Gerard Cassidy: Jeremy, coming back to your outlook and forecast for net interest income for the upcoming year with the six Fed fund rate cuts that you guys are assuming. Can you give us a little insight why you’re assuming six cuts? Is it your customers are telling you that their businesses are weaker, or is it your just economic outlook, the forward curve? Can you give us something behind why you’re assuming so many rate cuts?
Jeremy Barnum: Yes, Gerard, I wish the answer were more interesting, but it’s just our practice. We just always use the forward curve for our outlook, and that’s what’s in there.
Gerard Cassidy: Okay. Very good. And then as a follow-up, obviously, you pointed out also in the outlook, you’re going to have some deposit attrition. You had some, of course, in 2023. Can you guys give us some insights on the impact QT is having on the deposit base for your organization? And second, are you surprised that it hasn’t – QT hasn’t been more disruptive to the liquidity in the markets?
Jeremy Barnum: Yes, good question, Gerard. I mean, I think you’ve heard Jamie talk about this a lot. QT is obviously a big focus, and one of the complicating elements that we have in the current environment. I think that the math is the math in the sense that QT all else equal is withdrawing from system-wide deposits. In the last six months of this year, that’s been offset helpfully by a reduction in the size of RRP. And so that’s been supportive of system-wide deposits. As we go into 2024, RRP is at lower levels, and so that may be a little bit less of a tailwind. But it’s also the case, as you know, that there’s – the market’s expectation is that the QT is going to start slowing down at some point this year. So – and we still have reasonable levels of reserves and some cushion from RRP.
So that’s part of the reason that our outlook is for deposits to be modestly down with the shrinkage in system-wide deposits maybe partially offset by our belief that we can take some share. But also I think the second half of this year is going to be interesting to watch in terms of what the Fed does.
Gerard Cassidy: Great. Thank you.
Jeremy Barnum: Thanks, Gerard.
Operator: Next, we’ll go to the line of Manan Gosalia from Morgan Stanley. You may proceed.
Manan Gosalia: Hi, good morning. Thanks for taking my questions. There’s been a lot of talk about capital markets rebound. You noted you’re starting the year with a healthy pipeline. Can you give us some more color on what you’re seeing there and how the rate in – how the change in the rate environment is changing the conversations that you’re having across M&A, ECM and DCM?
Jeremy Barnum: Yes, sure. So, as you know, all else equal, this more dovish rate environment is of course supportive for capital markets. So if you go into the details a little bit, if you start with ECM, that helps higher, and the recent rally in the equity markets helps. I think there have been some modest challenges with the 2023 IPO vintage in terms of post-launch performance or whatever. So that’s a little bit of a headwind at the margin in terms of converting the pipeline, but I’m not too concerned about that in general. So I would expect to see rebound there. In DCM, again, all else equal, lower rates are clearly supportive. One of the nuances there is the distinction between the absolute level of rates and the rate of change.
So sometimes you see corporates seeing and expecting lower rates and therefore waiting to refinance in the hope of even lower rates. So that can go both ways. And then M&A is a slightly different dynamic. I think there’s a couple of nuances there. One, as you obviously know, announced volume was lower this year, and so that will be a headwind in reported revenues in 2024 all else equal. And of course, we are in an environment of M&A regulatory headwinds, as has been heavily discussed. But having said that, I think we’re seeing a bit of pickup in deal flow and I would expect the environment to be a bit more supportive.
Manan Gosalia: Great. And on the flip side, in C&I you spoke about lower revolver utilization, more muted demand. What would it take for that to rebound? Do you think it accelerates from here if rates come down, or is there room for this to slow even further if the capital markets open up even more?
Jeremy Barnum: Yes, it’s a good question. I mean, I think, as you say, it’s a little bit of a – I mean, I wouldn’t necessarily say that like lack of debt market access in the last year, that was more of an earlier effect in terms of having that driver revolver utilization. I think the main driver there is just a little bit of residual anxiety in the C suites, which increases as the companies get smaller in size. So there’s really going to be a function of how 2024 plays out. The softer the landing is, the more supported the utilization should be I would think. If things turn out a little bit worse, I think management teams are going to be incrementally more cautious about CapEx and so on, and so you might see utilization even lower.
Manan Gosalia: Great. Thank you.
Jeremy Barnum: Yes.
Operator: Next, we’ll go to the line of Glenn Schorr from Evercore ISI. You may proceed.
Glenn Schorr: Hi. Thank you. So I want to get your perspective on private credit overall. The industry saw a lot of growth, but it’s only so big relative to the banking market. I think there’s been a lot of share shift in direct lending and middle market lending, but now you’re starting to see more in asset-backed finance and you’re seeing them raise a lot of money in infrastructure and energy. So my question to you is, how big of a trend is this? How much do you think about it as cyclical versus secular? And most importantly, how does JPMorgan adapt and participate?
Jeremy Barnum: Yes. Thanks, Glenn. So I think the last part of your question, as you say, is the most important part, which is, this as an important factor in the competitive dynamic and what is one of the key things that we offer as a company. So it is a meaningful shift in the environment. It’s something that we’ve been watching for some time. We’ve made some enhancements and some new initiatives to ensure that we can compete effectively both in our traditional syndicated lending businesses, but also go head to head with the private credit providers and these types of unitranche structures, if and when that’s what the client actually wants. It tends to be a trade-off between the best possible pricing versus speed and certainty of execution.
