model. And that difference is probably disproportionately in the front end. So when you assemble that together, you have you know a little bit of the of the increase as a function of higher rates, but most of it is, is balances overall.

John McDonald

OK. And then just to finish up on the Nii, the the markets, Nii is guided a bit higher even though the outlook for rates is is also a little bit higher. So I guess what are some of the drivers there is a balance sheet mix and some other factors.

Jeremy Barnum

Yeah, it's a great, it's a great question, John. So, yeah, you correctly allude to the fact that we've said previously that the markets on II numbers actually liability sensitive all else equal. Also obviously in the context of what we always say, which is that in general changes in the markets on II, especially when they are driven by rates are almost always fully offset in the bottom line through NIR.

And so, yeah, you're right, this portal all else equal, based on higher rates, you would have expected markets on III to be down and instead the forecast is up. And the difference is changes in balance sheet composition. You know, essentially expecting lower amounts of finance non interest bearing assets on the balance sheet in the second-half of the year. And at this level of rates, you know, 1 balance sheet unit of that stuff drives the number like quite a bit if you think about it and can overwhelm sort of the rate effect. So that's what's going on there.

If you, you know, to just indulge myself for 30 seconds, there's also another interesting nuance, which as you will have noted that we actually increased the equity allocation to the CIB this quarter for reasons, but I think are pretty obvious in light of the amount of growth of of supporting clients that we've done and the way that's playing through RWA.

And the consequence of that is to move some equity essentially out of corporate into the CIB and a lot of those markets that obviously comes with a little bit of Nii. And so that Nii is moving out of, you know, NI axe into markets and I, I and so it would, it's sort of a rare exception to the rule that it changes in markets and I, I are offset in the bottom line. This piece, which to be fair is quite small, it's probably like 150 million is, is a part of the increase that we would not expect to be offset on the bottom line, although sequels. And so obviously it's left pocket, right pocket at the level of company.

John McDonald

OK, that's helpful. Thank you.

Operator

Thank you. Our next question comes from Erika Najarian with UBS. Your line is open.

Erika Najarian

Hi, good morning. I just had one question. I do want to revisit the succession line of questioning because it is so critical for a lot of your your current investor base. And so Jamie, I guess maybe re asking the question different way, you know, what characteristics is are you and the board looking for in terms, you know the new leader of of JP Morgan? You know, what do you think makes an exceptional CEO in the future as you pass the baton on?

And additionally, you know, I think that some of your investors may have read the announcement, particularly Marion's departure as sort of an extension of your, your tenure. And I'm wondering if we should, you know, think about your, your, your remaining, you know, tenure is more fixed or if you know, investors are still thinking about a more rolling type of retirement date and a long longer stay as executive chair.

Jamie Dimon

And so the, the question to that is, though the timing is essentially the same, obviously completely up to the board, but it hasn't changed. It's just a natural change that we have to go to about how we go about this. And but the look, you know, that question is obviously critical, but I've always said it's, you know, you want to be good at management, you want to be good at people, you want to be analytical, you want to be detailed.

You want to the culture care, you want to be curious. You want to have art, you want to have grit, you want to have soul, you want to have work ethic. You want to be able to travel, you want to be able to walk in operating centers and do as CE, OS and Prime ministers. It's all of that. I mean, I, I could give you a long list of stuff, but it's all of that.

At the end of the day, we're blessed with a lot of people who are great culture carriers across the broad spectrum. No one has all those things in the perfect way and some of the things you learn and some of the things you get better AT and you know, but you know, when you see it, we have two exceptional Co presidents. We have other people in the company who are great culture carriers, but you know, that's what you want.

And you wanted to cross the whole company, not wedded to invest in banking or trading or, or, you know, just big CE OS, but also wedded to the fact that we've got, you know, 300,000 employees around the world. And in our branch we have 50,000 top notch people, our operating centers, our costumes, we have 150,000 people. And you have to be flexible of mind to deal with this new growing complex world.

And, and we have teams of people. And as you know, I think it's important, you know, we pointed out that you know, we're blessed to have Jim Peepsack as the Chief Operating Officer, Mary Erdos continuing to run to asset and wealth management. So it's a great team of people which I am fully confident if I was hit by a truck, which is not my preference, we would be fine. And just just wanted to unpack.

Erika Najarian

Sorry. I am going to ask a follow up question. What do you mean by no change in timing exactly?

Jamie Dimon

We said last time that whatever I said last time is the time tail is essentially the same. Several years you can use, a few years you can use plus or minus or obviously it's totally up to the board, not up to me.

Erika Najarian

OK, thank you.

Operator

Thank you. Our next question comes from Jim Mitchell with Seaport Global Securities. Your line is open.

Jim Mitchell

OK, good morning. Just Jeremy, maybe a follow up on the expense question and operating levels question earlier. Understand completely longer term, no bank can generate perpetual operating leverage. But if we look at year to date results, it's been a strong revenue environment. But I think operating leverage on an adjusted basis was negative. You alluded to some expense one offs potentially. No question you're investing heavily and should be. So I get all that.

But just when I think about the benefits of AI and technology generally, is there a time over the intermediate term where you think expense growth could slow a little and operating leverage kind of becomes more likely in in a period of time over the next few years?

Jamie Dimon

I'm just going to answer that by saying when you have great returns and very good margins, which actually went up this quarter, not down, you know, the notion that somehow you can further increase your operating leverage is a crazy notion. We don't have that. I think it's part of the reason why banks failed. If you go back 20 years ago, we're never going to have that point of view and AI will have its gives and takes. So we don't we can't project.

I do think you might actually see a slowdown in growth, you know, maybe in a slowdown in 27 or 28. But you know, the teams are looking at all of our opportunities and we pointed out over and over again, we have an opportunity to spend more money in marketing with deposit ROI. We're going to do it. We're not going to have false gods. We have to pray that we can't do something really smart.

I've also pointed out over and continuously that some expenses, you know, if you accounted for them as investments that they have very good returns, but their expense in the short run. And so, you know, and you know, AI still remains to be seen because the other thing I think about AI, which is a little bit different than everybody else is you don't uniquely benefit from AI. The ultimate beneficiate AI will be our customers.

And in a competitive capitalist world, you know, we all will use AI to do a better job for the customers. And we can't just say, oh, it's going to increase our margins. We're going to keep that. If that were true, our margins would be 80% today because of computerization over the last 20 years.

Jim Mitchell

Yeah, well, all fair. Appreciate it. And then just maybe a quick one on, on regulation. Is there any update on the thoughts on potential for adjustments to the regulatory proposals since I know you, you and your peers have been particularly vocal around the G Sib surcharge and some elements of Basel 3. Just curious if there's been any developments there?

Jamie Dimon

There. There are. There are four obvious changes they should make and I think it's unfair when I hear them say, you know, they should do the numbers the right way and you guys should demand it, do the numbers the right way. And they think they want to be more conservative and conservatism. They should not do the numbers in a false way to make the number higher. And I just think that's intellectual clarity and honesty and stuff like that.

They have. They should get rid of the double count and operating risk capital. They should get rid of the double count in market risk capital. We have $80 billion or more now market risk capital and the biggest quarterly loss we ever had was $1.4 billion. You know, G even the C card market loss I think is like 14 or 15 billion.

And so they should adjust the the G ship the way they're supposed to going back to 2015 and they should change the way they're doing short. Wholesale funding, to be fair to everybody, those are the things they should do. The number should be the number. If they think we showed more capital, they should ask to hold 10% more and I'd be happy to do that, but I'm not happy to have these numbers falsely done.

Jeremy Barnum

Yeah. And I just briefly add on short term also funding. I think there's an important point there in terms of the competitive dynamics that we were really quite explicit about in our comment letter, which I would encourage everyone to read because it's, it's a nuanced thing. But I think if you go through it, it makes the point very clearly.

And what, what what they've wound up doing with this change. The short term wholesale funding is essentially, you know, increase the burden on, you know, banks like US and Bank of America that have both, you know, markets and banking businesses as well as, you know, traditional consumer businesses disproportionately relative to our, you know, former investment bank competitors, but different business mix.

And, you know, I guess conceivably someone could want that as a policy outcome. I don't understand why you would want that as a policy outcome because it is disproportionately damaging the ability of banks to serve Main St. But, you know, if that's what someone wants, they should say it. And if that's not what they want, then they shouldn't let it happen by accident as a result of like, you know, a seemingly very technical thing like removing RWA from the denominator of the short term wholesale funding contribution to the G sub score.

I mean, this is a little bit of what Jimmy talks about when he when he's saying like, you know, do the numbers right and just be clear about your your policy objectives.

Jim Mitchell

Yeah, absolutely. I appreciate, sucks. Thanks.

Operator

Thank you. Our next question comes from Matt O'Connor with Deutsche Bank. Your line is open.

Matt O'Connor

Good morning. It seems like everything is firing on most or all cylinders, trading, banking, lending, credit. Is this as good as it gets or, and I know you've kind of flagged, you know, some of the risks out there, but is there also an argument you made that were earlier cycle given AI and what seems likely to be a big increase in global defense spending, global supply chains management as we put all that together, what's, what are your thoughts?

Jamie Dimon

It's getting close to as good as it gets. We just don't know it's going to last, OK.

Matt O'Connor

And then, you know, the rate expectations continue to move all over the place out there and and you show that you're kind of well positioned for higher rates, you know, make more money. But is there a tipping point where the deposit behavior changes, you know, both from a volume perspective and then betas, which you alluded to earlier been better than expected so far. But, you know, if we go up a certain amount, do you think there could be a meaningful change in that?

Jeremy Barnum

Yeah, that's a good question actually, Matt. And I think, you know, short answer is like we don't really know. And if you'd asked me that question a couple of years ago, I would have said that that you're essentially asking a question about the complexity of the rate paid dynamic, especially for consumer deposit, the negative complexity specific. And, you know, if you'd asked me that at the beginning of this rate cycle, I would have said that we would be experiencing that effect right right now. And we're not.

But, you know, just from a common sense perspective, like you have to believe that at some point that kicks in. So when we do our stress testing and when we think about not just like, you know, slightly more elevated inflation environment and the slightly more aggressive response from the Fed, but something that's like meaningfully different. It's a true stress test with an actual change in regime. One of the things that we look at.

And stress is like, OK, at what point do you have that kind of like acceleration and rate paid as a result of that type of environment? And, and that's one of the reasons why it's important not to be naive about higher rates, because if you simply take our current EAR, even recognizing that locally, the empirical EAR is probably higher than our reported EAR and you ignore the convexity dynamics, you could convince yourself that, you know, and 7% rate environment is great.

And obviously that wouldn't be true if you had to do a massive refund deposit franchise in order to, to, to protect it essentially. So to assume some of that, it's something that we think about, it's in the models, it's very much like part of the discipline. But the question is you know plan and and obviously there's a larger question of the competitive dynamics and the full value proposition of of the deposit franchise especially.

Matt O'Connor

OK, that's helpful, Thank you.

Operator

Thank you. Our next question comes from Mike Mayo with Wells Fargo. Your line is open.

Mike Mayo

Hi, in response to the earlier question, you were asked about operating negative as negative and you gave the reasons for that. That, but is operating negative the way you look at things I mean when you grow revenues 15% core year over year, percentage wise it's negative but dollar wise I think it's positive. When I look at slide 2 and I don't know why I'm not going to I'm not going to create the narrative for you, but you know even if you take out those numbers if you no it was it definitely was positive.

Jamie Dimon

Let me, but can I just point out another thing? It was positive, but when revenues go up 10%, you know like our if your general, if your overhead, if your margin overall is 25%, when revenues go up 10%, the marginal return on that so you're not getting all the overhead is going to be a lot more than 25%. And people kind of forget that, but not as the rapid increase in revenue drives a big increase in operating leverage.

Jeremy Barnum

Yeah. So I agree with what Jamie just said. And maybe just since we've got a couple of questions about this and and obviously we did revise up this year's expense guidance by 2 1/2 billion, which is not a trivial number. So maybe I can piece all this together to to add a little clarity here.

So first of all, if you remember the guidance that we gave in fourth quarter last year for the full year for the company and if you made some kind of like reasonable assumptions about what type of markets, environment and NIR X markets the rest of the company at the time, you know, and you build out your models or whatever. I don't remember exactly what you had, Mike, but you know, I'm sure that the consensus was for meaningful negative operating leverage in this year's numbers, however defined. And that's why, you know, a company update.

You know, I gave the long speech about sort of what Jamie always says about why operating leverage in the long term for the cycle is not a thing now for a company like us anyway, producing the types of returns that we're producing now. And the root cause of that was essentially that the, you know, as Jamie just said, like there's a fixed expense base and there's a variable expense base.

The very variable expense base is disproportionately associated with the kind of capital marketing complex broadly defined. And we were in a moment where coming out of the back of the rate hiking cycle and relatively modest deposit growth etcetera, the Nii was still working its way out of out of the headwinds. And so when you and in the meantime we had inflation and investments and the usual stuff driving the expense base. So that sort of was the operating leverage picture for the year to Jamies Point.

Since then in the first half of this year, the capital markets complex has outperformed our then expectations by 6 1/2 billion dollars and we have booked in the first half of the year 1 1/2 billion dollars of additional expenses associated with that. So that says a lot about that kind of like marginal operating leverage point.

And then so therefore of the 2 1/2 that we increase guidance, 1 1/2 is essentially already booked and a direct sort of happy consequence of the exceptionally strong performance. And then yeah, we've implicitly added a billion for the second-half of the year. And there's there are some nuances. I wouldn't draw too many conclusions from that in terms of our expectations about the revenue environment because there are some other factors and there's some timing or whatever.

But at a high level, you know, that gives you the picture of the second-half of the year will be what it'll be and I think. If you look at returns overhead ratio, any metric that you know your updated models are going to show for this year, it's obviously, you know, exceptional performance principally through the lines of like returns, which is what actually matters.

Mike Mayo

All right, A little bit of national wealth management, a little bit of that credit card spend, a little bit of that other parts of the business. Yeah. And that's why I say a capital markets complex is really, you know, the whole company.

Jeremy Barnum

Well, yeah, exactly. So your marginal margin based on the number you just gave is 77% on that. And so how is why is that as good as it gets? Are you referring to the revenue environment maybe as good as it gets, Jamie or are you just being conservative or, or what?

Jamie Dimon

No, I just, I just think we're in a very healthy, active, exuberant market with very high prices and very high volumes. We benefit from that. We just don't know how long it will continue going to get a lot better than this. It can get better, but you know how much better? I don't know.

Mike Mayo

And then the second and then the second question does relate to the the management changes and Troy taking over the consumer bank. And you know, we don't know Troy as well as we did Marianne. And you have a lot more information internally, but to oversimplify and exaggerate. And we have FX trader now, you know, selling mortgage credit cards and deposits. And I'm, I'm being simplistic for a reason, but what gives you confidence that? Is the right person to run the consumer business when he doesn't have that experience in the past?

Jamie Dimon

Yeah. You know, Mike, it's a great question. You know, first of all, like I mentioned how you evaluate people, if they're analytics, it's the brain power through EQ, it's their heart, their soul, the culture carrier, you know, can they walk into operating says he's exhibited that, you know, in markets and investment banking. You know, they remember even the IB is extensive operations function and and back office function, technology function where he's exhibited great expertise. We're completely comfortable with that.

I do think it's very important that people have experience across the company and when I've seen investment banks, big banks taken over by someone only from the investment bank who only cares about the investment bank, you know, believe me, the rest of the franchise can suffer. You need respect for the rest of the franchise. So I think it's great for him. It's great for the company. He's already excited. He's always been to branches and out and about and and you know he'll take it hopefully upward, onward and upward.

Jeremy Barnum

And my just a minor action Troy with no offense intended to my old good friends who were foreign exchange spot traders, but Troy was actually an options trader, which is also where I started. So I think you would want me to correct the record on that one.

Mike Mayo

All right, thank you.

Operator

Thank you. Our next question comes from Sal Martinez with HSBC. Your line is open.

Sal Martinez

Hi, good morning. Thanks for taking my question. I have a broader question on AI and it is, is there an argument that we're vastly underestimating the the potential benefits to efficiency and its impact and the impacts on how companies can can run their businesses? I know block is a really different animal than you are on a lot of levels, but they argued when they cut, you know, 40% of their workforce that given the advancement in AI tools, if they look at their organizational structure with a blank sheet of paper, they can be much leaner and not sacrifice on product velocity and commercial outcomes.

And I guess I'm asking if you think there could be a parallel with banks where you can operate with a different structure, be much more agile, be more efficient over time. I know it's a sensitive topic, but I'm curious how you think about these questions and how you're positioning yourself for this world.

Jamie Dimon

So it's not a sensitive topic at all. We're going to use AI to do a better job for clients. That's our job. I we fully expect it'll have huge efficiency in certain parts of the company. And we know we analyze all the time. I think we've mentioned the past. We spend quite a bit of money on it. We have a lot of MPV's that we know we have, you know the whole company's working this at this point.

And you know there are I think there's almost 1000 use cases today though I we said that really important ones are 50 by 50 across risk, fraud, marketing, hedging, prospecting, note taking, idea generation, document reading and it's kind of just starting. So we do expect that. I think you have to put in the back of your mind that there are areas where we may just accelerate what we do that we want to get done anyway.

Think of a certain, you know, applications and customer facing things and stuff like that. We are preparing to make sure we can retrain our people and we have had discrete areas where we did reduce jobs by 30% or 40% and most of the people offer jobs elsewhere. So we do expect that. I also think that over time, remember this will be offered to smaller competitors too through you know, Fiserv and FIS and other fintech companies and over time.

We've been doing this nonstop for 25 years, but just large computers and mainframes and, you know, and, you know, APIs and various tools and tricks for use have always been trying to create more efficient stuff like this. This will be faster. This will be dramatic. You know, the whole company's involved in it. We have our off site in July.

You know, you can imagine this is a big topic everywhere, you know, from front office to middle office to back office to, you know, marketing to risk to, you name the subject, then more to come. But we're kind of in the midst of this size mini revolution and we'll report to you. But I do also want to point out, you know, maybe you could be ahead of other people kind of.

But always what always happens is the benefit accrues to the customer, not to, you know, the, the, the JP Morgan in this case, because other people are doing the same thing And you know, presumably leads to lower costs and lower error rates and a bunch of things. You can't just say, well, you're always going to go to 50%, stay there. You know, if we had a 50% ROA growing at 10% a year, you probably have in 50 or 60 years, you'd probably be 100% of the GDP of the United States of America.

Sal Martinez

Yeah. Yeah. OK. Thank you for that Follow up on equities and I think Jeremy you, you, you said and. If I recall correctly that the particular set of things that happened this quarter are you know, difficult to see repeated. Can you just maybe elaborate on what was most exceptional this quarter? I think some of your peers have talked about Asia prime brokerage there and I think you mentioned derivatives and and and cash being strong. But is there any areas or products or geographies that were particularly noteworthy in terms of of the strength this quarter that may, you know, be difficult to sustain going forward?

Jeremy Barnum

Yeah, I mean, there's really not a lot like behind my comment. It's essentially, you know what you would get from asking any of the commercial AI models this question and the two year old 2 stages old version of the model. In other words, it's all the obvious stuff that's been heavily reported. Like we had some major IP OS, we had some major index rebalancing, we had some very complicated dynamics and Korean equity market, there's been a lot of activity in Asia.

The overall environment has been dynamic and interesting across a whole variety of dimensions. The clients have been extremely active. So it's like all, it's all the headlines basically that you know have have have driven the market and of course that could obviously repeat, but I just think like statistically it seems improbable that that particular combination of effect repeated. So and you guys, those who pay attention, you can see most of this on a daily basis from volumes Stock Exchange, the CME volumes through hedge funds hiking through is not a not a secret marginal loans. You can see a lot of this taking place during the course of 1/4.

Sal Martinez

Got it, Thank you. Thanks haul.

Operator

Thank you. Our next question comes from Ibrahim Punuwala with Bank of America. Your line is open.

Ibrahim Punuwala

Hey, good morning. I guess maybe a lot of discussion on the strong Wall Street backdrop. Maybe Jeremy, just talk about the Main Street part of the US economy. There is a sense that there's a fragility when you look at housing, real estate rates potentially could go higher. Give us a sense around what you're seeing from on the consumer side, the ability to sort of pull forward and and resiliency if rates go up. And are you seeing any broadening in CapEx beyond AI or is it very AI centric in terms of what you're seeing on even commercial lending activity? Thanks.

Jeremy Barnum

OK, Let me do these in reverse order actually because I'll just address your AI cutbacks question quickly. We we do see some decent kind of cutbacks and associated loan growth across the franchise. And at least on the surface some of that does not appear to be AI related. However, I was a little reluctant to draw the conclusion too strongly just because the AI team has started to, you know, proliferate in so many different parts of the economy, right?

It's like, you know, the comments about data centers wind up creating a lot of demand for like plumbers and electricians, right? So you know, you wind up seeing it in sort of slightly non obvious places. And so any given bit of loan growth or cutbacks that you see that doesn't superficially look like it's AI related might still be, but on the other hand, you know, it might not.

Jamie Dimon

So big numbers, I think CapEx is about four trillion a year and AI went from 400 billion last year to 700 billion this year. People project, which so do our people. It'll be like a little over trillion next year and maybe a little reduction in the non AI CapEx, but that's hard to figure out because the same people, some of the same people doing the same.

Jeremy Barnum

Yeah. And I was talking to our economist the other day about like the CapEx impact of Chips Act and some of that's kind of rolled off and it's getting replaced by more direct AI stuff. So it's a little bit hard to untangle the whole thing going to the consumer for a second. So few things I guess I've kind of already covered, but so #1 spend is kind of fine, you know, robust and across income segments seems like a bit of a tailwind there from tax refunds.

Delinquencies are a little lower than we expected. And again, that's a better performance you see pretty much across the board by kind of FICO score. There's some of the that economic heterogeneity data came out from the Fed recently, which also I think doesn't give a lot of support to the K shape narrative essentially. So again, we think about this, we worry about this, we look at it, but from our perspective through all the various dimensions, there's not like that much there in terms.

To support the K shape narrative now to your point about fragility and rates and housing and stuff like that, it is of course we are in a slightly higher than normal inflationary environment. I think Marianne had made some comments at some point about a cohort of consumers who are experiencing you know negative real wage growth and and that potentially creating some distress for those folks.

Now, some of that statistically is kind of always going to be true in any moment in time in any cohort, but that's probably a watch area. And you know, I think generally, obviously it's been a long expansion that's gone on for a long time. I think the economy is surprised on the upside, consumer strength is surprised on the upside. And that inevitably makes everyone worry about fragility and about the thing that could change it.

But as I always say, you know, when it comes to consumer credit performance, it's just about the labor market. And so, you know, you're not going to hear anything from me that's new or differentiated about the labor market. Like we all see the same numbers. And, you know, it's been surprisingly resilient. So for now, that's the narrative.

Ibrahim Punuwala

Got it. And I guess just a follow up on the capital front, you have excess capital, strong ROES, but I guess the question would be, why buy back stock here at three times tangible book when things are so good, bad things could happen. Why not just have some ex even more excess capital for. But any day if things go South, just talk to us in terms of how you're thinking about buybacks at these levels. And I know Jamie's talked about potential M&A at some point, maybe asset management fintechs, but yeah, would love to revisit that. Thanks.

Jamie Dimon

So before I answer that, I want to, I always enjoy reading your your weekend notes. They're insightful and sometimes quite funny. So thank you for that. You know, look, you're absolutely correct. I mean, we've always said we want to buy back less dock as the price goes up and more dock as the price goes down. We had a lot of excess capital. And so we were struggling with that. If you talk about two years ago, we still think the number used just approximately 40 billion. And I think we now think we've actually deployed it.

Over time, you know, the world's gotten bigger, it's gotten more complex. I just got back from a tour of Europe. Our security resiliency initiative, the the hyperscalers, the needs are just big. And it's not just AI you're talking about global infrastructure, the remilitarization of the world, the restructuring of trade, of trade is taking place, the enormous need of our governments.

You know, you have global deficits or almost 4 1/2 or 5%, which is a very big number competing for the same capital. So we do think we'll deploy and that has consequences that we're not going to tell the market we're going to do. But I, we agree with you generally. And, and if we think we can deploy, it's very different than buying back stock.

I've also never thought that buying, I actually want to get rid of that number money returned to shareholders. I just don't even like seeing it because you know, paying, buying back stock is not returning money to shareholders and you're making an investment decision. You're not making a return money to show decisions. I actually do want to borrow all our reports. And so you, you, you can see changes taking place. We're just not going to tell you what they are.

And I, I made a mistake last time mentioning $20 billion. We, we could obviously do far more than that or nothing at all. But I was trying to point out is we have huge opportunities for organic growth in every single business we're in. Organic growth is hard. It's technology, it's people, it's systems, it's branches, it's bankers, it's hiring, it's training and recruiting, you know, but I was surprised to find out, you know, in parts of Europe that well, we doubled our share in certain areas.

You know, they think that we could do a lot more there and country by country, including countries that, you know, we say aren't doing particularly well. And, and I think that's true here. We have our branch in the United States. We've got a credit card business, we've got the app Arsenal, the the Apple business at one point, which we have pretty high hopes for if we come up with, you know, better products and better services.

And so, yeah, so the goal is to deploy our capital at a 17% return. That is the goal. And you know, which we think we can do over time. We should always be looking at inorganic. The what we don't want to do is look at inorganic as a sign of weakness or organic in which I think companies do. Sometimes they bullshit about M&A when they should be focusing on why they're not doing particularly well in the area or something like that.

And we have a lot of competition, by the way. You know, we've pointed out before very good competition, not just not just Goldman Sachs, who's doing a great job. If you didn't read their numbers this morning, because I did. But you know, you got Stripe and PayPal and cash and Block and Chime and sofa and revoluting and they're good. And we have to make certain investments to keep up with them or to, you know, hopefully do a better job than some of them.

And so we're doing all of that, but it always you should always be looking at things that could be good for your company inorganically. And so we and we've done a bunch of deals this year. You know, most were goods, couple weren't. Be good and we're going to be looking and we're open minded. It wasn't any particular thing or any particular place. It might be adjacencies, it might be data related, it might be a whole bunch of errors.

We have a bunch of skunk wars going on. You know, we have, we hope Chase UK that we continue to build that in a way that becomes a great European digital bank over time. It could take a lot of time and effort to do that. So but you raised a good point. Thank you and glad to hear your reading. My parents will be proud. Thanks, Jamie.

Ibrahim Punuwala

Yeah, I do of course. Thank you.

Operator

Our next question comes from Glenn Shore with Evercore. Your line is open.

Glenn Shore

Hello, thank you. Just two quick follow-ups. One and the last couple of times you talked publicly, we had a couple of comments on the smart cash tool that you're working on. I know you said it's nascent and early, but sometimes technology moves fast. So curious status of the tool when you might roll it out into who and maybe a little more on your your comments on you you're going to have to pay more for money over time. Just curious.

Jamie Dimon

Yeah. So it just kind of relates to in the Jeremy of talking about before about the velocity of money and how it's going to move in a new world. So we are kind of prepared for that. So this is still a test case. You know, banks people are in different position and if you actually look at accounts and these don't relate to every account, they relate to a narrower segment accounts and and where you're competing for their investment business and their deposit business.

So you're what you're going to see is certain tests coming out and then you'll find out about what we can do, we can't do and we're going to learn a lot by doing some of that. And we think it could be good for customers and good for us. We're not just finding ways to waste money.

Glenn Shore

OK, So still so this year thing I take it, yes, you'll see something this year. Very cool. One other follow up on you just touched briefly on it. I'm just curious of how you'd state your your European consumer banking aspirations. You mentioned opportunities, you do plenty of business there, but you mentioned opportunities in each country by country. But it maybe you could just sum it up an aggregate of what are you trying to be in as a consumer banking in across the major markets in Europe.

Jamie Dimon

We didn't when we were talking about just bricks and mortar, we weren't going to try to compete. So we couldn't have with local banks, their brands, their capabilities. And unlike United States over there, we had all the overhead and different languages and different regulatory regimes etcetera. And we have no real reason to when digital may have changed that.

So we started Chase UK. I've got like four or five years ago was a, it was a complete start up, you know, and we made, you know, a little bit of fits and starts, but we have I think almost 3 million or two and a half million customers. And in the UK we have, we've opened up in Berlin. We've actually done much better in Germany than we thought we're going to do, though it's not quite properly yet.

So we got to look at there you have a platform, the platform costs money as you can distribute, of course, more and more clients and more and more countries, you know, you can get to the point where you're, you know, break even and then hopefully profitable. And so we've added the investment products in the UK, you can assume we're going to try to add them elsewhere and probably credit card.

And hopefully, you know, the dream would be that it would be a pan European successful digital bank building it off with JP Morgan Chase's strengths. You know, we are a private bank. We do have a upscale, a huge business here. We've got a lot of clients that go cross-border. We've got a lot of, you know, training capability and underlying capability and research capability.

So, you know, but it's still adjusted over time that you'll always call this like. This is it's not in Kuwait, me. It's not a brand new thing, but it's it's developing over time. I have high hopes for it. And we, you know, the management team is doing great. We tell them, you know, constantly come in and tell us what you want to do, what you want to do differently, what we've learned. And we're kind of patient kind of us too.

Glenn Shore

All right. Thanks, Jamie.

Operator

Thank you. Our next question comes from Gerard Cassidy with RBC. Your line is open.

Gerard Cassidy

Thank you. Jamie And Jeremy, you guys have talked about you seeing some excesses and underwriting and credit late last year, I think it was Jamie, Jeremy, you talked about risk on in the capital markets. What are you guys seeing in credit underwriting from your competitors? Is it getting crazier or? No, It's still pretty good. And what's, what's the outlook there, please?

Jeremy Barnum

I mean, crazy is a strong word. But you know, I spent some time looking into this issue like a week ago and you know, we did hear some example. I mean, I don't know. For whatever reason, I think the data center underwriting space is one that resonates with me as a kind of bellwether for what? People are doing and no, we passed on some deals that, you know, obviously because when you look at the data center stuff, the key question is like, what happens with power supply? What happens with 10 ends? What happens with, you know, it's a well, well discussed thing.

And we have a pretty precise framework to govern what we're willing to do and what we're not willing to do in that space across those types of risks. And we saw some deals come through where, you know, we're just like, yeah, we're not doing that. So, you know, it's normal. I guess it's, it's competitive and people are eager to be involved. And, you know, in some cases there's ironically some element of like relationship lending that's happening through the data center space when it's kind of a startup entity that's building the data center. So that's part of the story a little bit too, but I don't think we're screaming from the rooftops that, you know, underwriting is underwriting centered such class.

But I think you see normal pressures and we're navigating those in the way that we do, which is, you know, we do flax in some moments for particularly important clients in in situations where we feel like it's the right thing to do. But in general, you know, we're we try to be the one that holds the line and make sure that we're guided by our own risk appetite and, and the kind of appropriately skeptical view of of of the environment.

Jamie Dimon

We didn't talk about a huge deterioration in credit underwriter there. I think we talked about it's a very mild one, but it's across several spectrum, which is, you know, people assumptions on revenue growth or add back of expenses more pick weaker, some weaker and this is not across the board, but it's more, more some players than others. You know, we some weaker covenants, some people taking more rollover risk.

And by that I mean if rates go up, how much interest rate exposure you're taking as opposed to, you know, underlying exposure and it's just things like that. But they, it is across that spectrum, you've seen a little bit of weakness and, and the only point we're always trying to make is when there's a credit cycle and there will be a credit cycle, how will everybody perform?

And I don't think it's going to be like a bell curve of performance. I think there'll be some pretty, there'll be some outliers out there, just like there were by the way, in the great financial crisis.

Gerard Cassidy

I, I totally agree with you, Jamie, on that. I don't want to sound Pollyannish, but on a question regarding the regulatory outlook, obviously we've got Basel 3 end game. Hopefully we codified maybe by the end of the year. I know you guys have put out your remarks on it. And next year hopefully we get tailoring. Could you, could you envision a period where the, the, and again, I don't want to sound Pollyannaish, but a period where the regulators are just set where you go because the last 20 years there has been constant change with the regulators affecting the banking industry. Could we enter a period where we have a stability in the regulatory environment which could enhance valuations possibly for bank stocks?

Jeremy Barnum

Well, go ahead. I would break the question down into two parts, like could we envision stability and impact on valuations? On the question of stability, I mean, I don't think it's Pollyanna, Pollyanna Ish to say that regulatory stability is a desirable thing. And I actually think it's a relatively nonpartisan idea. Like, you know, I think they're the, it's, it's, it's understandable and correct that, you know, there would have been a big reaction to the crisis and then maybe a reaction to the reaction and that the sort of amplitude of those oscillations might be decreasing.

And we got into a place where we've got about, right. And, you know, frankly, do we get to a point where banks are primarily focused not on complying with regulatory constraints or various types, which should probably in general operate as backstops, but rather thinking about what their own standards are and what, you know, their own risk appetite is? And have that be kind of the true north of any given set of decisions.

And I think we're getting closer to that state, which will be good. Whether achieving that state would be, you know, particularly supportive of bank stock valuations, I'll leave that question to you. But at least I think for banks like us, I'm not convinced that's a major drag right now to be honest or that it has been.

Jamie Dimon

And in the recent past, I would just add this one legislative litigate Supreme Court decision that makes it less likely that we won't have flip flopping, which is a present remove a lot of people more easily. But I'm hoping, I mean, what really should happen now is when they write legislation, they could be more clear about their intent and what they want because they could have written it and said we want this independent or you can't even replace so many or we don't want flip flop and regulations.

But I really like the fact that. Mickey Bowman and Kevin Walsh are taking a step back and looking at the broad range of changes, which have been extensive over 20 years and never ended, and often with no ultimate intent or intended consequence. Where they want inner system and outside system makes it safer. But I actually believe you can make the system much safer, much safer. And that should be the real goal, you know, not just adding layer upon layer bureaucratic reporting.

You know, the some of the regulators said that from now on they're going to focus on safety and soundness. Well, if they do that, we would have no Mras, you know, because none of them related to our safety and soundness. They're related to other issues. And, and I think have you related to safety and soundness. Silicon Valley Bank and First Republic wouldn't have happened simply upon they were taking too much history risk, which was disclosed that one thing.

And so I I just think the goal should be to take a step back, you know, look at these things in the open light, be very honest about what worked and what didn't work. Like resolution did not work. Resolution recovery does not work. You know, people should, you know, should look at the discount window differently. And anyway, if those things are done, I think we can have a safer banking system where we don't have to be breathless every time a bank fails.

Gerard Cassidy

Thank you, my thoughts exactly. Thank you, Jim. You guys, you, you guys. Are there guys who know so much about this that should be making some of these recommendations to the regulators? It's in all of our interest. It's just to be better not, you know, not any one of us, all of us agreed. Thank you, Jamie, and thank you, Jeremy.

Jamie Dimon

Thanks, Gerard.

Operator

Thank you. For our final question, we will go to the line of Manan Gasolia from Morgan Stanley. Your line is open.

Manan Gasolia

Hey, good morning. Jeremy, as we think about the various expense buckets you called out at the start of the year, you know the volume related expenses, bankers, tech, marketing and I know majority of the increase in the expense guide is coming in the revenue related line. But are you also bringing up some of the other categories, you know, maybe pulling forward any deck or marketing spend given the environment?

Jeremy Barnum

Yeah, there there's some of that stuff going on. So I'm trying to sort of keep it simple and and disproportionately focus on the big driver, which is obviously volume in revenue related expense. But as is always the case there, there are some ups and downs which some of which relates to things like our marketing strategy, which I probably don't particularly want to disclose.

But I think one topic which is not financially meaningful this year, but which I think is interesting and may become in the future is the question of token expense because that is something that we're spending a bunch of time on. I think as you know, probably pretty much everyone in corporate America. So just for the avoidance of doubt, it is a trivial number for the first half of the year. We are forecasting some meaningful acceleration in that number for the second-half of the year.

But still, nonetheless, the full year contribution of that is still trivial and obviously we had budgeted some of that. So it's not in any way meaningful driver of the current outlook or the revision of the outlook. But obviously, you know, when you listen to the Frontier Labs talk, they talk about the exponential and the acceleration of usage, which is obviously driving their revenues and you know, someone's paying those bills.

And we're in a sense like a representation of the economy as a whole that we're probably lagging a little bit some of the, you know, cutting edge adoption and usage as we should given who we are as a company. But it is an important question for us as we go into next year and the subsequent years. And I think the good news is that we've done a lot of really high quality thinking on this and a lot of the infrastructure that we've built over the last couple years is going to position us to be quite sophisticated about using the right models for the right purpose.

I mean, just to use one sort of topical example, no events intended to those of you who tend to write slightly long reports. But as you can imagine, sometimes people like to summarize those reports using AI tools. And as you know, the tools are quite good at doing that. And you know, you really don't need the latest cutting edge, you know, incredibly expensive model to summarize now reports. And the idea is use the right model for the right purpose. Be smart about open source where appropriate and sure that you're getting value out of it.

Ultimately, in the end, you know, either we're going to have a lot more capacity or we're going to have a lot more efficiency or both, or we're going to have better revenue outcomes or we're going to compete more effectively. And we just need to be disciplined about how we handle that. So that's a body of work that's happening right now.

Manan Gasolia

Got it, very helpful. And then maybe just on on CIB and the the increased capital allocation there? I guess how nimble do you expect to be there? Do you think we're at peak allocation here? You know, are there any internal limits that you might be rubbing up against or is there room to keep allocating more balance sheet to the business of the environment remains where it is?

Jeremy Barnum

I mean, I'm definitely not going to get into discussions with you about like internal limit management. I guess it was on the press call, so maybe you didn't hear this, but I did get a question about this. And I think the right it's, I think and I think you said this correctly, but I just want to throw on the side of being precise here. Sometimes people think about capital allocation almost as if it's a hedge fund where you're like giving a pot of people some capital and telling them to go use it. If that's not the way it works, it's the opposite of that.

In other words, we have demand from clients to support them in various ways. And to be clear, we also have some what you might describe as passive effects like obviously when volatility is higher, market risk capital goes up passively and simply the appreciation of global equity markets increases. You know the RWA associated with things like the prime business.

So you've got active and passive effects, but the active effects are US responding to client needs. And obviously we've got, you know, a ton of access as a company. And as Jamie said, our primary goal is to deploy that organically. So when our CIB clients want us to serve them and we can do that in ways that makes sense for us from a risk appetite and from a returns perspective, we've got plenty of capital to do that.

And so, you know, we do that sometimes there are other financial resource constraints and that's part of what we do for a living is try to manage that stuff. And you know, I talked a little bit company update if you recall about the system and the fact that the system is currently quite flush with capital, but at the margin last flush with liquidity. And that's obviously an area of advocacy, especially in light of, you know, the stated goal to reduce the size of the Fed balance sheet.

You really need to reduce bank demand for reserves to get that done. And so that in turn probably requires some adjustment to liquidity regulation. So that's, you know, the next thing on the agenda, right. And our, but our risk standards haven't changed. It was, you know, it's possible to make things change because people self select and pick somebody else and that would be fine with us.

Manan Gasolia

Got it. Thank you.

Operator

Thank you very much. We have no thank you. We have no further. Thank you all for participating in today's conference. You may disconnect at this time and have a great rest of your day.

Details at JPMorgan IR

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