JPM
#Good morning everyone
I’m going to take you through the presentation, which is available on our website
Please refer to the disclaimer at the back of the presentation
The third quarter was generally constructive across businesses and asset classes
Underlying business drivers grew broadly and we maintained or gained share in a competitive environment
and global economy continue to grow
Clients are active with demand for credit remaining solid, all in all resulting in 7% growth in net income driven by positive operating leverage as revenue rises and expense remains controlled
On an adjusted basis, this is a clear record for a third quarter
Of course, against this financial backdrop I want to acknowledge the recent natural disasters
The impact on affected customers, communities and employees has been devastating, and supporting them is our priority as we rebuild
I will note that any financial impact is not significant to our results
Starting on Page 1, the firm reported net income of $6.7 billion, EPS of $1.76, and a return on tangible common equity of 13% on revenue of $26.2 billion
Highlights for the quarter include average core loan growth of 7.5% year-on-year, and the FDIC recently released its survey showing that the firm has surpassed the competition and now ranks number 1 in total U.S
deposits and in deposit growth, driven by strong consumer deposit growth up 9%
Client investment assets, credit card sales and merchant volumes were all up 13%, and we continue to rank number one in global IDCs
We had record revenue in the commercial bank and delivered record net income and assets under management in assets and wealth management
The credit environment continues to remain benign across products and portfolios
Card charge-offs were fully in line with our expectations and guidance, and outside of card our charge-off rates remain at historically low levels
Now turning to Page 2 and some more detail about the third quarter
Revenue of $26.2 billion was up approximately $700 million or 3% year-on-year driven by net interest income up $1.2 billion, reflecting the impact of higher rates and continued loan growth, partially offset by lower markets revenue
Adjusted expense of $14.4 billion was flat to last quarter and to last year if you exclude $175 million of one-time items in CCB in the prior year period
Credit costs of $1.5 billion were up about $200 million year-on-year driven by higher net charge-offs in card, and in the quarter we built card reserves of $300 million primarily due to seasoning of newer vintages
We saw a wholesale release of over $100 million partially driven by select names in the energy sector and reflecting improvements in portfolio quality in commercial real estate
Shifting to balance sheet and capital on Page 3, what is most notable on this page is that all of the numbers are basically flat quarter-on-quarter with the exception of growth in tangible book value per share, as capital generation was fully offset by distributions, reflecting a payout of above 100% for the first time in a long time, in line with our previous capital plan
From here, we expect the direction of travel for our CET 1 ratio to be lower over time
Moving on to Page 4 and consumer and community banking, CCB generated $2.6 billion of net income and an ROE of 19%
We continue to grow core loans up 8% year-on-year driven by mortgage up 12% and business banking, card and auto loans and leases were each up 7%
Year-on-year, we saw 13% growth in each of client investment assets, card sales and merchant processing volumes
Nearly half of the growth in investment assets came from net inflows and our deposit margin continued to expand, up 6 basis points this quarter
Revenue of $12 billion was up 6% year-on-year
Consumer and business banking revenue was up 15% on higher NII, approximately equally due to margin expansion as well as strong average deposit growth
Mortgage revenue was down 17% on loan spread and production margin compression as well as lower net servicing revenue driven by the MSR
Underlying that decline, the mortgage business is performing well relative to the market
Our originations are down only 1% versus the market down an estimated 15% as we gain share and purchase
Finishing up on revenue, card, commerce solutions and auto revenue was up 7% as higher auto lease income and growth in card loan balances outpaced the continued impact of investments in new account acquisitions
Expect CCSA fourth quarter revenue to be relatively flat sequentially as higher net interest income will be offset by the anniversary net impact of Sapphire reserve last year
Expense of $6.5 billion was flat year-on-year or up 3% excluding the one-time items I mentioned
Higher auto lease depreciation and continued underlying business growth were partially offset by lower marketing expense
The overhead ratio was 54% for the quarter as positive operating leverage despite significant investment in the business moves us closer to our medium term target
Finally on credit performance, in terms of net charge-offs, as I said, card increased in line with expectations and guidance, and in auto charge-offs included approximately $50 million of a catch-up reflecting regulatory guidance on the treatment of customer bankruptcies
Excluding this, the loss rate in auto was only 41 basis points
In general, it feels like the auto market has plateaued at current levels with inventory, incentives, used car prices and SAW all having stabilized over the last few months
In terms of credit reserves, are previously mentioned, we built $300 million in card reserves in the quarter as we grow, and although there were no mortgage reserve actions, portfolio quality improvements allowed us to absorb the expected impact of the hurricanes into our current reserves
Now turning to Page 5 and the corporate and investment bank, CIB reported net income of $2.5 billion on revenue of $8.6 billion and an ROE of 13%
The third quarter of 2016 revenue in both IBCs and markets benefited from a number of (indiscernible) events and higher levels of volatility, creating tough comparisons across the board
This quarter in banking, IB revenue of $1.7 billion was strong and relatively flat from last year’s record levels
Year-to-date, we’ve gained some share and maintained our number one ranking in global IBCs
We also rank number one in North America and EMEA
We printed record advisory fees for third quarter, up 14% on broad strength across sectors and deal sizes particularly in Europe, making up for a smaller wallet in North America
Equity underwriting fees were down 21%; however, we rank number one in wallet, number of deals and volumes globally for the quarter and for the year to date
The market remains active and the pipeline healthy
In debt underwriting, there was a reasonably high run rate coming into the quarter and we broadly maintained it, landing fees slightly down year-on-year and quarter-on-quarter driven by strong re-pricing and refinancing activity and high yield bond issuance
We rank number one in fees year-to-date and gained share overall and across products
Treasury services revenue of $1.1 billion was up 15%, and while higher rates are a driver, we are also seeing positive momentum in organic growth in the business globally as our clients are responding favorably to the investments we’ve made in our platform and products
Moving on to markets, total revenue was $4.5 billion, down 21% year-on-year against an impressive third quarter of 2017 in a quieter and very competitive environment
Fixed income revenue was down 27%, a solid performance given a backdrop of low volatility and tight spreads
At the risk of laboring the point, you may recall that we gained 240 basis points of share in FIC in the third quarter of ’16, which will mean our year-on-year decline will look larger than most
Equities revenue was down 4% but underneath that is a diversification story
Consistent with last quarter, lower flow and exotic derivatives activity was substantially offset by strength in cash and prime, which continues to be a bright spot throughout this year
Before I move on, the fourth quarter environment so far feels consistent with the second and third with no obvious catalysts on the horizon for that to change, but of course change it could, so it’s worth pointing out that the fourth quarter last year was also a record for a fourth quarter since the crisis and as such, we expect next quarter’s markets revenues to be lower year-on-year
Securities services revenue of $1 billion was up 10% driven by rates and balances, with average deposits up 15% year-on-year as well as by higher asset-based fees on market levels globally
Finally, expense of $4.8 billion was down 3% year-on-year driven by lower compensation expense on lower revenues, and the comp to revenue ratio for the quarter was 27%
Moving to commercial banking on Page 6, another excellent quarter in this business with net income of $881 million with record revenue and an ROE of 17%, and although we recognize that our results are flattered by a benign credit environment, the performance is very strong and broad-based and is driven by the investments we’ve been making in the business, the differentiated path on capabilities we can offer our clients, and our commitment to business discipline
Revenue grew 15% year-on-year driven by deposit NII and on higher loan balances with overall spreads remaining steady, and while IB revenue was down some year-on-year, we grew 9% sequentially with particular strength in middle market, which is starting to feel like a trend
Expense of $800 million was up 7% on continued investment in the business focused on technology as well as banker coverage, having added over 200 bankers since the beginning of 2016; and since our investment agenda is ongoing, expect fourth quarter expenses to remain at about this level
Loan balances were up 10% year-on-year and 1% quarter-on-quarter
C&I loans were up 8% year-on-year driven by strength in expansion markets and specialized industries, but were flat sequentially in line with the industry on flat utilization despite decent deal flow and stable pipelines
Commercial real estate saw growth of 13% year-on-year and 2% quarter-on-quarter, and although growth rates are decelerating, we continued to outpace the industry; however, we remain very disciplined in client selection, products and pricing, and are sticking to what we know well
Finally, credit costs were a benefit of $47 million, predominantly driven by commercial real estate
Credit performance remains strong with the net charge-off rate of 4 basis points
Leaving the commercial bank and moving onto asset and wealth management on Page 7, asset and wealth management reported record net income of $674 million with pre-tax margin of 33% and an ROE of 29%
Revenue of $3.2 billion was up 6% year-on-year driven by higher market levels and by strong banking results on higher deposit NII
Expense of $2.2 billion was up 2% year-on-year driven by a combination of higher compensation and higher external fees for which there is an offset in revenue
This quarter, we saw net long term inflows of $21 billion with positive flows across fixed income, multi-asset and alternatives being partially offset by outflows in equity products
We also saw net liquidity inflows of $5 billion and continued to increase our global market share
Record AUM of $1.9 trillion and overall client assets of $2.7 trillion were up 10% and 9% respectively year-on-year on higher market levels globally, as well as net inflows
Deposits were down 6% year-on-year and 4% sequentially, reflecting continued migration from deposit accounts into investment-related assets as we are retaining the vast majority of these balances
Finally, we had record loan balances up 10% year-on-year driven by mortgage up 19%
Moving to Page 8 and corporate, corporate posted net income of $78 million, treasury and CIO’s results improved year-on-year primarily due to the benefit of higher rates, and you’ll remember that last quarter other corporate included a legal benefit which is driving the quarter-on-quarter decline you see on the page
Finally, turning to Page 9 and the outlook, all of NII, expense, charge-off and loan growth remain broadly in line with previous guidance, so to wrap up, this quarter and this year we continued to consistently deliver for our clients, our businesses are performing strongly across the board, maintaining or gaining share
Our financial performance clearly demonstrates the power of the platform, the benefits of diversification and of scale, as well as an investment strategy focused on long-term growth and profitability
We remain very well positioned to continue to benefit in a growing global economy
Operator, we can open up the lines to questions
Question-and-Answer Session
Very well, how are you?
<UNK>, there’s no change in our transfer pricing methodology or even the way we compute it
It’s to do, as you appreciate, with obviously higher rates and the fact that we are in a very disciplined environment at this point in deposit re-price
We would expect to continue to see the margin expand over the course of the next several quarters, but we would also expect to continue to drive higher NII as we’re growing our deposits
(Indiscernible)
Yes, so I think the way to think about it, not to diminish the importance of any individual breach or situation, is that we are honestly under constant attack, both in a more general side but also from a fraud perspective, and so while we always react and learn lessons from every individual situation, this is not the first breach nor will it be the last breach, so as a result we have been constantly evolving and refining the way we think about fraud prevention, detection, underwriting, continuing to move to multi-factor protocols around customer identification, looking to leverage all of our data to better inform our underwriting decisions
So the reality is that as important as it is and as much as we---+as each individual breach could impact the overall equation, we have had to evolve over an extended period to the position that we’re in now, and so as a direct result of this, there won’t be specific meaningful changes but a continuous evolution
So when we are looking, whether it’s at sending out preapprovals or marketing offers or receiving inbound applications, we are increasingly looking at a number of different data points and facts to be able to identify the customer and understand the application
Yes, and the reality, <UNK>, is that we’ve kind of operated over an extended period now on the presumption that while we happen to know about this breach, there will be others either right now that we don’t know about or over time, and so we have to be proactive, not reactive, and we’ll obviously look to learn anything we can but we continue to evolve, so that we can use all of the information at our fingertips
As a practical matter, we are not seeing a specific increase in fraud
Correct, correct
As a result, we’re already spending the money that we need to spend to keep hopefully ahead of the curves on all of these things
Our operating losses are---+I will say that the combination of all of the information that had been compromised over the course of the last several years has put pressure on fraud costs, but nothing incremental from this, and so no, no impact on expenses or loan growth that would be measurable
Yes, so look, obviously apart from the rate hike in June, nothing has really happened much since last quarter, and so the landscape is looking pretty similar, and not because that’s surprising, so I’ll come back to that in a second, which is to say that there’s been very little to no movement in the re-pricing of deposit accounts
There’s been some incremental movement in certain savings and CDs, but nothing systematic in the consumer space, but that’s pretty much as we would have expected with rates at these absolute levels
So at some point in time, and that may be a couple, three more rate hikes from now, the dynamics may start to change, and so we haven’t changed our perspective about what we think the ultimate re-price will look like
In asset wealth management, the story on deposit pricing is somewhat similar - a little bit more movement, but nothing particularly meaningful or dramatic
The story there is very much again as expected
At these levels of rates, you are seeing customers start to make choices to move certain of their deposit balances into investment assets
That’s normal migration that we expected and that we’ve modeled, and we are retaining those balances, so we are starting to see some of the dynamics we expected play out
That started happening at the beginning of the year and has continued to progress
Then in the wholesale space, there is a spectrum as well, so I would start with we’re firmly on a re-price journey in wholesale, no doubt, and depending on where you are in the spectrum it ranges from the smaller and lower middle market companies, where the re-price is modest but present, to the higher end where it’s reasonably high
So overall, if I step back---+so that’s where are
If I step back and say have we learned something new in this cycle that we didn’t know, the answer is no, not really
If you look at the first four rate hikes of the previous normalization cycle, the overall cumulative deposit re-price was pretty much the same as it is now, so we continue to believe that the dynamics that we’ve been talking about over the last several years and that we’ve expected will play out
They may not play exactly as we have them modeled, but they will ultimately play out that way and we have appropriately conservative re-price assumptions
So at the risk of hedging, it’s actually a bit of both
The reality is there’s always been two different camps on the re-price area for consumer
There’s been the camp of acute market awareness, low for long, technology advancements allow movement of money to be easier, competition for retail deposits and good liquidity deposits is high, therefore re-price higher
The counter to that, which has merit and which we are seeing to a degree, is customers feel that they’re weighing a more balanced scorecard of things when they chose where to keep their deposits, and customer satisfaction, the suite of products and simplicity, the digital and online offerings as well as the safety, security and brand all matter, and price is a factor but not the only one
So I would say we certainly feel that having a leading digital capability is critical to our overall customer franchise, and it will in all likelihood have an impact on stickiness of deposits because customers value that kind of convenience very highly
I would also say one other thing about where we are right now, is that as you know, as much as you’re right about the potential demand for the sort of high liquidity value deposits, there’s a lot of excess liquidity in the banking system and although loan growth is solid, it’s solid, so we aren’t seeing a frenzy, albeit that we’re very proud of our deposit growth
Yes, welcome back
I don’t have that off the top of my head, but we can get back to you
I fear if I give you a ballpark, I’ll get it wrong
While we’re on the call, we’ll get someone to send the details and let you know
We’re doing a bit of all of the above, so I’ll start with the comment which you (indiscernible) before but which we still strongly defend, which is that branches still matter, that 75% of our growth in deposits came from customers who have been using our branches, that on average a customer comes into our branches multiple times in the quarter
I know that all sounds like old news, but it’s still new news or current news, so the branch distribution network matters
Customer preferences are changing and we are not being complacent to that, so we are underneath the overall 5,000-plus branches continuing to consolidate, close, move, grow, change all of our branches in line with the opportunity in the markets that we’re in
So net for the year, we’ll be down about 125 branches
We’ve closed more than that, consolidated some and added some, so we’re not being complacent to the consumer preference story, but branches still matter a lot and we’re building out all of the other sort of omni-channel pieces, as you know, so that we have the complete offering
If the customer behaviors start changing in a more accelerated fashion, we will respond accordingly
Yes, so I would characterize this as over the two quarters of normal, so you may recall last quarter there were a couple of things that we talked about
First was that there was a $75 million one-time interest adjustment in mortgage which artificially reduced loan yields for the quarter, and secondly that seasonality and mix in card similarly
So we would normally in the law of extraordinarily big numbers expect for a 25 basis point rate hike that we’d see about 10-ish basis points of improvement in loan yields across the whole portfolio - we didn’t see that last quarter
What you’re seeing this quarter is the reversal of those factors and the normal benefit of the June rate hike
Yes, so as we look at the loss rates for this year, they’re coming in as we expected at less than 3%, and as we look out to next year, based on what we know today, it’s still in that 3 to 3.25% range, albeit maybe at the higher end of that range, so it’s broadly in line with our expectations
So the reserve build---+and you know, in the consumer space, we move our reserves not in dollar increments, but the reserve build is about a little less than one-third on the growth and a little more than two-thirds on normalization of rates
Yes, so a couple of things
The first is just to repeat the standard, just as a sort of macro matter, we’re more sensitive to the short end of rates than to the long end of rates, particularly over any short period of time, so intra-quarter volatility in the 10-year, while it’s not nothing, is unlikely to have a material impact on our run rate
Clearly an overall generally flatter long end of the curve in general on average through the year, all other things being equal, it will have had a dampening pressure on our expectations, and it’s part of the reason why they went from 4.5 to 4, not the only ones, as we progressed through the year
But generally speaking, intra-quarter volatility is not something that would have a meaningful impact on our run rate
Okay, so on the first, I think it is quite important to not look at the average and to kind of decompose it into constituent parts, because we’ve talked before about the fact that we use our balance sheet strategically in the CIB, but loan growth is not really a thing there, and so this quarter we saw no loan growth in CIB, so no big deal, but it means that that 7.5% core growth for the whole portfolio would have been outside of CIB, closer to 9, so start with that
Consumer has been pretty consistent, so across the consumer space, whether it’s our jumbo mortgages, whether it’s the business banking, card, auto loans and leases, they’ve been growing at reasonably solid and consistent high single digit territory, or even low double digit for mortgage over the last several quarters
At this point, we don’t really see anything that is suggesting that that will moderate meaningfully
So where you’re seeing---+and similarly in asset wealth management on the banking side
So really, where you’re seeing the growth moderate is in commercial, and it’s in both the C&I loans and the commercial real estate loans, and they each have a story
With the C&I loans for us, the story is about moving from meaningfully outperforming the industry to being more in line with the industry, so over the course of the last couple of years as we’ve added expansion markets, opened new offices, added a couple hundred bankers, developed our specialized industry coverage models, we’ve been growing meaningfully better than the industry, and so you see that even in this quarter in our year-on-year growth of 8% as compared to the quarter-on-quarter growth, where it’s flatter
That, to me, is really a factor of the fact that in this space in the cycle, our clients have strong balance sheets, they have a lot of liquidity, they have had access to the capital markets, and so GDP plus growth is not unlikely to be a level for the foreseeable future
With commercial real estate, it’s slightly different
We’re still outpacing the industry, but we’ve kind of gone from very strong to strong, and we would continue to expect that to slowly moderate
That’s a number of things - it’s from higher rates, it’s actually a lot of competition, and then it’s also about clients and activity given where we are in the cycle, so we are being very cautious about new deals that we add to the pipeline and the client selection that we have
So all of those factors, I think, weigh into the commercial real estate space
Tax reform, so fiscal stimulus, the reality right now is although I think everyone, and ourselves included, are hopeful, obviously that tax reform is done for the right reasons and that the economy responds accordingly, at this point it’s not front and center in the dialog we’re having with our clients about whether they should or shouldn’t do a strategic deal or take an action, so I would say it is neither holding up business nor spurring business, but that could change
So at this point, I’d say it’s a factor but not a driving factor, and that could change
Well, we’ll just deal with the fourth quarter because I think the landscape of rate hikes for 2018 is an open question
We would expect loan yields to hold relatively flat, all other things being equal
It’s a very competitive environment
We aren’t seeing---+you know, we’re seeing some pressure in commercial real estate spreads, we’re seeing generally spreads holding up, but I would expect competitive pressures to keep loan yields relatively flat
Yes, so we are---+at this point, we are at that 3% charge-off rate, rising to 3 to 3.25 next year and growing, so you should continue to expect that we’ll be adding to reserves
Our outlook for reserve add next quarter is below this quarter, but obviously we’ll continue to observe that
With respect to the hurricanes, right now in this quarter’s results in the credit lines in mortgage particularly and to a much lesser degree in wholesale, we’ve effectively built $55 million of reserves
To sort of contextualize that, we have used our unfortunate experiences of Sandy and <UNK> and other natural disasters to calibrate the assumptions we’re using
At this point, it’s early to be able to say how the losses will actually manifest themselves
It could be that it’s lower than that, but that’s our sort of central case right now, $50 million in mortgage and just a handful of million in the wholesale space
I’d just start with a bit of a philosophical discussion, which is it is our opinion that now, as much if not more so than ever, the investments we’re making in technology will effectively breed and deliver the efficiency, so to the degree that we are able to find incremental investments or accelerate them, we’ll be willing to do that
Our expense numbers in our outlook have never been targets, so that’s the sort of mental, philosophical point of view, that we would deliver any technology innovation and investments that we could execute well that we think would be either accretive to our returns through revenues or efficiency
Specifically when you look at the simulation, just as a point of technicality, in 2018, probably middle to third quarter of 2018, we are expecting that the FDIC (indiscernible) will reach its level at which the surcharge will be able to be reduced
That’s a meaningful positive for us, and so if you look at the implied growth and expenses from ’17 through the medium term, they are larger than it implies, but if we found the opportunity to do more or to accelerate more, we would do it and explain it to you, so we’ll come back to that at investor day
Yes, I think---+so when we did some (indiscernible) at the end of last year, I think that we said that we’d expect the revenue rate for the full year this year to be 10.5%, and it would be a little better than that
The revenue rate increase in the quarter speaks to a little bit of spread and a little bit of lower (indiscernible)
It will go down next quarter because of the fourth quarter effect of the Sapphire reserve travel credit for an overall, call it 10.6 for the year
But yes, we do expect to hit the 11.25% in the first half of next year, and we’ve reached the inflection point end of the second quarter and into the third quarter where growth is offsetting the impact of the significant upfront investments in Sapphire reserve, so we’ll see revenues grow from here
Yes, so I’ll just start with credit for a second, because although we absolutely expect at some point that we’re going to see normalization of credit, we haven’t seen that yet - I just want to make that clear
We are appropriately cautious and staring at everything, but we’re not seeing any deterioration or any thematic fragility in our portfolio that we’re concerned about at this point
With respect to the revenue side of the story and the efficiency side, it really is a story of all of the things you mentioned sort of all coming together at the same time, so we have been adding to---+we have our expansion markets from the WaMu acquisition, we’ve been adding new markets and opening offices, we’ve been adding bankers, and as you know---+
Yes, we are in all 50 of our top MSAs now, and we’ve been adding bankers
As you know, when you add all of these investments, for a period of time when they are still in the build-up mode, you don’t see that drop to the bottom line or to the top line, and now we’re starting to see our bankers hit their stride, become very productive, balances are building
Then, I would also say that this is at the epicenter of delivering the whole platform to our clients, so if you think about what we’re able to offer our clients in terms of international capabilities, banking coverage across industries, core cash, global payments, we have a platform offering I think that is---+well, it’s certainly complete and it’s somewhat differentiated
Then a third thing I would say is that it’s a buttoned up business
We have been looking at efficiency and expenses and really working on making sure that through the simplification processes that we went through in 2013, ’14 and ’15, that we are focusing all of our efforts on our core strategic clients, and it’s paying off
Yes, so I would say---+and like you said, there’s so many uncertainties that it’s almost talking about hypotheticals at this point, as encouraged as we are with the ongoing dialog
My view is sentiment is relatively high, in fact it’s picked up slightly over the course of the last short while, so from that vantage point we’re in a position of strength
There would necessarily be some lag, so whether that is a couple of quarters or longer, but certainly in the foreseeable future you would hope to be able to see increased demand and confidence leading to action
Yes, so I’ll start with the excess liquidity question, because while we feel very, very good about our liquidity position, and you will have seen in the recent disclosures where everyone is positioned, and necessarily even if LCR was the only consideration people would want to be running a buffer to LCR, so---+but LCR is not the only consideration, and the other most notable one I would point out to you would be resolution planning
So know that when we have our overall liquidity position, we’ve taken into consideration a combination of constraints, and so what may look excess on one lever may not be as excess on another
The second I would say is that when we look at the deployment of (indiscernible), we look at it in the context of our target for what we want the duration of equity for the company to be over the course of normalization in rates, and obviously it’s not just about liquidity, it’s also about duration
So we’re comfortable with our liquidity position, we have a framework for deploying it and for thinking about the spot and forward-looking duration of the company
That’s not to say that we are not opportunistic in taking advantage of moves that are technical in the long end of rates to either deploy or to un-deploy, dry powder, and we still have some
So it’s more than just liquidity, it’s also duration, and we’ve taken the overall (indiscernible) in our expectations and our targets into consideration, albeit that we still have some dry powder
Yes
So it will be over the short while, and our full expectation outside of any other like stimulation is that as the front end of rates goes up and as gradual QE unwind happens, that you’re going to see the long end of rates go up, albeit more slowly
So it’s pretty typical at this point in the normalization cycle to have a curve flatten - that’s what we’re seeing, that’s what we would expect
I would expect to continue to see the long end rise, and yes, it should be NIM accretive
I would say it’s wallet share, it’s blocking and tackling
We did pretty well in Europe but there is still a lot of competition, so I would say it’s less about the specifics of any one competitor because the environment is pretty competitive, and just about sort of reasonably broad strength
Two things that I would also point out is, first, in equity underwriting, similar to in FIC, we gained a couple hundred basis points of share in the third quarter of last year, so on an apples to apples basis to where we would normally expect our share to be, we’re still doing very well
Okay, that was a lot
So look, first of all, we welcomed the report and it’s a long report, a couple hundred pages
There’s a lot of recommendations, very comprehensive, so kudos to the treasury for delivering it
We are supportive of those recommendations kind of writ large, and I think the most important thing to remind you is that this is not about materially changing the legislative landscape
It’s about recalibrating, sensibly recalibrating the specifics of individual rules over time
So we’re still digesting the report, but we are supportive
It is very comprehensive and it could be very beneficial to the liquidity and depth of the capital markets, which is what we should all hope for, and not contrary to safety and soundness
So in that sense, very supportive, all good
It’s going to be complicated and it will take time, but the will is there, and so whether it’s the administration or the regulators, there’s a general recognition that there’s the ability and the appetite to want to make rational change, and so if that helps to grow the economy and all the things that come with that, we’re working as constructively as we can on that
We have a fairly large mortgage loan portfolio in addition to having a large portfolio in our investment securities in NBS, so we are already reasonably equivalently mixed in terms of our percentage of mortgage exposure to our total assets or loans to the competitive landscape
Trust me when I tell you that you talk about excess liquidity because of LCR, and we are thinking about more than just LCR, and we do---+as I said, while we do maintain a short position and the cost of being short is relatively cheap, we don’t have the kind of capacity to invest $100 billion-plus in NBS right now, or anything that’s meaningful like that to generate higher returns without blowing through our duration targets
No, we haven’t
As we talked about before, a while ago we made some surgical changes to our credit box in the card space, but that’s, if anything, I would say incredibly granular, incredibly surgically tightening, not the reverse
Whether that’s in card, in certain micro cells, or whether that’s in auto, I would say we’ve been pretty conservative and we’re probably doing at the very margins a little bit of tightening
Well I mean, congratulations to them if they have a high degree on what 2018 CCARs will look like
I will tell you this - we said very clearly that we feel that the company should operate within the range of 11 to 12.5%
We feel like it should be lower in that range, and having a capital plan approved as $19.4 billion of share buybacks over the next four quarters and over 100% payout based on analyst estimates is a start
So nothing has changed about that objective, but we would want to be measured about the pace at which we do it until we have a bit more final clarity on what the new generation of capital rules will look like, so we hopefully will know more as we go into the next cycle of capital planning
We haven’t changed our point of view that we should be able to continue that journey down into the range, and that would be our objective
To tell you that we can give you the road map for that today, I think is not accurate
But you can do---+you can and you have done your own math
Look at our earnings outlook in your models and payouts of over 100%, and you can see that we can move down in that same time frame to something much lower than we are now, if not towards the bottom
But that’s not to say that we will be able to do that - we need to go through tests
So the compliance burden and the readiness and work to be ready is a significant heavy (indiscernible), as you say, for all market participants, so there is the possibility that effective at the beginning of the year, there will be ongoing work that needs to get done
We feel like we’re reasonably well positioned to defend our position, but there’s no doubt that over the course of the year and beyond that people get clearer and clearer on transparency and cost to execute versus advice, versus content, that there may be competitive dynamics that change, and we feel like we’ve been building for the last several years to be ready for those dynamics
So there could be some bumps, but I don’t think it’s anything that we’re concerned about at this point, and we will all learn a little more as we go through 2018.
You know, I would say that for sure has to be part of it, and even with the auto situation, what you’re seeing is, I think, a marketplace that is much more responsive
So while we felt like we got ahead of the issues and tightened early, you’ve seen the sort of industry generally move in that direction
I think there’s no doubt that the environment in totality with capital liquidity controls regulation has led to higher quality loan books, so yes, we have been pressure tested
Energy was a one in a 100 year flood, and I think the industry and specifically our portfolio performed really quite well
Now that’s not to say that there isn’t a point of pain out there somewhere that we won’t see; we just feel like we’ll be in a position to get through that
Yes
Yes, all of the above
I would tell you that we are seeing that rotation start
If you go back even three years ago, we kind of gave you an outline of what would happen
We said we were going to see rotation from the high wealth segment into investment assets, followed ultimately by the consumer space
We’ll see retail deposits move into money funds, we’ll see outflows of wholesale (indiscernible) deposits as the Fed shrinks its balance sheet, but those things are going to play out over the course of the next---+you know, depending on the rate curve, over the course of the next two to four years, so we’ve begun to see it
It should be expected
I don’t think it tells us anything new or different necessarily at this point
Yes, so look, our card spend growth at 13% up year-on-year is still very strong, so when we say moderated, it’s from very strong to very strong, and it is in part due to the number of new products we’ve had
So we would continue---+the Sapphire reserve card spending engagement is very strong, and we’re very pleased with it, so I wouldn’t say it’s a moderation necessarily
It’s just at these very high levels, slightly higher to very strong is still a great story
If you think about our first acquisitions were in August and September, so we’re kind of at the early stages
So far very encouraging, so far better than our expectations, but a little early to sort of draw some conclusions on it, but very encouraging
Okay, thank you everyone
