Unknown Analyst
Thank you, everybody. It's a very, very distinct pleasure of mine to introduce the preeminent leader of our industry, person who's been the preeminent leader of our industry for many decades, Jamie Dimon. It's an even greater pleasure when he was your former boss. Thank you. Thanks for coming.
When I say Jamie has been a leader of this industry, it's not just that he has run the largest bank in the world, the most excellently run. He's shown us how to do it. But it's also he's been a leader for the way the industry should think about the business and the business of banking through the financial crisis, through the European crisis. And this year, through what happened with the regional banks.
And that's very important for us to keep in mind. And it's also the basics of what good banking is about, disciplined growth, good risk management, the importance of technology and systems. He was talking about it a lot before many people did. I know you all want to hear from him. I'll just say one more thing, which is that when I used to work at JPMorgan, often we'd ask ourselves the story whether we were going to take something to him or not, face a problem. Well, what would Jamie think? What would he do?
To my surprise, and it should not have been my surprise, I found that I continue to do it afterwards. And I'm not the only bank CEO who does it. And there can be no greater tribute to a person than to say that you've taught us. So Jamie, thank you for coming.
James Dimon Chairman & CEO
Venkat, thank you very much for the kind words. Thank you.
Jason Goldberg Barclays Bank
If we could just put up the first ARS question as we get going. But Jamie, thank you for taking the time. I appreciate you being here.
I really want to do focus on JPMorgan this afternoon, but I'd remiss if I didn't ask you about your macro view of the world, perhaps on the consumer side, 80 million consumer customers, 12% deposit market share, over 20% card share. You must have a well-informed real-time view of the health of the consumer. So we'd love to hear about it?
James Dimon Chairman & CEO
First of all, thrilled to be here. Jason, one of the great analysts in banking, I read all your stuff, as you know. And Venkat, thank you for those kind words.
I'll tell you by the consumer, but there's a big but. So I want to be -- it's pretty good. They have more money than they've had, home price has gone up for the last 15 years. Asset prices have gone up. Their balance sheet is in great shape. Their incomes have gone up. They've got more cash in their check-in accounts than pre-COVID. It was a lot more, and it's been coming down so that excess -- we call it excess savings seems to be normalizing. Wages are going up, particularly at the low end. It's pretty good, which is why you have a pretty good economy.
And there are huge buts here. And I just think people will make a mistake to look at real-time numbers and not look at the future. And the future has quantative tightening. We've been spending money like drunken sailors around the world, this war in Ukraine is still going on. Those are really big buts. To say the consumer is strong today, meaning you got to have a booming environment for years is a huge mistake.
Jason Goldberg Barclays Bank
And then maybe shift gears leading positions on the wholesale front. I was hoping you could take us your thoughts there as well.
James Dimon Chairman & CEO
Well, same thing. If you look at wholesale, and -- we were quite honest about it, we've been over earning on credit. We're over earning on credit. You see it in credit card, where we all would probably say the lowest credit card loss will ever go, a norm is 3.5. The lowest ever go is like 2.75, they hit 1.50. Now they're going back to the 2.50, 3.00, just the normalization.
Wholesale had the same thing. We had the lowest wholesale credit losses we've ever seen. Literally, probably in the history of banking, we had middle market losses for the better part of 5 or 6 years, and it's still good. It's normalizing. Downgrades are being upgrades, there's a little more stress and strain, particularly in certain sectors like real estate, you're getting a little more stress and strain in subprime auto and stuff like that. But it's -- I call it more of a normalizing process.
If and when you have a recession, which you're eventually going to have, you'll have a real -- a normal credit cycle and which I think is quite predictable. In that normal credit cycle, something always does worse than normal. So this one, the obvious one is office real estate, but there'll be a couple of other industries that probably do worse than normal this time around, too.
Jason Goldberg Barclays Bank
And maybe just offer your high-level perspective?
James Dimon Chairman & CEO
But again, think of it -- it's the same thing. I really -- the fiscal spending, deficit spending is higher than it's ever been as a percentage of GDP other than more time. People -- and that's before all the additional commitments to the green economy, the remiliterization of the world, the IRA Act, the Chip Act, Europe financing, the energy crisis, which they did last winter, God knows what it's going to cost them this winter.
There's a lot of fiscal stimulus taking place out there. And the largest and COVID still running through. The large asset QE is still running through. So we're still living on that, and that's really strong. And of course, that drives everything, including business results. So businesses feel pretty good because they look at their current results, they're not so bad. But those things change. And we don't know what the full effect of all these things are going to be 12 or 18 months from now.
Jason Goldberg Barclays Bank
I guess maybe talk at a high level how you think the banking industry performed against that backdrop. Obviously, March was this many crisis you dealt with, we have this potential for a high interest rate environment to stick with us for a bit. You talked about potential CRE losses, which I know is a major concern for JPMorgan, but could obviously weigh on others?
James Dimon Chairman & CEO
The banking industry is quite strong, and we call it mini crisis because the only so many banks were offside on interest rate exposure and wish everyone knew, by the way, it wasn't Plainsight, HTM and incented by regulations to put your money in HTM, less capital requirement, didn't have the market-to-market.
Of course, accounting is not the marketplace. The market makes its own decisions about what they really think about accounting. And accounting, it can be a fiction like what's the fiction between HTM and AFS and all that. I never particularly like HTM. Why would you be better off tying your own hands and what you can do with securities. I just never quite understood that concept.
But that crisis, what we didn't know was the runnable deposits. Runnable deposit is not the same thing, it's just uninsured. There are a lot of banks that uninsured deposits are quite sticky. And so you got to be -- we got to be a little more analytical about that. I hope we don't overdo things and regulations around that, too.
But the thing about the banking crisis, and I would tell us about the economy in general is if rates go up, and I give a higher odds than other people. I think that the fiscal stimulus, QT, the change of flows around the world, there's a chance that rates go up, that if rates go up other 50 basis points, that will cause more issues with banks, more issues with real estate.
And if you have that with the recession, yes, you're going to see a little bit more stress and strain in the system. And then the banking system, which I think is broadly sound. And a lot of these banks that you see are strained themselves today by buying back less stock, beefing up capital, reducing the duration in the AFS portfolios. But you will see that stress and strain elsewhere, too.
That will be Warren Buffett's fame is tide going out. There's going to be a lot of people swimming naked. And so -- again, I -- as a risk manager, I look at that and you should be prepared for it. Every bank should be prepared for it, some won't be, but -- and so should other companies. There will be leveraged companies, possibly private credit, if that happens. And I'm not saying it's going to happen. We don't know -- I don't spend a lot of time guessing about outcomes of soft lending, medium recession, hard recession because nobody knows. I do think we should be prepared for the tails.
And that's -- those are the tails we're kind of prepared for and I think other peoples should be, too.
Jason Goldberg Barclays Bank
I usually don't start with capital, but given the Basel III and gain proposal came out late July, I'm sure you spent all summer.
James Dimon Chairman & CEO
Yes, we didn't say.
Jason Goldberg Barclays Bank
1,100 pages worth?
James Dimon Chairman & CEO
1,100 pages after 10 years I mean, honestly, like this has been a lot for too long, but.
Jason Goldberg Barclays Bank
Maybe at a high level, what were your main takeaways?
James Dimon Chairman & CEO
Let me count the ways. Hugely disappointing for the following reasons. So think of strategically, what I would love to know what they really want to accomplish. If they want the mortgage business outside of banking, they should say it, raise the capital, put operational work against it and push it out. I think they don't do that, just tell us not do any mortgage anymore.
If they want a private credit leverage lending out of the system, that's fine. But I think what is it they actually want? Do they want banks never to fail? I never thought that was the goal. But if they want things never to fail, this isn't going to do it, we should do something else.
Do they look at other alternatives. Did they actually learn the right lessons from Silicon Valley Bank and First Republic? Like, the -- like I think they have enough authority to tell banks, you could take this much interested exposure and not that. And that were to solve some of these problems right there.
So it was never a capital problem. And so I'm thinking -- what does they want? They look at comprehensively. I would love to know the cost benefits to society of pushing some of these things out. I look at this major issue about -- we've gone from in America in 1996, 7,300 public companies to something like 4,500 today. So it should have gone from 7,300 to 14,000 with the growth of the economy and growth. Private equity has gone from 1,000 to 10,000. Why is that? Are we better off by having less transparent private markets than public markets.
So I think there's a whole bunch of strategic issues they should have asked, thought, analyzed, shared some of the cost benefits, shared some of their thinking about all that kind of stuff. Then there's what I consider more tactical? Like I've always thought G-SIFI is an asinine calculation. Operational risk is even more asinine.
Do you like diversification? I think diversification is a wonderful thing. But G-SIFI, some -- some not the stress testing because that actually incorporates, and operational risk is anti-diversification. And operational risk are all revenues equally bad, really -- like honestly, I look at that thing, who did that, what person and what Ivory Tower thinks that, that is a rational thing to do.
And then I would prefer more transparency, not like on the miles. I mean no one is going to try to game it, but a little more transparent with the process they went through. Did all the governors have a point of view. I'd like to know the other governments think. I want to know and go back to strategic. I'd like to know why on the international side, if you look at the numbers, so take Barclays and us, you may not know this yet, but -- no, but we would have to hold 30% more capital than a European bank. Is that what they wanted? Is that good long-term. Why? Didn't we say we're going to have international just? What was the goddam point of Basel in the first place?
And I look at all that, it's like, what is it we're actually trying to do? And so it's, by the way, 25, we think, like you said, the 1,000 pages, and we haven't been till the detail, but if you take it the way it is, basically, we think today is 30% more RWA. I don't know where they came with their 19. I just -- I'm missing that, and it's 25% more capital.
And the other -- so we will be forced to optimize in a million different ways. And the MPR probably won't be all the way there. But every single thing was put in the outlier, like G-SIFI was supposed to be adjusted by their own rules for the size of the global economy. It wasn't. It will be half what it is if they did that.
And so I don't mind the changes they didn't make, which actual did add a little bit of capital for us. I'd like to know why they didn't make the other adjustment. If that's the adjustment they should make, they should simply make it FSRT. So capital -- the FSRT, I'm not against proper capital but doesn't CCAR, G-SIFI, operation with capital, FSRT, all double account, the global market shock that's in CCAR. What do they try to do is I just -- all I want is fairness, transparency, openness and they students right for the United States of America. I'm not sure they did most of what I just said.
Jason Goldberg Barclays Bank
A lot of follow-up.
James Dimon Chairman & CEO
You can portal that, too, by the way. And the bank is quite upset, and that's also nothing. I'm not sure it's a great thing that we have this constant battles with regulators and as opposed to open thoughtful things. We used to have real conversations with regulators. There's none anymore in the United States. Like you're virtually none.
This doubles just all from up top, imposed down below and then you got to -- of course, we simply have to take it because they're judged jury and hang them in, and that is what it is. JPMorgan will adjust, will survive, we'll do fine. It will have unintended consequences that they may not like including one day, I think you're going to see much more volatility in the market like you saw in COVID in February 2019, and they won't realize that they actually close that.
Jason Goldberg Barclays Bank
I guess are there any lines of business you feel need to cut back on or get out completely in light above that?
James Dimon Chairman & CEO
I'm not going to sit and tell you what a lines of business. But yes, we might. We -- you have -- every one of us will have to optimize different products, services, clients, locations. But -- I mean give us time. We got to go through all the rules in detail. They're probably going to clarify with some are -- some are not completely clear yet, and then we'll figure it out.
Look, all these banks are smart people. And it also, in my view, causes a little bit of this herd thing where the Federal Reserves have a little humility. They're the ones who told the world rates aren't going up. And it wasn't the Federal Reserve in general, is each one of them independently. In fact was each central bank. So if I would then I have a little more humility over stuff like this.
Jason Goldberg Barclays Bank
So you've been pretty open with your views with us today. I suspect over the last month or so, you've expressed these views with other the regulators?
James Dimon Chairman & CEO
I was on vacation.
Jason Goldberg Barclays Bank
So you haven't done that?
James Dimon Chairman & CEO
Trying to de aggravate myself from this kind of things like. I want them to do the right thing. It's just clear to me that they didn't. And now we have to go through all these rigor work NPRs. Do you think the NPRs going to make a s*** of difference. It's my academics argue with their academics, and they could do what they want anyway. That's all that's going to happen.
Unless some other Fed governors or other people decide to get deeply involved and try to do what's right and fair, and they think about what's good for the country, not just -- can they stop themselves ever from being blamed for a bank failure.
Jason Goldberg Barclays Bank
All right. So I guess I won't ask the question, where do you think you have the greatest chance to make progress?
James Dimon Chairman & CEO
I expect no real progress.
Jason Goldberg Barclays Bank
I guess, in that backdrop...
James Dimon Chairman & CEO
Unless some of these other regulators get tougher and decide they should be pushed around by 1 or 2 people in the Federal Reserve.
Jason Goldberg Barclays Bank
So I guess if we take what you said RWA is up 30%. Now was that for JPMorgan, you were talking about [indiscernible]?
James Dimon Chairman & CEO
That's JPMorgan.
Jason Goldberg Barclays Bank
RWA is up 30%...
James Dimon Chairman & CEO
But you -- I don't know -- and my rough is roughly the same. RWA and CET1 have done slightly differently in this thing because CCAR is absolute dollars. And so it's slightly different. That's why one is 30, one is 25.
Jason Goldberg Barclays Bank
So I guess you've talked about this 13.5%?
James Dimon Chairman & CEO
But all of this, honestly, like, say, if you look at -- they say, do they want banks ever be investable again. I -- if I look at my money because I'm not going to sell my stock and stuff like that. I think we would to navigate it. I wouldn't be a big buyer of banks.
Jason Goldberg Barclays Bank
All right. So let's unpack that. So RWA is up 30%...
James Dimon Chairman & CEO
Look, I'd be no better than equal way, whatever you call it.
Jason Goldberg Barclays Bank
So RWA is up 30%. I assume you keep a 13.5% CET1 ratio, your 17% ROE target goes -- ROTC target goes to 14%.
James Dimon Chairman & CEO
Quick. Yes.
Jason Goldberg Barclays Bank
So I guess...
James Dimon Chairman & CEO
I noticed.
Jason Goldberg Barclays Bank
So I guess a couple of things. So is 13.5% the right number? Or could that come down? Or what could you do to kind of work around that?
James Dimon Chairman & CEO
Well, I first say is that we're retaining more capital because we don't wait the end of this thing to phase all in. We can still buy back some stock, approximately the rate we're doing it today and get there by the end of 2024, the new rules. Obviously, you just did a calculation, the MPR may change a little bit. But I agree that's the right place to start. And then we will optimize differently. So we will get back some of that, maybe not all of that.
I also think that the short run, like the next couple of years is very different than you look at the long run, I think of American banks have to hold 30% more than competitors around the world. That is a huge negative over a long period of time. It may not be a negative over a short period of time because of the position we all built up.
But basically, it means -- what it should mean is I'm going to have certain things should not be held in the banking system. That's what it means. Almost all loans are bad. Just listen, almost all loans are bad. And the other thing we have to look at is what does it mean for the consumer , like small businesses, mortgages, middle market loans, and it will cost more in credit.
And I haven't done the economic analysis about what that cost is on growth for America and stuff like that. So -- but we'll optimize. We'll get back some of that. Some of it, like I said, will have unintended consequences. It may cause more concentration in banking by client. So I can envision to a bunch of things where it's going to happen is that the big guys will get more of it for a whole bunch of different reasons, not less of it, even though I just said loans could be bad because you've got to earn it back elsewhere.
So most people wouldn't make loans to be in the loan business anymore.
Jason Goldberg Barclays Bank
Why don't we put up the next ARS question. So I'm not going to get up [indiscernible] that easily, Jamie. But -- so 17% goes to 14%, then there's minification, optimization, change in business practice, potential market share gains, reprice. What do you think that 17% number?
James Dimon Chairman & CEO
I really don't know. 17% is pretty good. So I'm not -- it's like my own people, they say 17, we've done it a couple of years. I did these numbers myself because people question these things. We -- I reused, I think, in our proxy, 12 peers. And how many years, over the last 10 years, did a company earn over 18% even once -- of those 120 years.
If I remember correctly, it was 5% or 6%, and we were half of that or something. And how many earn below 6% in those years? It was 30 or 40x. And so if you can -- if we could earn 17% for the rest of my life, I would take that in a second. I'd push that button right now and retire. I mean -- and that 17% would probably be 50 years if someone here can do the numbers, we're probably be half of the global GDP.
So then, so if that's a good number. And if it's a little bit less, we can deal with that. So -- but we -- Jeremy, when we -- obviously, we're doing a lot of work now. When we do our quarter, we'll probably give a little bit of update when we think about it. But it's not over yet. People -- the NPL tends to change. I don't think it's going to change a lot, but it will tend to change a little bit.
Jason Goldberg Barclays Bank
I just saw on the on screen, though, but the audience was roughly 50%, 15% and then 25% each 14 and 16.
James Dimon Chairman & CEO
I'm not going to target 14%. You can take that off the table, okay?
Jason Goldberg Barclays Bank
Okay. We'll take mid-teens plus. I guess also, we didn't talk about the new G-SIB rules. But with the proposed changes, it seems the practice G-SIB management will be harder to achieve. It seems like you've kind of had this upward trajectory there. Any kind of increased ability to manage that more effectively?
James Dimon Chairman & CEO
They're the same thing. We take every one of these things, and you're going to manage it down to the product level, the regional level, and the client level. So we're going to do our homework in each one, including G-SIFI, operational risk capital.
So operational risk capital, and I don't know the answers yet, will affect mortgages, which is already a s***** business. And is that what they really want to do. So I don't know. And then like you said, it comes to optimization, whatever it is, if we can earn different types of revenues in that client or that product, something like that, you may be able to make up for some of it.
Jason Goldberg Barclays Bank
Got it. And then I guess before moving on.
James Dimon Chairman & CEO
But I think they did 2 right things in G-SIFI, like the bucket is 10 basis points and the average has done slightly differently. Even though -- believe it or not, that's worse for us because it takes our 4.5% up a little bit.
Jason Goldberg Barclays Bank
And then in next month, the SCB actually falls from 4% to 2.9%, I guess, against the new Basel reform?
James Dimon Chairman & CEO
I'm not sure it is going up to 4% should have ever happened, and it shows you about SEB. Again, that was never meant to be a regulatory capital regime. Why it's being added on top of as capital is going to beyond me at this point? And also, I think having that kind of think up or down 1% in a year, so it was not a good idea. And then maybe where they got to that 19% number, they took credit for that in the 19% number, which to me wouldn't -- they've have been completely honest.
Jason Goldberg Barclays Bank
And I guess could buy back share repurchase continue or that goes on hold until we figure this all out?
James Dimon Chairman & CEO
Are we -- is anyone here from JPmorgan Investor Relations. No, I mean we are buying back stock at a lower level. That can continue all the way to the end of '24, and we can meet our new capital requirements. So it will be less than you might otherwise have done. But right now, I'd rather wait and see. I'm also quite cautious in fiction getting about the environment, more cautious than other people. I think there's more potential odds of an accident of some sort than other people think.
Jason Goldberg Barclays Bank
I guess, maybe we can shift gears maybe to the business against that. And maybe just start on the top of the house and just net interest income, just your kind of macro thoughts in terms of loan growth, credit cards has been strong. Most other areas have been subdued, economy is slowing, RW amortization becomes top of mind. Just kind of what's your outlook for here.
James Dimon Chairman & CEO
Yes. I don't worry -- loan growth is always an output. It's not a goal. We don't look for it. So credit card is going up again. It's mostly normalized, our revolvers go up. and revolving there is notion that revolvers are higher they've ever been, not really true. It's actually just the economy to size the average revolver balance is still lower than pre-COVID even though we're back at the number of total revolvers before.
The other loan areas are although real estate down a little bit, some levelizing, middle market down a little bit, some because they used public market -- the public markets opened up, so a bunch of industries that just sold bonds and paid-up loans and stuff like that, which is completely normal.
And NII, I think we've given you numbers as they haven't really changed that much, you have them, right? Whatever they are, they're the same as they were before. But I caution you, we're still over-earning in that number. And we probably do a little bit better than we told you, but think of quarter-by-quarter because the uncertainties are so large competition, the ability to move money, QT, QT has been all over the place, like first, it happened and then when the bank failures happen, they basically reversed some of it.
The Fed sold a lot of T bonds. A lot of it came out of RRP, not at a bank deposits, but bank deposits are going to come down with QT. At one point, you'll see reduction in deposits and there'll be more competition. A lot of banks don't need the money, so they haven't been competing. But if you look at bank competition, it's very regional. And it's very bank specific. This bank wanted money. There's banks doing CDs. I just think what's going to happen with NII, we know it's going to come down to a different level. We just don't know when. And I don't want to predict one.
Jason Goldberg Barclays Bank
I still got to ask a follow-up.
James Dimon Chairman & CEO
We still can earn good money. It isn't like -- we'll just giving back to over earning part.
Jason Goldberg Barclays Bank
You said a little better. So your guidance was $87 billion for 2023. So you're saying a little bit better than that?
James Dimon Chairman & CEO
Could be a little better than that, yes.
Jason Goldberg Barclays Bank
And then you've also talked about the mid-$70 billion number at some point in the future. Although I think when you gave that number that was before First Republic, I just...
James Dimon Chairman & CEO
I think, yes, that's before First Republic, yes.
Jason Goldberg Barclays Bank
I guess do you want to opine on that figure?
James Dimon Chairman & CEO
I'll let Jeremy do that when he does quarterly earnings. We'll give you an update, but I still think there's the over-earning component. And I think I'm quite cautious about that, too.
Jason Goldberg Barclays Bank
I guess you touched on deposits in terms of dealing with QT and money fund competition paid as kind of been, I think, lower than expected at JPMorgan, so far? I guess your mid-70s number implies a catch up in here. Just maybe talk to in terms of just how you manage the balance sheet backed up.
James Dimon Chairman & CEO
So we -- I hate this deposit beta number because it includes small business, large corporations, it's all over the place. We have a huge payments business. I would say it's been what you would expect in everything other than consumer, which is the bulk of it. So large corporations and businesses so it can move money pretty actively, we had to compete for that.
It's the consumer side where JPMorgan isn't as competitive as other banks. We're retaining a lot of the deposits anyway because we have other programs or stuff like that, but that's the one point you're going to have to increase it. And even aside in my own company, Jen and Marianne will say x, I'll say y. Jeremy will say z. We don't know. I don't ever care that much. It is what it is.
It will be what it is, we're still going to earn money. I just want to acknowledge the over earning part. Right now, we're retaining more of NII we would expect to, had there been a normal thing in that. I think every bank is in a different position what they need or don't need.
Jason Goldberg Barclays Bank
Got it. And then maybe shifting gears to trading and investment banking. I have to get the [indiscernible] before a how is the quarter going question out of the way.
James Dimon Chairman & CEO
I always hate this one, too. So -- because really, like it's not over yet, no one knows. Quarter-over-quarter, year-over-year, down 1% or 2% in trading. And I think it's something like that in Investment Banking. Pipeline is strong, but I always remind people, I never talk about pipelines. You know why? Pipelines is like open and close. They don't really tell you what's going to happen for equity or certain types of debt or stuff like the M&A. There's a lot of people talking a lot of it, [indiscernible] stuff taking place, markets are open.
Jason Goldberg Barclays Bank
The trading?
James Dimon Chairman & CEO
Trading is doing fine.
Jason Goldberg Barclays Bank
So down 1% or 2% year-over-year.
James Dimon Chairman & CEO
I think that's what I said.
Jason Goldberg Barclays Bank
And Investment Banking...
James Dimon Chairman & CEO
I'm sure my own people are going to correct me on that. I think roughly equivalent to last quarter, something like that.
Jason Goldberg Barclays Bank
Flattish?
James Dimon Chairman & CEO
Yes.
Jason Goldberg Barclays Bank
Sequentially? These are the questions I get asked, My phone is going to start buzzing if I don't get clarity.
James Dimon Chairman & CEO
That's the Momenta hedge fund guys. Those of us who build businesses or job to serve clients through thick or thin regardless of whether we're going to earn our fair share of our clients' revenues over time.
Jason Goldberg Barclays Bank
So we could pull up and talk big picture if you prefer. But if you look at aggregate, the big 5 U.S.-based trading banks, this will likely be the fourth straight year trading revenues in the $100 billion to $110 billion band. That number used to be in the $70 billion, $80 billion band, kind of pre-pandemic. Maybe the medium term or longer term, what do you think is the right number?
James Dimon Chairman & CEO
Yes. I think that -- and that $70 billion to $80 billion was down for a much bigger number before that. So you did have a huge over a long period of time, down -- that coming down, some derivatives, some CLOs, some CMBS. A lot of stuff went away. I think the -- in my own view is a little low. This is more normal.
Here, it can grow from here. Now but it's trench warfare. We have to compete with Goldman Sachs and Morgan Stanley and Bank of America and Wells and Citi. But from here, that wallet may very well grow because remember, assets of the world grow and products grow and investments grow, international flows grow. So I think it's a possible it grows from here. If you have a recession, it's one thing, but if you have growth, it's another thing so -- but I mean we hope to eke out share gains. That to me is the most important over time.
Jason Goldberg Barclays Bank
And then you mentioned pipelines on the Investment Banking front, this clearly, post-Labor Day, it feels like there's some big IPOs in the market. DCM issuance was very active last week. M&A feels like it's coming back in terms of talk to kind of green shoots on what you're seeing there?
James Dimon Chairman & CEO
And again, you're just guessing the weather here. But DCM is a steady amount because people be financed. Sometimes CFO sentiment, they wait because they think rates are too high or too low. I think they make a mistake if they do that. I wouldn't spend too much time speculating about what you're going to do.
The DCM component, which is episodic is M&A related. So that will follow more M&A. And a lot of talk taking place whether they get finished or not, I don't know. And ECM, you saw -- to give you some numbers, I think in 2021, 400 IPOs. 2022, 40. This year, I don't know if somebody remember 70, 80 so far this year. It's open. But the open is much more for companies earning money, more legitimate stuff like that.
When I hear that -- and more people are having those conversations, companies going public that it's going to be a down round, but grow up on that one, too. It's not a down round. The last one was overpriced. And so yes, ECM is open. That can stay open until it doesn't.
And that's the most -- that's the pipeline like an accordion, it opens and closes over time. And when it opens up and values are pretty good, which they are today, and it closes when people think they can get a much better thing if they wait. My advice to a company, you can go public, you want to go public, you need to go public, don't wait too long. There's no -- I wouldn't -- I think the uncertainties out in front of us is still very large and very dangerous.
Jason Goldberg Barclays Bank
Because, again, that expenses in the first half of the year, $40.3 billion, even if adjusting for First Republic, you're kind of running better than your $84.5 billion guide?
James Dimon Chairman & CEO
It's rough, yes. When you say better, that bounces around a little bit, it's roughly that maybe a teeny bit better but yes.
Jason Goldberg Barclays Bank
But. I asked -- we had Daniel here last year, I asked a similar question.
James Dimon Chairman & CEO
Next year, he said something like that.
Jason Goldberg Barclays Bank
Well, I pointed -- he ended up beating last year by $1 billion. So are you beat it -- I mean.
James Dimon Chairman & CEO
I don't know.
Jason Goldberg Barclays Bank
You don't know?
James Dimon Chairman & CEO
I like spending money. You know that, right?
Jason Goldberg Barclays Bank
Yes.
James Dimon Chairman & CEO
No, I think what we've guided to before is still where we are today. But I also caution people here, we are a company that's not afraid about spending more if we think it is good for the long-term shareholder. So I would separate expenses into waste cutting, like BS, B*******, meaning too much, reporting if you don't read and then investments.
To me, opening a good new branch or building new good new system or hiring bankers in the country with wealth management bankers or investment bankers where you know you're going to do okay. It just isn't okay in the 12-month time period. Accounting is a fiction. 12 months means nothing to me. So to me, I always look at what is this mean if that's going to pay you off, it's not expense, it's a good thing to do.
And also, by the way, bad revenues. Warren Buffett always says, he was in the insurance business, sometimes you're better off taking your sales force and paying them, but paying them to play golf not to do any more underwriting. That happens in loan business too. And the way we avoided a lot of problems and high levers always is we got priced out, we wouldn't do them. And those are good non-revenues.
Jason Goldberg Barclays Bank
I guess, as you kind of think about the '24 budgeting process, are there any particular areas you like you feel like needed investment and I think consensus has an $88 billion number out there. Is that how you think about it?
James Dimon Chairman & CEO
That would be roughly equivalent, but the budgets are -- they're in phase right now and people are doing it. And I think we've laid out to guys a lot the investments, where we're adding technology, AI, branches, bankers and some of those investments, I can't tell you exactly what the returns, some of we know exactly what the returns are going to be. So -- and I think those plans will be roughly similar this year than they were last year, roughly. Something is up, something is down. The First Republic obviously changed a little bit where we have to deploy some of our resources.
Jason Goldberg Barclays Bank
I guess speaking of First Republic, can you maybe provide us an update in terms of employee customer retention, system integration. Any update to what -- looked to us as conservative assumptions around that deal?
James Dimon Chairman & CEO
Yes. They're still conservative assumption around that deal. And again, Jeremy will update you more, a little bit better on retention. I mean we've been losing a bunch of people, but they were almost all -- from the time we did it, they were almost -- had signed out beforehand. Better retention of access to we might do better retention of assets when we might have thought better retention of deposits that we might have thought. More business related than consumer related.
We closed, I think, 20 of their branches like literally this week. So we are keeping 60, very happy with some of the stuff we found. Remember, very clean assets, very good clients, some very good bankers all across the board. They did some wonderful things in how they handle the clients. So we're trying to figure out how we can do that, enhance some of our offerings and stuff like that.
Marianne and Jen have been doing a great job and the integration side is very basic. There's only so many apps, almost everything they did was outsourced. Some are going to be done through [indiscernible], some are going to be done through actual conversion and stuff like that. But we've done this before and hopefully get them all done by the end of 2024. I'm sure we'll get them all done within 2024. I tell Jen and Marianne, we got one we've done in 9 months. So let's move on to the bureaucracy.
Jason Goldberg Barclays Bank
This would be easier.
James Dimon Chairman & CEO
It should be easier.
Jason Goldberg Barclays Bank
You touched a little bit in your instruction around credit quality, but you talked about credit card charge-offs being 2.6% this year, 3.5% normalized.
James Dimon Chairman & CEO
Didn't say that, but go ahead.
Jason Goldberg Barclays Bank
Well, not today, but July. Jeremy said it in July. Is that wrong?
James Dimon Chairman & CEO
No, he did say that, yes.
Jason Goldberg Barclays Bank
What would you say?
James Dimon Chairman & CEO
Jeremy is usually roughly accurate.
Jason Goldberg Barclays Bank
I guess we've talked about this normalization and deterioration. Obviously going through this normalization process, any signs of deterioration?
James Dimon Chairman & CEO
Just very modest. I already mentioned, we look at like downgrades and upgrades in middle market, wholesale, more downgrades. You see -- you've all seen deterioration. We're not big in auto subprime, but you've clearly seen it there. It's explainable. So I don't think it -- it's nothing like the early indicators when subprime started going bad in the mortgage business in 2007. So there's a little bit -- a little bit in some leverage companies.
So yes -- but again, if rates go up, and things get more recessionary, you are going to see more people out there with problems. Part of that will be completely normal, part of that will be worse than normal because of the rate side. People are just not ready or used to 6.5% rates.
Jason Goldberg Barclays Bank
And then you mentioned it's kind of awkward.
James Dimon Chairman & CEO
That's possible. And the other thing about the rate side, keep in mind is because people look at the treasuries, at 4.2% treasury, 10-year treasury, but credit spreads are low. You look at the -- okay, are you ready? Okay, I'll ask you a question. This is when I asked the people like, high yield, credit spreads today or what?
Jason Goldberg Barclays Bank
Not that wide.
James Dimon Chairman & CEO
I'm going to say like 450 or 500, something like that. What were they -- what's the worse they ever got before the great financial crisis?
18%. And when I got to JPMorgan, I had them stress test 18%. They were, it'll never happen again. Well, maybe not, you're going to stress test 18%. What do they get to in the great financial crisis? 20%. At 20%, 1 or 2 people making markets in those bonds, you couldn't sell them anyway.
So it should happen, folks. And when spreads are very narrow and sentiment changes rapidly and governments have to sell, the United States, government is going to have to sell. Either they're going to sell net new bonds of $2 billion -- $2 trillion next year and roll over another $5 trillion.
Central Bank's -- governments are selling more bonds they ever sold before, Central banks would be selling more bonds and then some natural buyers like China and Japan would buy in less. It's not selling. And this is cautious side on all that stuff.
Jason Goldberg Barclays Bank
I guess again...
James Dimon Chairman & CEO
Including credit spreads. I am -- I would not be a buyer of treasuries at 4.2%, nor will I buy credit spreads at these spread levels.
Jason Goldberg Barclays Bank
So against that backdrop, you've added over $4 billion ACL reserve, you're kind of modeling a 5.8% unemployment, up 200 basis points from where the last sprint was, with the Avon of CECL. How much is the reserve building process already happened and how much?
James Dimon Chairman & CEO
CECL is one of those huge errors and mistakes. So that 5.8% is we have scenario planning. And I don't do the scenario planning because like you said, I would be putting up reserves, okay? I can't. I am quite cautious about what's going to happen in credit stuff like that. I can't.
Our top economists, always folks look at it and you do which the percent is going to get better, which percentage is going to be the same? Which percentage is going to be average? Which percentage it going to be severe average and those percentages average to the 5.8%, which means it's worse than it is today. And that means our reserve today can handle that 5.8%.
The $4 billion that you had, I think, roughly $2 billion simply relates to the increase in credit card standings. So it's not part of changing anything. And I portion, I've got the number relates to First Republic, close to $1 billion. And the others, then we do idiosyncratic to upgrades, downgrades, those are name-by-name specific.
So it's hard to say that you can look at the environment today, you are going to add more reserves today. And it's hard to say the environment is going to be worse, but that's why I mostly don't like CECL, bounces over the place. And I remind people from March -- I mean, from January -- the beginning of the year 2020 to June, we put up $15 billion. And then from June to the end of the year, we took down $15 billion. So CECL is a hypothetical number. It's very unfortunate it's incorporated in accounting.
Jason Goldberg Barclays Bank
I guess maybe bringing kind of this whole discussion together. One of my takeaways from your Investor Day was I think these big 4 businesses.
James Dimon Chairman & CEO
The other thing about our company, this is important. It relates to all these regulators, too. We already run the company as if you running it through an average cycle, we're including a stress portion. We look at credit and reserving and underwriting and trading, we don't say things are great and we will put up more capital later.
We say, no, we manage the company through the cycle so we can bank our clients in good times and bad times. An then we don't have to react in bad times, it sometimes you got to pull back dramatically. And so we're trying to incorporate all in how we run the company.
Jason Goldberg Barclays Bank
Putting that together, I guess looking out maybe what do you think are the 2 or 3 biggest growth opportunities in the next few years, payment, wealth management, international or you tell us?
James Dimon Chairman & CEO
It's literally, it's -- I think, in general, in Investment Banking, it's fighting to gain a little bit of share here and a little bit share -- it's area by area, country by country, segment by segment, industry group by industry group, FX in Asia, G10 here like it is, but we think we can fight and gain share. That's the goal.
Payments, we're doing quite well. Our share has gone up dramatically. We hope to do that. We have a bunch of new products and services coming. Custody, we think we've gained some share. We have new products and services coming. Asset Management, if you look at what we're doing, we're just building a private bank, and we're building Asset Management. Asset Management more is about products. So we've done a good job on certain new products and certain these active ETFs and stuff like that.
But on the private banking side, it's more bankers and more ARs. And you can see, we show you the head count we had. That's kind of the investment in that kind of area. All these areas is technology investments. And then in Commercial Banking, obviously, Silicon Valley Bank, we gained a lot of clients very quickly, but we're building what we call the innovation economy to do a better job and what First Republic did in Silicon Valley Bank was a big less than us, how they recover those clients.
So we are putting more bankers on the ground to cover some of those clients, changing some of our own policy and procedures. Middle market banking is still growing, and we have that Commercial Banking effort overseas. I just was in London, and it's working. We are covering more clients overseas in Commercial Banking.
And then consumer, we gained share in auto. It has its own issues and stuff like that. We've actually gained a little share recently in mortgage, tough business, but hopefully, we'll look at how these regulations turn out. We're gaining share in credit card, we've added, right call, ancillary services in consumer, the travel, dining stuff, which we have a new great lounge coming at La Guardia.
You've been in Boston, you have seeing ours and we're gaining share in Consumer Banking, small business, we have got products and services company. And those areas were still opening branches. We're still in products and services, adding better digital stuff, wealth management is a big area. I think we've really under -- not underperformed. We could do so much more there in terms of gaining share. So you see -- and you'll see that by -- mostly by assets under management and head count we're adding in branches around the country, et cetera.
And then some non-branch head count we're adding the conserve clients. You might have seen these great new ads. We can serve you digitally , remotely too. So a lot of stuff there. I think we grow in every single area. And of course, we have real competition too so we're quite cognizant of that.
Jason Goldberg Barclays Bank
Pull up there, we have about 5 minutes left to see if there's any questions from the audience.
Unknown Attendee
I'd love to hear your thoughts on bank M&A and maybe, yes, just size of banks out there, Yes.
James Dimon Chairman & CEO
Yes. So I mean the -- I hear people talk about banking, they act like it's a static thing. Banks do mergers, they are just all getting bigger. Go back to 2007, a lot of the big banks got smaller quickly, called failure. And so it isn't -- it's like the system static. You have some banks doing well, bigger ones. Some not doing so well and you're going to continue to have that. I think they should allow bank M&A so they could compete. That's not my own self-interest. I think it's a good idea.
If you're two banks, you think together, you're better off than separate, you should. And then you have new community banks all the time. like nonstop, you also have nonbanks, but PayPal, Square, Apple, Chime, Dave, Sofi, that's -- it's a dynamic system. You have a lot of stuff taking place. And we've got to compete with some of those people in some areas and some in a lot of areas. And -- so I think, there will be bank M&A.
And I think Johnny [indiscernible] actually came out and said they should allow it. The politicians say it shouldn't be allowed, they don't understand the dynamism of companies. And yes, some bank M&A will fail, but there's nothing wrong with failure. You don't want to stop people from doing what they think is a good thing with their capital and their companies. And as you know, mergers are tough so if we're advising a company, I'd say, no you better be prepared for a bank merger has a lot of complexity around technology, sociology, all these various things, management, capabilities, et cetera. So -- but it should definitely positively be allowed. I think it will be because it's better for the system.
Unknown Attendee
I got one over here, sorry. To your left in the back. So very quickly, you mentioned a few times that you are more bearish than most over here, sorry. You mentioned a few times that you're more bearish in most and you've made couple of comments over the last couple of months. The hurricane comment, obviously. Is there something in your business specifically that you're seeing? Or is it more your take on the macro indicators that a lot of other people are seeing as well and making similar comments?
James Dimon Chairman & CEO
It's literally the extent of the fiscal deficit, the fact that we've never been through quantitative tightening before. So I think there's a false sense of security that those two things will end up being okay. I don't know. I just -- there are big, huge semi tectonic shifts that we've seen. Remember, governments, you also have the IRA Act, the remilitarization of the world, the green economy. You've got a lot of stuff which is very different than the past. It looks more like the 70s to me than anything else.
And then there's war. Obviously, it's humanitarian crisis, but it is affecting all global trade, all global alliances, all global investing, America with the Middle East, America with China. And obviously, oil prices, energy prices, food prices, all of which could be hugely disrupting to geopolitics.
And I just put those category things in this bucket that says that is tough thing and maybe they all resolve and sort themselves out, maybe they won't. And I -- it just puts me on heightened edge of caution. And we could be sitting here a year and I wouldn't be surprised if those things have the 10-year bonds at 5.5%. Or oil is at $1.20 or $1.50. And it's only that. I don't know. I just in the back of my mind, I have to say that's not -- these things are tectonic differences that you've experienced since 1945. That's what it is.
Unknown Attendee
One more here. So on geopolitical tensions, I think you just came back from China, what's the takeaway from the trip? How do you think U.S. kind of edition would go from here?
James Dimon Chairman & CEO
Well, I'd put that highly cautious. So when I went there on that trip, the most noticeable thing to me, which now you kind of know a little bit is a lot of folks in Asia think that America wants to contain and maybe hurt China, which I don't think it's true. But I think the American Government has been quite clear that isn't the goal. The goal is to protect national security, American competitiveness and hopefully, that will be done in a way that's fair and reasonable and with our allies.
The other big takeaway by the way, is that the Chinese are worried about China. They all worry about China and America, but they were more worried about China. So you've seen FDI drop like a stone, FDI and an internal domestic thing. So I think -- it's an issue, but I think finally the American Government is doing the right thing. [indiscernible] was there Tony [indiscernible] was there. Johnny Yan went there. The President will hopefully meet with President Xi soon and they should have very rational private conversations, not insulting each other.
Both countries can do unilateral things. Just remember that, China has for years. America kind of didn't and now we are, we kind of pissed the Chinese off, but part of their own medicine and I'm hoping it will sort out. In terms of our own business, the risk-reward, which was very good, has now become just okay. The risk is bad. Like again, I don't expect more of Taiwan and stuff like that but you have to say this could go south.
Henry Kissinger have spoken about this, Nina was far more about international relationships and geopolitics than I do, he's quite worried that we're off track with China and it could lead to bad outcomes. But the other good news is 4 years from now, they'll probably be in a fully industrialized nation, the big GDP per person, maybe not big in America, by the way.
I think people have been a little foolish in how they looked at China is a 10-foot giant because China has got serious problems of their own, not of our making, including geopolitical kind of pissed off all their neighbors a little bit, all from a rearming -- they're not rearming because the America did. They're on the rearming because China is scaring them with their behavior in South China sea, et cetera. But the fact is they'll probably a large industrial nation.
So we're there. We're very cautious. We're managing our risk, but serve in China, hundreds of multinationals outside of China. We serve Chinese companies going out, which as long as we're not violating European or American sanctions and rules, we intend to continue to do. And then we also bank companies in China.
And we will -- there will be certain restrictions put on what we can do. What only you can do in China and the government is trying to sort out exactly what it wants to limit or not limit. I hope they're quite careful about it.
Jason Goldberg Barclays Bank
Seeing we're out of time, please join me in thanking, Jamie, for his time today.
James Dimon Chairman & CEO
Thank you very much. Good luck to you all.