Jpm at the Morgan Stanley U.S. Financials, Payments & Cre Conference

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JPM AT THE MORGAN STANLEY U . S . FINANCIALS, PAYMENTS & CRE CONFERENCE

TRANSCRIPT June 14, 2021

MANAGEMENT DISCUSSION SECTION

Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Thanks, everybody, for joining me this morning. I do have to read a disclosure statement first, and then we will move on to the main attraction. For important disclosures, please see Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

With that out of the way, I'm pleased to have with us this morning, Jamie Dimon, who needs no introduction as Chairman and CEO of JPMorgan Chase. Jamie, thanks so much for sharing some time with us this morning...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. Betsy, thrilled to be here. Next time, in person...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC That sounds great. Your final Zoom meeting, hopefully. Okay...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. Can be the end of them, yes...... QUESTION AND ANSWER SECTION

Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Well, let's kick off with a few near-term questions before we dig into the strategy side. And on the one hand, rates continue to be very low, but on the other hand, as you mentioned in your shareholder letter, there is real inflation risk out there. And I'm wondering how you're positioning JPMorgan Chase in this environment...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah. So, we do expect rates to stay low for a bit longer because the Fed has told us that. But you see, there are – if you look at our balance sheet, we have like $500 billion of cash and we've actually been effectively stockpiling more and more cash waiting for opportunity to invest in higher rates. So, our balance sheet is positioned that will benefit from rising rates both in the short end and the long run, and long rates. And that really depends on the decisions we make over the next six to nine months. But I do expect you're going to see higher rates and more inflation, and we're prepared for that.

And of course, also, all things being equal, things aren't always equal. I think it’s also kind of like a very, very strong economy. And so, with very strong economy has other implications for us. We try to take all that into consideration when we manage the balance sheet...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q So, what does that mean for your outlook for NII for 2021? I think you guided to $55 billion. Is that still intact?

...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A It's $52.5 billion. So, you can change your models. I know it's a little disappointing, but sorry. And part of that, I'd say about half the difference is card balances being lower. That's not all bad. There's a huge offset – not a huge offset, a but partial offset in charge-offs, but I don't look at that as bad. I think the consumer is in unbelievably good shape. I’d call it, the pump is primed for the future and they will borrow again at one point.

And the second half, I'd say, is mostly discretionary. We've just not been reinvesting a lot of proceeds. We waited. Mortgage prepayment's a little bit higher. You can reinvest those, too; we haven't. So, that's discretionary. And so, the run rate by the end of year maybe a little bit higher than $52.5 billion, but that's about where we are today...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q So, the natural follow-up here is, what are the triggers for reinvesting from that liquidity pool into securities? What are you waiting for to say that? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Well, you're making a good point. I mean, there’s a lot of discretion in securities. Obviously, loan is output. So, if cards go up then loans go up, we may see other loans go up a little bit. But that $500 billion of cash, you can invest $200 billion tomorrow and earn a lot more money on it. On the other hand, you would dramatically decrease your interest rate exposure to rising rates. And I think you need to protect yourself against rising rates. So, it's purely discretionary, and you’ll find out one day whether we made the right decision or not...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Okay. What about Markets? You've had this quarter a little bit more normalized markets, but there has still been some decent amount of volatility. How is IB and trading businesses trending so far this quarter? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah. So, remember the quarter last year was exceptional. Last quarter was exceptional. This quarter is what I call more normal, where you can plug in your model and make it really simple as like something a little bit north of $6 billion, which is still pretty good, by the way, and probably better than we told you last time. The last time we said more like 2019, I forgot what that number was, but plug-in number a little bit north of $6 billion...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q $6 billion is for your trading revenues? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A All trading, yeah...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Okay. Fixed Income and Equities......

Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yes...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q And then Investment Banking revenues is on top of that, obviously...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Investment Banking is having look, it could be one of the best quarters we've ever seen. And I would just use a number like up 20% from both prior year and prior quarter. It could be 15% to 20%. And the reason for that is there are big deals that may or may not close. We don't always know exactly when it's done, but we've had a very, very active quarter, ECM, DCM, and M&A...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Okay. All right. And I will just remind listeners, if you have a question, you can type it into your browser, and we'll get to them. I'm going to turn now towards the growth strategy, okay, with the quarter out of the way there, Jamie. Turning to growth and other business opportunities. Look, you're already number one across a very broad range of products and markets. So, the question we get often is where's the next leg of growth going to come from? Is it new share gain? Is it new geography? I assume it's a little bit of both, but maybe give us your sense of the skew there...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah, it is a little bit of both. And we have plenty of way to go, but it's now more like three yards and a cloud of dust. It's very tough competition both your base competition, fintech, big tech. So, the landscape is changing dramatically. But in the United States we're going to be in 48 [sic States] by the end of this year. We're still gaining share in small business, small business with credit card, branch deposits. We think we have a long way to go with investments basically within the banch system. We're very good to – ultra-high net worth with Private Bank. We've got like 1% or 2% we've talked about in the smaller but important investment accounts.

So, in credit card we think we have a ways to go. And there's not one area we don't think we can do a little bit better job in certain segments or something like that. And that's true for Commercial Banking. We're now in – I forgot the number – but close to 75, the top 75 MSAs. We do much more segmentation. So we're going more up against the innovation economy. We still think we can up our share of investment banking fees in the Commercial Bank.

Asset and Wealth Management, I already mentioned part of it. There are products that we – we just bought 55ip which is a tax advantaged investment tool, and investors are very smart people which we are embedding in all the things we do. There's the high net-worth of certain products and services. I think people still need a lot of financial advice.

And in CIB, it's the same thing. Go country by country, industry group by industry group, and trading on a detailed level what flows you have, what flows you don't have. A lot of that in the trading area is what you are going to build electronically. So, across, everything I just said, a lot of it is what we do in tech. So, think of it as, any bankers, any locations, any tech. Those are the three things that pretty much drive the future. And I'm pretty sure we can gain share overall, not in every little thing we do because always the competition is moving pretty quick, too...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q But now, at one time, you were doing consumer almost entirely, if not entirely, in the US. And that seems to have changed recently. You're leaning into the UK. You're thinking about other geographies with consumer specifically. So, maybe you could give us a sense as to what changed in your mind that brought you back to some markets that you had previously exited? ......

Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah. So, what we always said is we're not going to do retail overseas. I gave examples of branches. Where if I added 100 branches somewhere, I have to add all the additional overhead. So, not just the four walls and a few people, but you need to have – you need to be hooked up to our product systems, you need the languages, the compliance, the laws. They're all different. I can open 100 branches in Mumbai or 100 branches in the UK and there's no chance I'd gain enough share to make up for the additional overhead. As opposed to opening 100 branches here, I'm not adding any additional costs, other than the four wall costs. And we have all the products, all the brand, all the connections, so that makes sense.

Digital changes that. And so, what we're doing digitally in the UK is a chance to say, can we do something different? We haven't announced the brand, we haven't announced a bunch of stuff. There is some really neat stuff in it. I think it's all internal people right now. And think of it as – it's a long-term play. What can we do with our brand, our capability, and the UK is the beginning. And if it works there, then we'll think about other things we could do with that...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q And it's really starting off from a deposit perspective. Is that right? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yes, but more to come...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Okay. Let's look at expenses. Your expenses for 2021 have been creeping up a bit. It was at $68 billion, then $69 billion, then $70 billion. And maybe you can give us a sense as to what's driving that? I mean, part of it is paying people out, higher revenues, more expenses. But how much of this is going to be in the run rate because of fintech threat or other needs to invest? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A I would guess most of it is in the run rate. I mean of the $2 billion increase, about $1 billion is comp. Part of that is for good reason. We've done quite well, and we'd like to pay people for performance. And the rest is a whole smattering of different stuff, which I won't go through. But I've told our investors like nonstop for the last – as you know me, as you pointed out since 2002. We will do whatever we have to do to win in the marketplace. So when we find opportunities, we're going to grab them. It can be marketing. And obviously, there are different marketing opportunities today.

So, Marianne Lake and Jenn Piepszak, they know exactly what I'm thinking. It could be technology; it could be opening those branches. And these are the things that hopefully will drive profits for a decade. They're not short-term things. And I think, they're far more important than next quarter. And so, I think people are overly focused in the next quarter. We have to focus on beating the competition for the next 50 years......

Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q And that said, where are you putting the investments to work in particular in fintech? There's always a lot of discussion around the payments, the asset management, the data, etc. But how do you think about the go-to-market strategy with fintech? How do you think about buy versus build? How do you think about what's getting your investment dollars first? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Right. So, I mean, the way I always look – I mean, if you look at our capital, we always will invest in the business first before all the other things we do. And we're agnostic in buy versus build, right. To me, there's times we buy. We could build our own energy plants but we don't do

Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A that. We can build our own lights. We don't do that. We can build our own computers. We don't do that. We buy them. So we are willing to partner with people, I think we own a piece of over 100 different fintech companies. And then with some of them, we both compete and partner, which we do with Goldman Sachs. So, to me, we're kind of used to operating in that world.

But there's some obvious things when they can build a piece of software that’s going to be used by 500 million people and I am going to have to spend the same amount of money to build a software to be used by my 20 million people; obviously, it makes sense to partner. And so, there are other ones which are embedded – they are embedded in our IP, right. So, they're embedded in everything we do, and it would make sense not to partner.

But think of it as all of it is – you got to get – the cloud is real, AI is real, therefore you've got to get your applications and your data into the cloud and that is a lot of heavy lifting. And so, that's an investment in the future. You don't always necessarily see it. But what you see, what the consumer sees is digital. They see all the stuff, the Credit Journey, Chase Offers, personalization, the amount of fraud we stop and the risk we stop, the better marketing we can do, that's extraordinary.

And you see that in the consumer side. You see it in Private Banking. You're going to see it – you see it at JPMorgan Invest which is the new name for YouInvest. In YouInvest, we got $50 billion in it, and we don't even think it's a very good product yet. So, we're driving that thing. So, we're going to drive them all. And we think we have a huge competitive advantage if we keep on doing this and huge competition. I point out over and over that competition is way beyond anything the banks have seen in the last 50, 75 years...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q It feels like the competition on the fintech side really heated up significantly on more of the payments angle, right. Like, you’ve got Square and Stripe and SoFi, etc. There's obviously some competition on the wealth side. Maybe it's not as intense as what those companies have done to those markets that they're attacking. What do you think it is that they did that got them to that space? And what can you do to, I don't know, clip their wings? I mean, you want that growth that they're delivering, right...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah. And in some ways you get it. So, if you look at like some of the things we – we've got to be a little self-critical here. We could have done what Square did and we didn't. Okay? And so, if you were at my management meeting, I told them, we could have done it and we didn't. We didn't have the imagination to do it. It wasn't the technology. It wasn't like that hard to add. The dongle itself isn’t something that mystical. But they added data and services and advances against credit card receipts. And that advance against credit card receipts have been taking place my whole life. That's not new. They just digitized it and made it simple and clear.

And so, with all these things – so when we meet as a management team, we talk about what are the adjacencies we should be adding to Merchant Services or Asset and Wealth Management or CIB or custody or trading? And there are exceptional ones. And then we could buy things. We bought about 55ip about tax-enhanced investing. We bought InstaMed which is payments between healthcare providers and consumers. We bought WePay which helps – hook us into other people who are building API, things for consumers, digital consumer, businesses, etc. So, there's tons of stuff we could do, and we just have to do it ourselves and move quickly. I mean, it is a question of speed.

They're very good at reducing pain points. They have a lot of money. They have the benefit of not having legacy systems. I don't say legacy systems are bad. No, they're part of what made us successful. When you're running like 60 million credit cards on one system, it's very efficient. On the other hand, in terms of being able to update that system all the time and use the data more efficiently, it's very inefficient. You've got to get it into the cloud.

So, a lot of work to do. I mean, I'm comfortable we'll compete, but I think banks are really going to be under the gun. I mean, and you mentioned payments. PayPal is bigger than every bank in the world other than us and Bank of America. Square, Stripe, and I’m not even talking about the other $600 billion that has been invested and valued at fintech companies. That's before you get to big tech. That's before you talk about shadow banking. Some of the shadow banks are you can call them fintech like Citadel or Jane Street. I don't even know what you call it at this point.

So, that competition is tough and it's way different than it has been before. I think the banking system, counter to what people think has gotten smaller and smaller and smaller relatively. And if you look at the market cap of all the banks in Europe combined is $1 trillion which is the same that it was 20 years ago. And even the G-SIFI banks in the United States, I forgot the number, $1.5 trillion or something, which isn't that different than it was 20 years ago.

Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A And meanwhile these other things have become huge. And I'm not even talking about Visa, $400 billion; Mastercard, $300 billion. Man, we got the Chinese banks coming. So, I think the banking systems is going to be really in tough shape. That's my own personal view. And there will be winners in there, but it won't be all of them...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q And where is JPM in the winner's circle? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A You're talking to a competitive group of people. I think we got some of the smartest people in the business. We'll do whatever it takes. And so help us, God...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Right. So let's talk...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A I really mean it. I really mean it when I talk about management. I mean, I tell people – at one point it's the growl and the gut and the spit in the eye that’s going to matter. We have to fight. We have to move quicker; we've got to kill our own bureaucracies, and that’s more important today than it's ever been. And I've always been that way, but I just think that’s what we have to do to succeed. And we're going to, and we have been, but we shouldn't take it for granted. And Daniel and Gordon, the two co-Presidents, who both are exceptional by the way, among the other exceptional people we have here. But we sit in these rooms and we talk about – the conversations are more about let's assume some of these other people succeed.

One of the things that fintechs have been very good at is bobbing and weaving. They started here, doesn't seem important. All of a sudden, they're over here. They're looking to add products, they're looking to add service, looking at change price, looking at add-on pricing. In a lot of cases, they're not cheaper than what we do for the customer. They're easier. And so, we have to be very nimble in how we move about...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Okay. So, there's three other fintech competitor things I want to talk about before I go into some of the things you're doing in payments strategically. One is Buy Now, Pay Later. And is that something that matters to you or are you doing anything there? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A We do. We have My Chase Loan and My Chase Plan, which I just got the number, is $2 billion of loans. Which is not bad. Buy Now, Pay Later in the United States, I think, is about $50 billion. It's growing unbelievably rapidly. Again, what they – and a credit card is buy now, pay later. And so, this Pay in 4 thing became very popular. And it's real. But part of the thing that makes it so real is they do it at the point of sale. And again think of the imagination that we could have had, but we didn't. So, get your thing at the point of sale. And the merchants who complain about credit card fees are paying 4% or 5% on that. And that's where the spread comes in for the Buy Now, Pay Later.

So we're taking it quite seriously. But it's not – of all the credit card outstandings, which are $800 billion and auto outstandings and other stuff – we think we're going to be able to compete with which My Chase Loan and My Chase Plan. And yeah, I like the BNPL. If that's what customers want; we've got to learn to do it......

Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Okay. The next question here is on the...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A But not life-threatening...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q That's the other follow-up, right, on that is, hey, is BNPL going to take out your card balances in total? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A It will also become more competitive, right. Like, as the merchants get more options, they're going to negotiate those fees down a little bit. So...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Well, and also BNPL is supposed to be paid out of debit, right? It's not a leverage product and it's for [indiscernible] (00:18:06)...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Right. Well, again, it's – and you talk about banks, the first payment comes out of a bank. That's part of the underwriting process for the pay now, buy later – buy now, pay later...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Right...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Look, banks have to learn to be very nimble and use their assets to move very quickly, too. And some have done it actually. I’ve seen some banks do some of these things quicker than us. And so, hats off to them...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q What about the big tech or the big companies like the Walmart, big tech Apple, Amazon, etc.? What are you doing there to try to stop the tide? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah. So, they're – first of all, some of them have their own issues. They've got a lot of regulatory stuff, but I'll just put that aside. And whether they want to become banks or not, put that aside, all of them in my view are going to embed payments soon in what they have. And they all compete with each other. They all do a little bit of social, a bit of ads, a little bit of commerce, a little bit of – but they all kind of want payments embedded. So when you go to YouTube or Facebook or Apple, you can buy something, click a button and it gets delivered and paid. And so, you have to have wallets and things like that. And a lot of them are – they have marketplaces for financial services. So, think of Google Plex, it's a marketplace for financial services. They're also going to offer some of what I would call financial services directly, like financial planning.

Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A They don't need a bank to do that, but they can with open banking and all the stuff like that and partnering with whoever they partner with, they could say to the client, we could do these things for you and then you hook in your bank.

And of course, you don't want your bank to become just a utility in the back end that no one knows about. And it's possible some are going to do banks – that they're actually going to open a bank or different things. Some of them have huge advantages. And I pointed it out too. I'm not saying this by way of complaining. No capital requirements, no liquidity requirements, no social requirements, no insurance requirements, no CCAR requirements, no resolution requirements. They don't have the litigation kind of obligations we have. And those are important.

When we navigate this world, we've got to figure out, how are you going to compete and deal with – and by the way, like I said, those are just some of the things we have to deal with. We have strength: size, scale, scope, brand. We bank 60 million – we have some business with 60 million, half the households in America. And so, let's use our strengths to build these things and so on.

But they're all coming in one fashion or another, and some will probably succeed. And by the way, if you don't believe me, look at Ant Financial, even though I know they're going through some changes now. And some of these other companies around the world who've done a quite a good job disrupting major banks by using – oh and the other thing is, they have huge platforms and huge data. And that's a huge advantage. And so, we have this huge data and not quite the platform. We have 60 million, but they might have 200 million Americans booked in there. And they have other types of data. It's not clear to me, our data is not more important than some of theirs. On the other hand, we have more restrictions on what we can do with it...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Right. What about DeFi? Some people look at DeFi and say, this is the next thing in finance generally. I mean, it feels like it's a little bit of a small capital base right now. But given this unregulated credit model union, do you think that could be a competitive threat to you? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah, a little bit. They're not – I mean, remember, you've got to do a lot of things to serve a client. So, some of these will just cherry pick something. And I remember years ago when peer-to-peer lending came out, I told people, it was not going to work for a whole bunch of different reasons. But some of these things will work somewhat. Remember, they're also going to change when interest rates go up. And customers like services like ATMs and branches and advice, somewhere to call or call centers and so – but I do think you should never look at some of the – I'm not talking about cryptocurrency, I'm talking about DeFi at large. Yeah, they're trying to find ways to provide financial services purely digital whether it’s lending or deposits or loans or this in a way that it makes sense for those customer base.

And so, we should never act like – I don't think they're going to win but I don't like saying that to my management team. I don't want to forecast that because I've already pointed out, some of these people are really smart. And it may not look that way today but they're looking later. The world is not static. We have to remember. They're not just sitting there waiting for JPMorgan. They're looking for all the ways they can do these things for clients...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q So, let's talk a little bit about what you are doing on payments. You have this global effort, I think it's called Liink, L-I-I-N-K...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Uh-huh. Yeah......

Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Could you give us a sense as to what your vision is for that? ......

Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah. That's public. I mean, I've told the people here we're going to be disclosing less to all of you going forward because I think we disclose too much. But Liink is just a ledger. I think there's 450 banks hooked up into it, where we share data with banks in a real-time basis. So think of is the account real, did the money move, and it solves some of the problems that people legitimately point out about particularly international transfers and international money. So, just think of it that one day, Liink should be able to do trade finance much more seamlessly, very few hours, you know exactly where the money is, and everyone in the chain knows; and you can do it virtually in real time.

And eventually, by the way, there's no reason you can't move money through it too, so it will become a real link. And this is not just JPMorgan, this is getting all the banking system lined up for. And I point out on payments that we move $8 trillion a day quite effortlessly, quite cheaply, quite with huge risk in fraud and stuff like that and 78%, real-time, 95% same day. So, what problem are you trying to solve?

So, there are problems. If you're trying to move money to your sister in London, that's a pain. I understand that. You have TransferWise. They've done a great job. It's like, again, it wasn't the technology. It was the imagination. And then there's – if you said moving money to Philippines, the same thing. If you said trade finance; absolutely. When you move things to multiple countries, you're paying from multiple invoices, if you miss the dot, one thing, that payment gets delayed. It takes a week to do the research on it. And so yeah, there are problems to be fixed in the payment systems that we should do ourselves. If we don't do it ourselves, someone else will do it...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Yes. Having lived in Japan for eight years I'm very familiar with that; but, hopefully, you'll be able to solve those issues soon...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Well, then there's another one. I was sitting in my own management table and Takis, I think was saying that, how hard it was when he came here to open a bank account because he had no credit history here. Yeah, well, okay, that's kind of a no-brainer to go fix, because he had a credit history where he was. So, I think there are a lot of things we can do better in America. There's a tech company that does just that thing that came to see me years ago called Neom or something like that. Yeah...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q So, we have some questions from the audience I want to dig into. One is on digital currencies. And the question right here is you've got central bank digital currencies. They're getting talked about. How can you leverage this and are there any threats to what you're seeing in the ECB from this? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Look, it's a legitimate – I mean, if I was a central bank, I'd be looking at this. But there's a lot of work that’s going to take place. So, if you have a digital wallet and you use – I mean, I think what India did was great for it’s own people. Give people bank accounts. They can make transfer payments without fraud and corruption, stuff like that. That makes sense. Can you do it wisely and cheaply, and stuff like that. If you give people a digital wallet and you keep your money at JPMorgan or any bank or the Fed, the second you're in a crisis, it's all going to go to the Fed.

Well then, you're going to bankrupt the banking system and the Fed shouldn't be making loans. If a government starts making loans, it's almost every case it's been – it leads to various forms of corruption and stuff like that and the lack of discipline in the capital markets. And then there are other things. Remember, banking isn't just a wallet. It's also ATMs. It's financial planning. Someone you call for advice and gain a small business advice. It's investments.

So they could do pieces of it. They should look at it. But I think the right way is to really do a deep dive and study it. And then they're going to be legislation issues. Like, do you want the federal government to know everything you do? So, in China, they're going to do that. Whether the American public will put up would that, I doubt it......

Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q There was a question that came in. I'm going to read it, okay. Is there any level of deposit inflow or lower credit card balances that would encourage you to take more duration risk if the credit risk is not available? Or is it really more a function of absolute yields? I know we discussed this at the beginning of the session, but I had a question come in...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A That decision you make every day, right. And you always – if you could always take – you could always buy Treasuries. So, I could buy 10- year Treasury right now at 1.5%, instead of making 20 basis points or whatever we are making on IOER, move it out there, extend duration. We can do it with one phone call. My CFO is sitting over here. He can do it. He can do the same thing and buy mortgages at considerably over that which doesn't have much credit risk. I mean, we'd rather make loans. We'd rather serve our clients than make huge investment portfolios. But we have a lot of cash and capability and we're going to be very patient. And we're being patient because I think you have a very good chance that inflation will be more than transitory...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Got it. Okay. Just keying in on the loan piece of what you were saying. The loan-to-deposit ratios are sitting at 50-year lows obviously because of QE and demand for lending hasn't started to pick up that much yet, at least from what I see. But what do you see? Are you seeing any signs of life in the loan book? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Just a teeny-weeny little bit in CRE, commercial multifamily, maybe C&I. Middle-market utilization is lower than we've ever seen it, ever, ever. But that will change the second they start investing in inventory, receivables, and slightly more in plants, so maybe a little bit. Not on the mortgage side, not in the credit card side. Though I think you're going to see it eventually. I don't know exactly the time it is, but I think you have a booming economy.

And I think the table's been set for that booming economy. I think some of fiscal policy is on autopilot. So, think of it as both – not only do we put out the fuel to fire, but were guaranteed to put more fuel of fire in the first quarter next year, the second quarter next year, the third quarter next year. And then QE's partially on autopilot, though the Fed may very well change that at their meetings this week, and stuff like that. So...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q What's your outlook for QE? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A We'll see. The other thing, the thing about loans. I've always pointed out, the loan – banks generally, that I'm going to simplify it, you used to have deposits and lend out 100%, and would hold cash liquidity above that, in securities roughly. But today, because of LCR and SLR and stuff like that, banks will never again be able to lend out 100% of deposits. It will always be, I don't know, 75% of deposits.

Right now, for JPMorgan it's like 44% or something like that, which is unbelievably low, and that's because the rules changed. So, the transmission of monetary policy is different, it's not just QE. So, the way you should look at our – I forgot the exact number, but $400 billion to $500 billion more cash than we need for LCR. That wasn't true a year – I don't think that was true a year ago, and that's right. We don't – I mean if we could I'd turn away a lot of these deposit away, we don't really want them. But we want to be customer friendly...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q So, shareholders here are sitting looking at that saying – okay, the optionality is to reinvest in securities while you wait for loan growth to come back. And your point is, I need to have a better rate structure that reflects the inflation that I think is going to be coming.

...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah. We firstly run the business to serve the clients and a lot of these other things are outcomes. But the interest rate exposure to the firm, we also always look at to protect the fat tails. And that's a very different view, and we're going to protect the fat tails. JPMorgan will be a port of safety in the storm, period. Whatever storm that is. And you know, we can predict some. We do tons of stress tests and all that far beyond just the CCAR test. But one of the potential ones now is rising rates. Inflation is kind of more – raising more than the Fed is comfortable with...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q And you're really looking at the economic profile of JPM when you say that, because I would expect you have room in your held to maturity balances that you could [indiscernible] (00:31:03) ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A We’ve moved more stuff in the held-to-maturity, too, to reduce the volatility of SCB and all that. Again, which I hate, because I always look at that as it doesn't mean anything; it's like accounting. It doesn't really mean anything. And actually takes away some of your flexibility. How could that be good for a company? But it makes SCB less and why would you hold permanent capital for swings in AOCI that mean absolutely nothing. So, we're doing more and probably should have done it earlier...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Okay. A couple other questions. Just one on credit card. You mentioned it's still – it doesn't look like there's a lot of demand yet, but one of the things I think that you are looking at is providing credit cards to people who maybe don't have as much on credit scores, right. There's some new kind of underwriting that you can do using non-traditional data to underwrite a card...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Oh, yeah. Well, that...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Can you give us a sense as to what's going on there? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah. Well, first of all, card spend is like 20% over 2019 and we see it everywhere. And spend ultimately drives the thing, but – the outstandings. But outstandings, the consumer today has $2 trillion more in their checking accounts than they had in February of 2019. That's a huge number. That's why I'm saying the table is set for a really strong economy and that spend number will eventually drive the outstanding. That's why I think there's a pretty good chance you’re going to start to see it go up soon as people start to spend and do other things and stuff like that.

But I think all I'm going to tell you about credit is we always look for additional data and we don't use just credit scores to do credit. That’s going to be true for bank accounts, for that Reach product, and our Bank One or Bank On, whatever they call it. And so, yeah. And then – so for credit card, too, we're going to do that...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Okay. Turning to capital and capital optimization. What's better for JPM – continuing to grow share and end up with a higher capital requirement, or maxing out the buybacks? And people know that you've gone up basically two buckets in SIFI. And the question here is,

really, are you going to try to get back down to that just one bucket higher or do you care? You're like, hey, if I'm two buckets up, I'm two buckets up. Let's just get the revenues? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A I've always thought that G-SIFI is the stupidest, most irresponsible calculation I've ever seen in my whole life. It is not risk based. It doesn't have anything to do with anything. I think it was designed for – I don't even know what it was designed for. And we have so much capital that you can't possibly say that we need more capital to handle risk or something like that. And G-SIFI was supposed to be adjusted for the size of the banking system, the size of the global economy, and none of that ever took place, and we're still finishing Basel III from 10 years ago.

So my view is I'm not going to – I want to get back to the 4%. We have time to do it. We can find a lot of ways or just stupid ways to get stuff on our balance sheet or do a bunch of stuff. But I'd like to see them – what are they going to do with SLR, G-SIFI, Basel III, kind of finish the package, SCB. When we see all of that, we’ll be a little more direct and we'll see how we want to handle this.

But right now, I always – the first prism we always look at the business through is, do the right thing for the client. I'd rather – so if someone says, what would it do if you have to go up one bucket? Well, if I have to add 5% to capital, it's going to reduce my ROE by 5%. What's the mystery of that? To me, okay, well I don't want to go from 17% to 16%. But I'd rather go from 17% to 16% than lose my share of market or lose the client.

So, yeah, it's a terrible place to be in. That's what it is. We'll deal with it, and we're going to seek out a million ways to reduce it. I could seek out ways to get paid more on debit cards by outsourcing my debit card. I'm thinking about that, but I don't think that'd ever work in our position. But I just think that these are unfair. I want to find ways around them...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Do you think they're going to do any changes – make any changes to those capital ratios? I mean, Quarles is out in October...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A That's one thing we should do is crowdsource. People helping to reduce our G-SIFI. So anyone out there from fintech or that other world of shadow banks, look at us and anything you can do to help me reduce the G-SIFI, remember, we will pay to reduce it because it's very expensive capital. So, we'll share that with you. And what's your last question? ...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Okay. We have two last questions. One is on climate. It's a question from the audience here just asking, can you discuss your opportunities to impact climate given your position in the industry? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah. I think we've been trying to be really diligent and mature and thoughtful about reducing carbon intensity. We've spoken to the auto companies, utilities, we’re not doing this on our own. The car companies – how they plan to help and we’ll help in transition. It's got to be done in the right way. My view is we do it right as a country, very thoughtful by industry, we can actually get CO2 way down at very little cost to the economy. If we do it badly, I’m thinking not just banks, but from policy, we won't get it down and it will really hurt the economy.

And I remind people it's not a banking issue. You've already seen a lot of companies sell their dirty oil and gas assets or coal assets to non- public companies. Now, there's no transparency. We don't know anything about them, so they could make a lot of money on those investments. It's not about what banks do; it's about what the economy does, public policy. And one day, if the American public doesn't have the courage to talk about the carbon tax, we'll never really do a great job of fixing this problem.

...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q So, last question here is that you have created a formidable powerhouse in JPMorgan Chase since you took over 15 years ago. Wanted to just understand how you're thinking about the transitioning to the next generation. You did recently announce the reshuffle of your senior ranks and wanted to get how you're thinking about succession here...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Yeah. I think we're very – first of all, I'm very – I mean, you know Jenn Piepszak and Marianne Lake, two just exceptional executives who happen to be women. And by the way, we have a great bench. We have Daniel Pinto who's exceptional. Gordon, who has been one of the best partners you can ever imagine. So, I'm going to miss Gordon. I certainly wish him the best. He's going to stay associated with us. But there are a lot of very good people here. And I intend to stay which is sanctioned by the board for a significant amount of time. I think you put in your report several years. Significant means more than that, and one the directors specifically made that point.

And then, we have a lot of people to choose from. Remember, they have ’hit by the bus plan’. And then, obviously, and we meet every time we talk to all these folks and it may very well be a woman. But I just want to tell people, it will not be a woman because it's a woman. It will be the person who's the best suited for the job, regardless of race, sex, creed, or sexual orientation...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q And significant means five years? ...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A The board says significant. You've got to ask them what they meant by it. But they didn't want to seem like it's imminent, like two to three years. And I love what I do and I'm perfectly willing to stay here for five years. And I'll obviously go when the time comes. And as the – obviously, Daniel can run the company, and he’s fairly close in age to me. But after that, when that time comes, for the right person, I should just leave and let them do the job. Or if, I can't find the energy for it anymore. I'm going to leave then...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Q Well, you seem to have enough energy right now...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. A Still piss and vinegar, yes...... Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC Right. Well, Jamie, thank you so much for joining us this morning. Really, a great pleasure to have here at our Morgan Stanley Conference. So thanks very much...... Jamie Dimon Chairman & Chief Executive Officer, JPMorgan Chase & Co. That’s great Betsy, thank you......

Betsy L. Graseck Analyst, Morgan Stanley & Co. LLC All right. Take care. Now, we'll move on to the next session.

Disclaimer This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of JPMorgan Chase & Co.’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause JPMorgan Chase & Co.’s actual results to differ materially from those described in the forward-looking statements can be found in JPMorgan Chase & Co.’s Annual Report on Form 10-K for the year ended December 31, 2020, which has been filed with the Securities and Exchange Commission and is available on JPMorgan Chase & Co.’s website (https://jpmorganchaseco.gcs-web.com/financial-information/sec-filings), and on the Securities and Exchange Commission’s website (www.sec.gov). JPMorgan Chase & Co. does not undertake to update any forward-looking statements.