John McDonald – Sanford Bernstein: Just on the last point about the NII outlook, what are the drivers of the strong growth in your interest bearing asset base?
Marianne Lake – CFO: John, we didn’t hear the question.
John McDonald – Sanford Bernstein: Can you hear me?
Marianne Lake – CFO: Yes.
John McDonald – Sanford Bernstein: Could you tell me on the NII outlook, what were the drivers of the strong growth in earning assets you expect that you just mentioned on the NII page?
Marianne Lake – CFO: So, we’re growing – as you have probably seen we showed you in Investor Day, and while there was a little bit of lower growth this quarter, we do expect to grow loans in our Commercial Bank loans and asset management, household loans, mortgage banking. So, and they are growing at a positive rate very strongly. So, it’s really just the underlying business driver growth that we’ve being seeing and expect to continue.
John McDonald – Sanford Bernstein: On the expense outlook you mentioned for the adjusted expenses to be down about $1 billion, what’s the base that we should look at for you to be down from? Do you have that?
Marianne Lake – CFO: If I refer you back on our – some recollection I will do it for you, but if I refer you back to Investor Day, it’s based upon on our adjusted expenses, which are defined as our expenses excluding corporate litigation and foreclosure related matters, which in 2012 was $60 billion plus or minus, I think $60.1 billion and we’re expecting to be $59 billion this year and that’s what we’re on track to deliver.
John McDonald – Sanford Bernstein: What was it in the first quarter?
Jamie Dimon – Chairman and CEO: A little higher than that.
Marianne Lake – CFO: A little higher than that in the first quarter, but the first quarter is seasonally high.
John McDonald – Sanford Bernstein: Then can you just repeat your outlook on the default servicing expense line, that came down a lot this quarter nicely and you mentioned the target for the end of the year.
Marianne Lake – CFO: The fourth quarter’s normalized run rate was $725 million. This quarter it’s down a little of that as you’d expect given the IFR conditions. We said that we expected the fourth quarter to be running at $600 million, we have said that at our Investor Day, and we’re still on track to do that. We’ve also said that the long-term run rate for that part of the business would be about $325 million a quarter and that would be over the next couple of years.
John McDonald – Sanford Bernstein: Then the litigation dropped significantly this quarter. I think you said it was kind of immaterial this quarter on the litigation provision, is that right?
Marianne Lake – CFO: Well, the litigation dropped quarter-over-quarter. Clearly, we had a large number last quarter on the back of IFR and we did have litigation expenses this quarter; you will see in the supplement, they are just over $300 million.
John McDonald – Sanford Bernstein: And the last thing is on the buybacks, you did a healthy buyback this quarter, but the share count didn’t shrink that much. Is the first quarter heavier than usual in terms of your issuance? And the question is getting at, would $2.6 billion of buybacks in other quarters be expected to shrink the share count in quarters, (when it’s down) the first quarter?
Marianne Lake – CFO: Yes, that’s right, John.
John McDonald – Sanford Bernstein: So, your issuance is more weighted towards the first, is that right?
Marianne Lake – CFO: Yes, and also remember, we didn’t buy back shares in the fourth quarter or the third quarter. So there was a overall, overall net $2.6 billion – close to $2.6 billion, net of (indiscernible).
John McDonald – Sanford Bernstein: I was just looking at how that translates to reduction in the share count. It’s kind of offset by what you do on issuance right each quarter?
Marianne Lake – CFO: Yes.
John McDonald – Sanford Bernstein: And it was just a normal quarter of issuance, so kind of $2.6 billion buyback would keep the share count flat, is that the kind of ratio we might expect?
Jamie Dimon – Chairman and CEO: No, I think the issuance number is fairly level and consistent quarter-by-quarter. It is really based upon amortization of restricted stock and all that. And the buyback of $2.6 billion, I mean that was over the course of the quarter, so average down – half of that to the quarter, so we can give you more detail on that a little bit later, John.
John McDonald – Sanford Bernstein: Okay, but it’s fairly (indiscernible), that’s what I was getting at.
Jamie Dimon – Chairman and CEO: The $6 billion will offset how much average amortization over the same 12-month; like $2 billion?
Marianne Lake – CFO: $2 billion, $3 billion. Yeah, so, John, that’s a good way of looking at it. The $6 billion of authorized repurchase relates to employee issuance over the same period; just a little bit over $2 billion.
Jamie Dimon – Chairman and CEO: For accounting purposes.
John McDonald – Sanford Bernstein: $2 billion for the year and $6 billion for the year.
Glenn Schorr – Nomura Securities: First one, the first deadline for compliance with central clearing came and went and it clearly didn’t have much of an impact on your first quarter FIC results, so I’m curious, I hear commentary in the market that a lot of clients might not be ready for either the second or the third deadlines later this year, curious, what you’re expecting and if you do think it could produce any hiccup on activity levels?
Jamie Dimon – Chairman and CEO: So, the second one is the big one, that’s June ’11…
Marianne Lake – CFO: Yeah, June ’11.
Jamie Dimon – Chairman and CEO: Something like that, and that’s where you have a lot of asset managers – a lot of bigger clients and stuff like that. People are still getting used to it. So, I think we’ve got 30% or 40% lined up to do it. They’re still reading documents and they’re signing new documents, so hopefully they’ll go smoothly. It’s unlikely to go smooth in the first round. The first round has really, really large participants and swap deals, et cetera, so we’ll have to just wait and see.
Glenn Schorr – Nomura Securities: Even on the wait and see, if some aren’t ready, do you think of that as a temporary and just literally a function of processing, maybe we don’t need insurance anymore, because it’s too expensive?
Jamie Dimon – Chairman and CEO: Look I don’t – we really don’t know. I would say temporary, but probably still down a little bit because of the reason you gave. Some people just say, we don’t need to do this anymore. We also know all the final rules by the way how the SEFs are going work in bidding.
Glenn Schorr – Nomura Securities: Marianne, on the RWA front, a bunch of little thing in here, but Basel 1 RWAs were up 11% quarter-on-quarter, but Basel 3 were pretty much flat. I know that has something to do with 2.5 being starting in the first quarter, but if you can help us.
Marianne Lake – CFO: Yeah so if you take – if Basel 1 RWA went up about a couple of hundred billion dollars, that’s all about the implementation of the new market risk rules in Basel 2.5 which is also why you saw our ratio go down from the reported 11% last quarter. So, it’s really all explained by that. Our Basel 3 RWA was flattish quarter-over-quarter with some positives and minuses.
Jamie Dimon – Chairman and CEO: That was already in there potentially.
Marianne Lake – CFO: Of course, yes.
Glenn Schorr – Nomura Securities: So, I guess that leads into the comment you made towards the beginning on any passive run-offs and model enhancements are not pulled forward in your results and I think you said it could be a better 100 basis points. Is there a dollar amount of RWA natural run-off that we should be thinking about, because obviously capital is building?
Marianne Lake – CFO: Yes. Per selection and again Glenn, and then again if I get it wrong in there it’s on the slides in the (indiscernible) in Investor Day that I think that 100 basis points equates to about $180 billion of RWA over the next two years. But remember the passive run-offs will take place over time not completely linearly but over time and the model enhancements again tend to be a little bit lumpier and a little bit more back-ended. So, we just have to see how that pays out. But, yes, we are still expecting for those things to happen, so we are off to get 100 basis points of benefit from that and that’s without any active litigation that’s going to happen over the course of time. Please check that slide for me Glenn, when you latch on.
Glenn Schorr – Nomura Securities: Will do. Last one Jamie, I know you addressed some of this in your shareholder letter, but between the – everything relates to Basel 3 stress test, Dodd-Frank in place already and then OLA and Living Wills coming online. It feels like we are going down the path on containing to big sale but yet there is a steady drumbeat including (indiscernible) to change things. Just curious on where we are headed in this and what will stop the drumbeat, when is enough, enough?
Jamie Dimon – Chairman and CEO: Glenn, I actually think you all on the line should be dealing with this issue a little bit because the reason you have companies is because they serve clients well at a good cost. There is a reason our numbers are good because we have cross-selling clients come to us and there are reasons for global banks just like there are reasons for community banks. I think the real issue, again, and you guys do the numbers is, the banking system has gotten so much stronger in the United States, and it’s not just capital, but it’s capital liquidity oversight, sort of activities that people didn’t like (longer) being done, derivatives going to clearing houses, and the initial wave of OLA and Living Wills et cetera, those things should all work. I hope at one point it would be a clear victory and just stop eating our young (at this thing).
A Closer Look: JPMorgan Chase &: Co Earnings Cheat Sheet>>