J P Morgan Chase & Co (NYSE: JPM) Q4 2021 earnings call dated Jan. 14, 2022



Good morning, ladies and gentlemen. Welcome to JPMorgan Chase’s Fourth Quarter and Full-Year 2021 Earnings Call. [Operator Instructions] We will now go live to the presentation. Please stand-by.

At this time, I’d like to turn the call over to JPMorgan Chase’s Chairman and CEO, Jamie Dimon; and Chief Financial Officer, Jeremy Barnum. Mr. Barnum, please go ahead.

James Dimon — Chairman of the Board and Chief Executive Officer

Thank you, operator, and good morning, everyone. The presentation is available on our website and please refer to the disclaimer in the back. It’s slightly longer this quarter to cover both our fourth quarter and full-year results, as well as spend some time talking about the outlook for next year.

Starting with the fourth quarter on Page one. The firm reported net income of $10.4 billion, EPS of $3.33 and revenue of $30.3 billion and delivered an ROTCE of 19%. These results included a $1.8 billion net credit reserve release, which I’ll cover in more detail shortly. Adjusting for this, we delivered a 17% ROTCE this quarter.

Touching on a few highlights. As we suggested last quarter, we have started to see a pickup in loan growth, 8% year-on-year and 3% quarter-on-quarter ex-PPP, with a significant portion of this growth coming from AWM and markets. But we’re also seeing positive indicators in card, as well as increasing revolver utilization in C&I. And it was an exceptionally strong quarter for Investment Banking, particularly M&A, as well as another good quarter in AWM.

On Page two, we have some more detail on the fourth quarter. Revenue of $30.3 billion, was up 1% year-on-year. Net interest income was up 3%, primarily driven by balance sheet growth, partially offset by lower CIB markets’ NII. And NIR was down 1%, largely driven by normalization in CIB markets and lower production revenue in home lending mostly offset by higher IB fees on strong advisory.

You’ll notice that we’ve added some memo line to this page this quarter to show NII and NIR excluding markets, as well as a third line of standalone markets total revenue, which as we said before is more consistent with the way we run the company. We’ll be keeping this format going forward. And you’ll see later that this is how we will talk about the outlook.

If you look at things on this basis, the drivers are the same, but the numbers are a little different. NII excluding markets is up 4%, NIR excluding markets is up 3% and markets is down 11% on normalization. Expenses of $17.9 billion, were up $1.8 billion or 11%, largely on higher compensation. And credit costs were a net benefit of $1.3 billion, reflecting reserve releases.

Looking at the full-year results on Page three. The firm reported net income of $48.3 billion, EPS of $15.36 and record revenue of $125.3 billion. We delivered a return on tangible common equity of 23% or 18%, excluding the reserve releases.

Then on to reserves on Page four. We released $1.8 billion this quarter, reflecting a more balanced outlook due to the continued resilience in the macroeconomic environment. Our outlook remains constructive, but our reserve balance is still account for various sources of uncertainty and potential downside as a result of the remaining abnormal features of the economic environment.

On to balance sheet and capital on Page five. We ended the quarter with a CET1 ratio of 13%, up slightly and reflecting nearly $5 billion of capital distributions to shareholders, including $1.9 billion of net repurchases.

With that, let’s go to our businesses, starting with Consumer & Community Banking on Page six. CCB reported net income of $4.2 billion, including reserve releases of $1.6 billion. Revenue of $12.3 billion, was down 4% year-on-year and reflects lower production margins in home lending and higher acquisition costs in card, partially offset by higher asset management fees in consumer and business banking. Many of the key balance sheet drivers are in line with the prior quarter.

Deposits were up 20% year-on-year and 4% sequentially, and client investment assets were up 22% year-on-year, about evenly split between market performance and flows. Combined credit and debit spend was up 27% versus the fourth quarter of ’19, with each quarter in 2021 showing sequential growth, compared to 2019. Within that, travel and entertainment spend was up 13% versus 4Q ’19. Though we have seen some softening in recent weeks contemporaneously with the Omicron wave. Card outstandings were up 5% year-on-year, but remain down 8% versus 4Q ’19.

However, it’s promising to see that while revolving balances bottomed in May of 2021, since then, they’ve kept pace with 2019 growth rates. And home lending loans were down 1% year-on-year, but up 1% quarter-on-quarter as prepayments have slowed. And it was another strong quarter for originations, totaling $42.2 billion, up 30% year-on-year. In fact, it was the highest fourth quarter since 2012, driven by increase in both purchase and refi volumes.

In auto, average loans were up 7% year-on-year and up 1% quarter-on-quarter. After several strong quarters, the lack of vehicle supply resulted in a decline in originations to $8.5 billion, down 23% year-on-year. So overall, loans ex-PPP were up 2% year-on-year and sequentially driven by card and auto, and expenses of $7.8 billion, were up 10% year-on-year on higher compensation, as well as continued investments in technology and marketing.

Next, the CIB on Page seven. CIB reported net income of $4.8 billion on revenue of $11.5 billion for the fourth quarter. And for the full-year, net income was $21 billion on record revenue of $52 billion. Investment banking revenue of $3.2 billion, was up 28% versus the prior year and up 6% sequentially. IB fees were up 37% year-on-year, primarily driven by a strong performance in advisory, and we maintained our number one rank with a full-year wallet share of 9.5%.

In advisory, we were up 86% and it was the third consecutive all-time record quarter benefiting from elevated M&A volumes that continued throughout 2021, specifically from mid-sized deals. That underwriting fees were up 14%, driven by an active leverage loan market, primarily linked to acquisition financing. And an equity underwriting fees were up 12%, primarily driven by our strong performance in IPOs.

Moving to markets, total revenue was $5.3 billion, down 11% against a record fourth quarter last year. Compared to 2019, we were up 7%, driven by a strong performance in equities. Fixed income was down 16% year-on-year, reflecting a more difficult trading environment early in the quarter, especially in rates, as well as continued normalization from the favorable trading performance last year in currencies, emerging markets, credit and commodities.

Equity markets were down 2% on $2 billion of revenue, as continued strength in prime was more than offset by modest weakness in derivatives. For the full-year, equities revenue was $10.5 billion, up 22% and an all-time record. It was a particularly strong year for both investment banking and markets. And looking ahead, we do expect some modest normalization of the wallet in 2022. However, for purposes of the first quarter in investment banking, the overall pipeline remains quite robust.

Payments revenue was $1.8 billion, up 26% year-on-year or up 7%, excluding net gains on equity investments. And the year-on-year growth was from higher fees and deposits largely offset by deposit margin compression. Security services revenue of $1.1 billion was flat year-on-year. Expenses of $5.8 billion, were up 18% year-on-year predominantly, due to higher compensation, as well as volume-related and legal expenses. And credit costs were net benefit of $126 million, driven by the reserve release I mentioned upfront.

Moving to Commercial Banking on Page eight. Commercial Banking reported net income of $1.3 billion and an ROE of 20%. Revenue of $2.6 billion, was up 6% year-on-year on record investment banking revenue, driven by continued strength in M&A and acquisition-related financing. Expenses of $1.1 billion, were up 11% year-on-year, largely due to investments and higher volume and revenue-related expenses.

Deposits were up 8% sequentially on seasonality. Loans were down 1% year-on-year and up 2% sequentially, excluding PPP. C&I loans were up 4% ex-PPP, primarily driven by higher revolver utilization and originations in middle markets and increased short-term financing and corporate client banking. CRE loans were up 1% with higher new loan originations offset by net payoff activity. And credit costs were a net benefit of $89 million, driven by reserve releases with net charge-offs of 2 basis points.

And then to complete our lines of business, AWM on Page nine. Asset & Wealth Management reported net income of $1.1 billion with a pretax margin of 34%. Revenue of $4.5 billion, was up 16% year-on-year as higher management fees and growth in deposits and loans were partially offset by deposit margin compression. Expenses of $3 billion, were up 9% year-on-year, predominantly driven by higher performance-related compensation and distribution fees.

For the quarter, net long-term inflows were $34 billion and for the full-year were positive across all channels, asset classes and regions, totaling a record $164 billion. AUM of $3.1 trillion and overall client assets of $4.3 trillion, up 15% and 18% year-on-year, respectively, were driven by strong net inflows and higher market levels. And finally, loans were up 4% quarter-on-quarter with continued strength in custom lending, mortgages and securities-based lending, while deposits were up 15% sequentially.

Turning to Corporate on Page 10. Corporate reported a net loss of $1.1 billion, revenue was a loss of $545 million, down $296 million year-on-year. NII was up $160 million, primarily on higher rates, mostly offset by continued deposit growth. And NIR was down $456 million, primarily due to lower net gains on legacy equity investments. Expenses of $251 million, were down $110 million year-on-year.

So with that, as we close the books on 2021, we think it’s important to take a step back and look at the performance over the last few years through the volatility of the COVID period. And then pivot to discussing the 2022 and medium-term outlook.

So turning to Page 11, what stands out is the stability of both revenues and returns through a very volatile period, especially when you strip out the reserve build and subsequent releases in 2020 and 2021. If you look at the revenue drivers on the bottom left-hand side of the page, you see overall revenue growth with some significant diversification benefits. NII ex-markets was down nearly 20% on the headwinds of lower rates and card revolve that we’ve discussed throughout the year. This was partially offset by significant NIR growth ex-markets largely from higher IB fees and AWM management and performance fees. And we also saw strength across products and regions in CIB markets, as the extraordinary market environment in 2020 did not normalize as much as we expected in 2021.

So when you look across the company, we saw consistent modest revenue growth, as well as good performance in the areas that we control. Notably, staying in front of our clients to serve them well and managing our risk effectively resulting in quite stable returns once again proving the power of the JPMorgan Chase platform.

So turning to the next Page. The strong revenue performance and consistent returns have further bolstered our confidence and forging ahead with an investment strategy designed to ensure that we’re prepared for the long term. On the left hand side of the Page, you can see the expense drivers from 2019 to 2021. The first bar is structural. And while the growth of 2% is modest over the two-year period, that includes some COVID-related effects that we would see as temporary, including, for example, lower T&E spend and elevated employee attrition, and we do expect some catch-up in those effects as we look forward.

Then the middle bar is $3.4 billion of growth in volume and revenue-related expenses. Some significant portion of that is driven by increases in incentive compensation, primarily from investment banking, markets and asset and wealth management. The major areas where we have seen exceptionally strong results and where changes in compensation are more closely linked to changes in performance. And remember, we’ve seen a lot of market appreciation and strong flows in AWM and CCB. So don’t assume all of this as CIB, as you look forward, because there are some versions of the world where the markets and fee wallet goes one way and AUM goes the opposite way.

And then this bar also includes volume-related non-comp expenses, such as brokerage and distribution fees. Some of which are true expenses and some of which are bottom line neutral, because they’re offset with revenue gross ups. Then, the last bar of $1.7 billion as previewed with you this time last year is a result of our investment agenda, which we’ve been executing largely according to our plans and consistent with our longstanding priorities. You can see the breakdown of the total investment spend on the right hand side of the Page, $9.6 billion growing to $11.3 billion across the categories that we’ve often discussed. We’re continuing to broaden our footprint and expand our distribution network.

Then marketing, where the significant increase in spend as part of the reopening in the second half of last year resulted in a full-year spend comparable to 2019. And tech, which we’ve broadened to include tech adjacent spend reflecting our recognition, the tech means more than just software development and encompasses data and analytics, AI, as well as the physical aspects of modernization, such as data centers. And what’s really powerful to note here is our ability to make these investments, which are quite significant in dollar terms and are designed to secure our future, while still delivering excellent current returns.

So over the next few Pages, let’s double-click into some of these investment areas to see what we’re doing, starting with examples of marketing and distribution on Page 13. We’ve expanded our reach across the US and are thrilled to be the first bank in all contiguous US 48 states, an important milestone in our branch market expansion plans. We also continue to expand internationally, including 13 international markets as part of our commercial bank expansion, China and both our CIB and AWM businesses, and in the UK with Chase UK, where we’ve seen exciting progress since we launched in September. Although we expect this to be a multi-year journey before having a measurable impact on the firm overall.

We continue to hire bankers and advisers in investment banking, private banking and wealth management, really across all of the wholesale and consumer footprint where we believe we have opportunities to better penetrate geographies and sectors to continue to grow share. And as I just said, the point of our investment strategy is to secure the future of the company. So we’re not making short-term claims about share outcome causality, but as you can see at the bottom of the page, our market shares are robust and growing broadly across the company.

Turning to Page 14. In addition to all of our distribution-related investments, a critical foundational component of our strategy is technology where we spend over $12 billion annually, with about half of that being investments or as we sometimes call it change the bank spend. It’s important to understand what’s in the investment category. About half of that is foundational and mandatory, which include regulatory-related investments, modernization and the retirement of technical debt in addition to other key strategic initiatives to help us face the future.

On the left hand side, you can see some more detail around this. Modernization, which includes migration to the cloud, as well as upgrading legacy infrastructure and architecture, data strategy that enables us to extract the value that exists in our proprietary dataset by cleaning it and staging it in the right ways and then deploying modern techniques against it, attracting and acquiring top talent with modern skills and the product operating model, which is obviously a popular buzzword these days.

But if you look through all that, it reflects the simple reality that the best products get delivered when developers and business owners are working together iteratively with end-to-end ownership. Underpinning all of this is our continued emphasis on cyber security to protect the firms and our clients and customers, as well as maintaining a sound control environment.

Moving to the right hand side, the other half of the investment spend is to drive innovation across our businesses and with our client facing products. We believe it’s critical to identify and resolve customer pain points and improve the user experience, and we’re attacking the problem with the combination of building, partnering and buying. And so a few examples of that.

On the retail side, we’ve been able to digitalize existing product offerings with applications like Chase my Home and launch a cloud native digital bank with our recent Chase UK launch. On the wholesale side, we’ve continued to innovate on our execute trading platform, commercialized blockchain through Onyx and are building out real-time payments capabilities.

In addition, our modernization allows us to more efficiently partner with or acquire more digitally-centered companies. And you can see several examples of this on the page. So taken together, our strategy and investments are critical to ensuring that we can compete with the most innovative players out there, whether we’re the ones pushing the envelope of innovation, or responding quickly to the creativity of our competitors, but doing so at scale.

With that, let’s talk about the outlook in the year ahead, starting on Page 15. As you’ll remember from Daniel’s comments in December, the 17% that we have talked about as a medium term ROTCE target is not realistic for 2022. We do expect to see some tailwinds to NII, including the benefit of the latest implied and the expectation the card revolve rates will increase. But the headwinds likely exceed the tailwinds as capital markets normalize of an elevated wallet and we continue to make additional investments, as well as the impact of inflationary pressures.

However, despite these potential challenges for the near-term outlook, we do continue to believe in 17% ROTCE as our central case for the medium term as rates continue to move higher and we realized business growth driven by our investments. So let us try to give you more detail around forward-looking drivers that could be headwinds or tailwinds.

So first, the rate curve. Our central case does not require a return to a 2.5% Fed funds target rate as the current forward curve only prices and 625 basis point hikes over the next three years. Assuming we realize the forward curve from there, we see the outcomes as being relatively symmetric with plus or minus 175 basis points of ROTCE impact as a reasonable range relative to our central case. And of course, there are obviously any number of rate paths to get there, which could produce different outcomes over the near-term.

In this illustration, the downside assumes that rates stay relatively constant to current spot rates, whereas upside would be driven by a combination of a steeper yield curve and more hikes together with a more favorable deposit repricing experience. And of course, what we are evaluating here is the impact of rates in isolation on NII. But for the performance of the company as a whole, credit matters a lot. And the reason why rates are higher will have an impact on that.

In markets and banking, we feel good about the share we’ve taken and there are reasons why the beginning of a rate hiking cycle could be quite healthy for fixed income revenues in particular, at least in the sense that it might provide a partial offset to what we would otherwise expect in terms of post-COVID revenue normalization. In our central case, markets and banking normalized somewhat in 2022 relative to their respective record years in 2020 and 2021, and resume modest growth thereafter.

The downside case assumes a return to 2019 trend line levels with sub GDP growth rates, whereas the upside case assumes continued growth from current elevated levels. As we’ve been discussing in consumer, the big surprise as we emerge from the worst moments of the pandemic was the lower level of card revolve even a spend has started to return. And our central case, we assume healthy sales growth on the back of continued economic recovery and strong account acquisitions. And that, combined with relatively constant revolve rates generates a strong recovery and revolving balances.

But there are those worry about a permanent structural shift in consumer behavior, which could be a source of downside. And in that scenario, revolving balances could stay depressed relative to the long-term pre-pandemic averages resulting in approximately 50 basis points of downside relative to our central case. Of course, there could be an upside case where revolving balances recover much faster, but we believe the risks here are more likely to be skewed to the downside.

And then let’s touch on inflation for a second, which is obviously increasingly relevant. On balance, modest inflation that leads to higher rates is good for us. But under some scenarios, elevated inflationary pressures on expenses could more than offset the rates benefit, which could represent around 75 basis points of downside. And while it’s not on the page, another key driver is capital. Where even though we remain hopeful, our central case assumes no re-calibration of the rules and that we will operate at a higher CET1, reflecting that we finished the year in the 4.5% GSIB bucket, which equates to a 1% increase from GSIB in the central case, although as a reminder that does not become binding into 2024.

This is a good opportunity to point out the QE deposit growth and growth of the overall financial system proxied by GDP growth of the factors in the original 2015 role release combined represent two full GSIB buckets. So in the absence of those, we would still be in the 3.5% bucket. With that in mind, any re-calibration could be a tailwind and each 1% change in the CET1 level is worth about 150 basis points of ROTCE. And to be clear, for simplicity, we’ve assumed a normal credit environment in the analysis on the page. So when we take a step back, 17% remains our central case in the medium term, but over the next one to two years, we expect to earn modestly below that target.

In light of all that, let’s talk about near-term guidance on Page 16. We expect NII excluding markets to be roughly $50 billion in 2022, up approximately $5.5 billion from 2021. As I mentioned upfront, this is a change relative to how we’ve previously guided as we feel that the ups and downs of markets NII can be a distraction, and the vast majority of that variation is likely to be bottom line neutral.

Looking at the key drivers of that for 2022, there are few major factors: Rates, with the market implied suggesting approximately three hikes later this year. And the reason steepening of the yield curve, we would expect to see about $2.5 billion more NII from that effect. You can see at the bottom right, we’ve shown you the third-quarter earnings at risk, and an estimate of what we would expect to disclose in the 10-K, reflecting the year end rate curve and changes in the portfolio composition.

And as we know, in our quarterly filings, there are lots of reasons to be careful when trying to use EIR to predict NII changes under real world conditions. But at a high level, if you look at the numbers on the bottom right and what’s happening to the yield curve recently, you should find the $2.5 billion increase relatively intuitive.

Then, balance sheet growth and mix where we are expecting higher spend and new originations to drive revolving balances back to 2019 levels, and also benefiting from securities deployment towards the end of 2021 and into 2022. And partially offsetting both of those factors with the roll-off of PPP. So while we do expect NII to increase year-on-year depending on the path of rates, it may take a couple of years to return to the full NII generating capacity of the company.

Turning to Page 17, as we said at the outset of this section, we are in for a couple of years of sub-target returns. Despite this, we are going to continue to invest and we’re not going to let temporary headwinds distract us from critical strategic ambitions. And so looking at adjusted expenses, we expect roughly $77 billion in 2022, an increase of about $6 billion year-on-year or 8%. And before we go into the breakdown, it’s worth noting, while the year-on-year increase is eye-catching, a meaningful portion of it is actually the annualization of post reopening trends from the second half of 2021 across various categories.

So starting with the first bucket on the page, which is the structural expense increase. As I alluded to earlier, we are seeing some catch-up this year, both from the impact of inflation and our compensation expenses, as well as higher non-comp expense, with the resumption of G&A. Then, volume and revenue related expenses. Remember that this is both comp and non-comp. From a comp perspective, to the extent we are assuming some normalization of capital markets revenues, there should be a tailwind here.

But keep in mind a couple of points, the normalization assumption for markets and IB fees at this point is pretty modest. And our assumption for AUM is for modest increases. At the same time, we have the impact of volume growth on non-comp, both in wholesale and in consumer, which is offset by lower auto lease depreciation. And most importantly, we are adding another $3.5 billion of investments, which I would note, includes the run rate impact of our acquisitions, as well as some of the run rate effects that I just mentioned and reflects similar themes to the ones I discussed earlier.

As I wrap up, it’s another good moment to stop and note how privileged we are to have the financial strength and the earnings generating capacity to absorb these inflationary pressures, while also making critical investments to secure the future of the company.

So in closing, on Page 18. We’re happy with what we’ve been able to achieve over the last two years, not only the business results, some of which are highlighted here on the page. But also continuing to serve our customers, clients and communities, and importantly, executing on our strategic priorities. As we look ahead, we will continue to invest and innovate to build and strengthen this franchise for the long-term. And while there may be headwinds in the near-term as we continue to work through the consequences of the pandemic, we’ve never felt better about the company and our position in this very competitive dynamic landscape.

So with that, operator, please open the line for Q&A.

Questions and Answers:


Thank you, everyone. Please stand-by. And our first question is coming from the line of Erika Najarian from UBS. Please proceed.

Erika Najarian — UBS — Analyst

Hi, good morning. Jeremy, my first question is for you, and it’s on Page 16, and it’s a two-part question on this guidance. The first is, could you help us size the timing and magnitude of deposit beta that you presume in this $50 billion number, as well as the size of securities deployment?

And the second part of that question is, clearly, we’re missing that white-box rate in terms of CIB markets’ contribution. And if you could give us sort of real as to think about CIB markets in light of your comments about more modest normalization versus the idea that this business is naturally liability sensitive?

Jeremy Barnum — Chief Financial Officer

Right. Okay. So three questions in there, let me take them one at a time. So beta, at the end of the day the reprice experience is going to be a function of the competitive environment. But for the purposes of working through the guidance, I can tell you that we’re assuming that this hiking cycle is going to be generally similar to the prior hiking cycle, all else equal. The environment is a little bit different in some important respects, so I think the system this time around is flush with deposits, is flush with liquidity in a way that it wasn’t before. So that could at the margin make the reprice little bit slower.

On the other hand, the competitive environment is different, especially with some of the neo bank and trends and that could go in the other direction. So it will be what it will be, but for the purposes of the guidance, we’re assuming a reprice experience that’s similar to what we experienced in the prior cycle.

In terms of deployment, obviously, deployment is going to be a situational decision. But if you’re looking at the $4 billion bar on Page 16, securities deployment is a modest contributor to that $4 billion number. The bulk of it is the loan growth narrative particularly in card. And then in terms of markets NII, the whole point of not guiding explicitly to markets NII is to avoid getting distracted by the noise there, which can come from a lot of really, kind of, a relevant places like interest rate hikes in Brazil and cash versus futures positions, which is the example I’d like to give. But big picture, if you need something for your model or whatever, there’s a couple of things we could suggest.

So if you look at the supplement, we’ve actually been disclosing the markets NII number for some time in the supplement. So you actually have a pretty decent time series of that number over time. If you regress that thing against the Fed funds rate, you’ll actually see that there is a pretty clear negative correlation there. And so you can draw some conclusions from that.

But I just will point out that like in any given moment, relatively small changes to the mix of the markets balance sheet and really changed the NII quite significantly even in an environment of no policy rate changes. So it’s sort of like a health warning against putting too much emphasis on that projection.

Erika Najarian — UBS — Analyst

Very clear. Thank you. My second compound question is on capital. If you could give us an update, I know that January 1st is the adoption date for SA-CCR. If you could give us an estimate on the impact to CET1, and just to clarify that 17% medium term ROTCE does take into account that your GSIB surcharge is 4.5%?

Jeremy Barnum — Chief Financial Officer

Yes, so let me do the second one first. So in short, yes. So as I said in the script, we are not assuming any re-calibration in that’s 17% target. So that does mean 4.5% GSIB in the equity component of that number. In terms of SA-CCR, the impact of SA-CCR adoption was about $40 million of standardized RWA. So I think if you do the math that’s like 10 basis points of CET1.

Erika Najarian — UBS — Analyst

Thank you.


Our next question is coming from John McDonald from Autonomous Research. Please proceed.

John McDonald — Autonomous Research — Analyst

Hey, Jeremy, I want to follow up on that. Maybe a broader discussion of how you’re managing the capital constraints with SLR and the rising GSIB, and what does that mean for balancing share buybacks, which obviously reduce this quarter preferred issuance and other levers that you have?

Jeremy Barnum — Chief Financial Officer

Yes. So, as you know, John, in terms of share buybacks, that’s at the bottom of our capital stock. So to the extent that we’re seeing robust loan growth, other opportunities to invest in the business, as well as potential M&A opportunities, those are all going to come ahead of buybacks. And so I don’t want to sort of guide on our buyback plans for next year, which under SCB, as you know, are really quite flexible as a function of the earnings generating — the earnings generation outcomes the capital build. But you can kind of draw your own conclusions in terms of the growth in the minimums that we see in the future, as well as the loan growth, as well as some of the investments that we’re making. And frankly, we’re kind of happy about that, that just — we want the capital to be used that way rather than being used for buybacks.

John McDonald — Autonomous Research — Analyst

Okay. And then as the follow-up, maybe, compound follow-up. The new CET1 target, or where you expect to kind of run this year, if you could clarify that? And also any color on the modest normalization of the FICC and equities wallets that you could flush out?

Jeremy Barnum — Chief Financial Officer

Yes. So in terms of the target, I mean, I said previously, the 12% was not off the table. And that remains true, depending on the outcome of the ruleset, depending on the Basel III end game, depending on all the various components. You can see a world where 12% remains the minimum. But as you can see and as I said in response to Erika a second ago, the 17% target assumes something closer to 13% as a function of the expected increases in GSIB and some other factors. So we’re kind of going to operate in that type of range throughout the year was obviously the flexibility that we have.

Oh and then, sorry, you also asked about normalization of markets and IB fees. I mean, I would say, if you’d asked me in the middle of the year, we were talking a little bit about thinking that over a reversion to 2019 run rates was the thing that like could happen in theory. The way we feel right now, our central case is, obviously, that we will see some normalization from exceptionally strong performance both in IB fees and markets.

But I think we’re expecting that normalization to be a little bit less like nowhere near all the way down to the 2019 levels, partially because the banking pipeline is really very robust. We feel good about the kind of organic growth in equities and some of the share gains

We are still processing the Q&A portion of the conference call. We will be updating it as soon as we analyze and process the con call. Stay tuned here for more updates.

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