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JPMorgan Chase & Co. (JPM)

Citi 2013 U.S. Financial Services Conference Transcript

March 5, 2013 3:40 PM ET

Executives

Marianne Lake - Chief Financial Officer

Analysts

Presentation

Unidentified Analyst

So, five choices, how do you view JPMorgan stock. For me it’s one of my to pick in the sector that’s review is number one, number two, the core holding kind of (inaudible); number three, you like the company lots, you just don’t think that stock is all that interesting, number four, the good relative short against some of the cheaper financial in this space and number five, you think is an absolute short.

Okay. So, here is the core, 45% of the people say the core holding and 24% obvious one of the top pick. So just maybe if you just kind of start off in terms of overall. We are now into the third month of 2013? Any trends like we saw here some trends some of the banks talking about how prices going to be a little bit more rational on the C&I side, [Richard Davis] talked about, he said that people are starting to use their credit card little bit more because the consumer payment trend, anything you see in terms of your results.

Marianne Lake

Yeah. And let me start with just couple of general things before we go into some of the topics we can tell you about what we see in, for example, card spend. So as we look at the macro economic environment, so continuation of positive trends that saw in the last part of 2012. So, whether its unemployment, whether gradual but steady improvement in jobless paying, whether its housing, which we feel in terms of bright spot.

So nice improvement -- improved 6% year-over-year in 2012 and continues in 2013. Demand is strong, supply is tightly growing and housing haven’t been more affordable in my whole life time. So consumer, if you look at the consumer balances as well, most importantly debt service burden, it’s the lowest has been since we’ve been measuring it. So housing is in the right spot.

Credit we talked about, we expect improving credit and moving space this year in 2013 but more slowly than we saw last year. But if I take you through the content, because we obviously get some particular insight when we look at, our content, in our portfolio.

What we’ve seen so far, January and February is strong growth in both months, double-digit growth, in terms of sales growth year-on-year and little bit less strong in February than January. But if you take a look at and we did because we read in many particular article, if you take a look at the wealth segmentation that spend is skewed toward the top end of that spectrum, but even in the [macro] space we are seeing strong growth year-on-year in both January and February. So that’s an encouraging sign but more confidence at the higher end.

Unidentified Analyst

One other comment we got from lot of presenters is 2013 will remain challenging year, it’s always different than what you guys look now. So in terms of is, how you kind of characterize that, because we had some bank say, it looks very challenging, others little bit more optimistic, you guys a little bit more on the optimistic side, is there anyone kind of reconcile that you already think the risk like model or?

Marianne Lake

Yeah. And I think, this were, especially I think these both topic, I’m not -- it is going to be a challenging year on some front. So we talked about the fact that, if you ask me the challenge we face and the industry faces, then I think, I saw in the presentation earlier, is that, the amount of regulation change that we’re, those coming up, while it’s huge plain agenda. There is enormous wealth that you need to get on this, significant uncertainty.

So when we talk about the fact that this isn’t, we don’t face lot of challenging year, is a challenging year on that front. But we see positive signs in terms of economy. We positioned ourselves and we went further invested. We positioned ourselves to grow strongly. We are executing well against that and everything is moving in the right direction. So it would be, now you need to say we don’t have challenges, but we are working through them and there are other positive signs too.

Unidentified Analyst

Okay. Great. Shall we skip up the next one on capital return? The one that seems I think coming up in terms of investors want higher capital return. At the Investor Day you disclosed, you are going to have potential excess capital $28 billion over the next two year, which will get to the equivalent of 11.5% of Basel III Tier 1 common ratio after dividend stays on consensus, but before share buyback.

So for the audience, what level are Tier 1 common you think JPMorgan will be at by 2014. So answer number one will be 11.5%, basically that they don’t touch the dividend, they continue, there is no share buyback and just maintain a dividend, 11% which will be the equivalent of 45% payout based on consensus numbers, 10.5% will be a 60% payout, 10% will be an 80% payout and 9.5% will be 95% payout?

So, how do you, I mean, there is going to be one issue is, you could be sitting at 10.5%, there is still shift in terms of return the capital. So how do you kind of prevent like the capital ratio that can’t continue to creep up?

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