JPMorgan Chase (JPM) Q4 2017 Earnings Conference Call Transcript

JPMorgan Chase (JPM 1.94%)
Q4 2017 Earnings Conference Call
Jan. 12, 2018 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to JP Morgan Chase's Fourth-Quarter and Full-Year 2017 Earnings Call. This call is being recorded. Your line will be on mute for the duration of the call.

We will now go live to the presentation. Please stand by. At this time, I would like to turn the call over to JP Morgan Chase's chairman and CEO, Jamie Dimon, and chief financial officer, Marianne Lake. Ms. Lake, please go ahead.

Marianne Lake -- Chief Financial Officer

Thank you. Good morning, everyone. I'm going to take you through the earnings presentation, which is available on our website. Please refer to the disclaimer at the back of the presentation.

Starting on Page 1, the firm reported net income of $4.2 billion, EPS of $1.07, and a return on tangible common equity of 8% on revenue of $25.5 billion. The impact of U.S. tax reform is the one significant item we have this quarter. We reported a $2.4 billion reduction to our fourth-quarter net income.

Excluding this, our performance would have been $6.7 billion of net income, EPS of $1.76 a share with an ROTCE of 13%. Similar to the last few quarters, our underlying results were quite strong in the fourth quarter, and highlights included average core-loan growth of 6% year on year, bringing up to 8% for the full year, and credit performance continued to be very strong. A good holiday season fueled double-digit growth in card sales and merchant volumes, each up 13%. Our client investment assets were up 17%.

We maintained our No. 1 rank in global IB fees and we grew share. And we have record net income and revenues in the commercial bank and record revenues and AUM in asset and wealth management. Before I go into our results, let's spend time on tax reform on Page 2. The $2.4 billion impact of tax reform was largely driven by deemed repatriation of our remitted overseas earnings as well as an adjustment to the value of our tax-oriented investments, including affordable housing and energy.

These were partially offset by a benefit from the revaluation of our next deferred-tax liability. The impact is primarily in corporate but, as you can see, there was some impact to each of the CIB and the commercial bank. The capital impact is $1.2 billion higher, at $3.6 billion or about 25 basis points of CET1, and our effective tax rate will be approximately 19% this year and 20% over the near term, think through 2020, after which it should start to gradually increase as certain business credit will phase out over time. While there is now an enacted bill and with that there's more clarity, there are still a number of open implementation as well as accounting questions that will require clarifications and as such our estimated impact may be refined in future quarters.

That said, I know there are a number of important questions which I'll try and get you clarity on. So with respect to the deemed repatriation, the operative word for us is "deemed." In many ways you can think of our unremitted overseas earnings as the equivalent of bricks and mortar, being required in order to meet local jurisdictional capital and liquidity requirements. So we do not expect to actually remit anything significant. Second, although the reduction in the corporate tax rate was 14%, you can see that the reduction in our effective tax rate is only about 10%.

Given the impact of the geographic mix of our taxable income, the disallowance of FDIC fees, and smaller benefits associated with tax-exempt income and other deductions as a result of the lower absolute rate. Moving on to the BEAT tax, this is an area where there do remain open questions. However, at this point we do not expect to have a BEAT liability, but if we are wrong, we would not expect it to be material. Next, the question of whether the benefit will be competed away and if so, over what timeline.

Pricing strategy would differ across products. It is true that we operate in competitive and transparent markets, and this means that ultimately you can expect some of the benefit for the industry will be passed through to our customers over time. Competition is one key driver but there are other factors such as scale, expertise, the breadth of your products and services, and the investment that you're making in customer experience, and these matter a lot. And for certain of our businesses, pricing is not necessarily directly or immediately driven by fluctuations in the cost of capital, think slow markets.

And remember, we didn't get to price up the changes in market structure and capital and liquidity over the last several years. So it will be in nuanced, it will be different across products and time is a very important dimension. Any competitive dynamics will play out over time. We are in the process of putting together a cohesive and comprehensive set of long-term and sustainable actions for our employees, for customers, and communities in part in response to tax reform.

Some of our plans may involve subsidies for lower-income borrowers and support for small business and for these customers and for some others, they may see the benefits sooner. With respect to our capital plan, there are no immediate changes to note. This won't change our overall strategy, and remember the first half of 2018 is governed by last year's CCAR. Finally, on the potential impact to our businesses, the modernization of the U.S. tax code is a significant step forward for the country and a big win for the economy, and we include an estimated 20 to 30 basis points of growth in the U.S. this year and next. However, clients are still digesting the tax bill and much like this rate cycle, we haven't seen this movie before: we'll have to watch it play out. There will be pluses and minuses by clients and pluses and minuses across the products.

So overall, stepping back, tax reform is a positive and for our clients there's more certainty, more clarity, and that should give them confidence to act. Moving on to Page 3, I've given some details on the fourth-quarter results. Revenue of $25.5 billion was up $1.1 billion, or 5% year on year, as net interest income was up $1.3 billion, mainly reflecting the impact of higher rates and continued strong loan and deposit growth, partially offset by lower NII in market. Non-interest revenue was down modestly, as growth in auto as well as asset- and wealth-management partly made up for lower market performance. Adjusted expense of $14.8 billion was up 9% year on year, reflecting higher compensation expense as well as business growth, including auto-lease depreciation.

In the fourth quarter we took an impairment charge of a little over $100 million related to certain leased assets in the commercial bank and we increased our contribution to the foundation, adding $200 million this quarter. Credit costs of $1.3 billion were up about $450 million year on year, charges were flat with an increase in cards being offset by continued decreases across other portfolios. And although net-reserve builds this quarter were modest reserve, we saw releases in the fourth quarter of last year of approximately $400 million. Shifting to the full year on Page 4, we reported net income for the year of $24.4 billion, a return on tangible common equity of 12%, and EPS of $6.31.

Adjusting for the two front-page significant items that we had this year, being tax reform this quarter and the benefit of the WAMU settlement in the second quarter, our net income would have been another record of $226.5 billion with an ROTCE of 13% and EPS of $6.87. Revenue crossed back over the $100 billion threshold this year, which feels good: $104 billion, up 5%, $4.1 billion of which was higher net interest income, in line with guidance, benefiting from higher rates and growth, relatively modest deposit repricing but pressured by lower market NII. Non-interest revenue was up $400 million with higher auto lease income as well as higher fees across investment bank, asset wealth-management, and consumer, adding $2.6 billion to revenues and more than compensating the headwinds in home lending on a smaller market, investments in cards, and other markets. We ended the year with adjusted expense of $58.5 billion but, as you can see, we made a total contribution to our foundation this year of $350 million in part in anticipation of tax reform.

This brings our adjusted overhead ratio to 57% for the year even as we continue to make very significant investments across the franchise. Credit costs for the year were $5.3 billion, down 1% as the environment remains benign. Moving on to Page 5, balance sheet and capital. We ended the year with CET1 of 12.1%, down almost 40 basis points versus the prior quarter, about 25 basis points of which related to tax adjustments and the remainder low growth.

All the other ratios,as well as tangible book value per share, also reflected a combination of $6.7 billion of capital distributions and the $3.6 billion impact of tax reform. Moving on to Page 6 and consumer and community banking. CCB generated $2.6 billion of net income and an ROE of 19%. We continued to grow core loans, up 8% year on year, driven by home lending, up 13%, and business banking, card, and auto loans and leases were each up 6%.

Consumer deposit growth was strong, up 7%, and we believe we are maintaining our sizable lead over the market despite an industrywide slowdown given rising rates. Card sales and merchant processing volumes were each up 13%, driven by continued strengths from card new products as well as ongoing momentum in merchant services. In December, we completed the acquisition of WePay, which marks a big step for us into the integrated-payment space, allowing us to efficiently provide software-enabled payments to small business clients. And we also completed the renegotiation with Marriott for our co-branded cards, which will make us the largest issuer of the largest co-branded hotel program in the world.

For all intents and purposes, we've now finished the renewals of our co-branded card deals. Revenue of $12.1 billion was up 10% year on year. Consumer and business banking revenue was up 16% on higher NII driven by continued margin expansion as well as strong average deposit growth. Home-lending revenue was down 15% on lower net servicing revenue driven by MSR as well as loan spread compression. Our originations were down 15% in a market down an estimated 25%, and we gained share, a trend we expect to continue given our investments.

Card and merchant services and auto revenue was up 11 % year on year on higher auto lease income, growth in card loan balances and margins, and lower net acquisition costs. For the full year, card revenue rate was 10.6%, in line with our guidance, and we still expect to reach 11.25% in the first part of this year. Expense of $6.7 billion was up 6% year on year, driven by higher auto lease depreciation and continued underlying business growth. The overhead ratio was 55% for the quarter, 56% for the year, as the business moved past the impact of investments and started generating positive operating leverage in the second half of 2017.

Finally, on credit, card charge-offs came in line with guidance for the year, at 2.95%. The increase in card charge-offs was predominantly offset by pristine credit performance across other portfolios. In terms of credit reserves, the net $15 million build this quarter was driven by a $200 million build in card on growth, offset by releases in home lending of $150 million and auto of $35 million. And, as I noted last quarter, auto trends seem to have stabilized and the industry feels to be on solid footing. 

Now, turning to Page 7 and the corporate investment bank. CIB reported net income of $2.3 billion on revenue of $7.5 billion and an ROE of 12%, but revenue was impacted by two noteworthy items this quarter and both of them had an impact in markets. So I'll start with markets. Total markets revenue was $3.4 billion, down 26% year on year. However, fixed-income markets included the net impact of tax reform on our tax-oriented investments, which was approximately $260 million, accounting for 6% of the year-on-year market decline.

Additionally, equity market included a notable loss of $143 million on a single margin loan. This accounted for 3% of the year-on-year decline. It's worth noting that the loss appeared here in markets as reelected fair value option on this loan. However, when you do industry comparisons, be aware that others involved in this facility may not have made that same election and may have all of their losses in credit.

So, in addition, although not in markets revenues, $130 million of credit cost this quarter was driven by a reserve build related to that same name. So adjusting for those items, our markets revenue would have been down 17% year on year, which is much closer to the experience up to the beginning of December, when we last spoke publicly. Fixed-income revenue was down 27% adjusted, principally driven by a tough prior-year comparison and low volatility and tight credit spreads, which have continued into this quarter. Equities revenue was up 12% adjusted against a record fourth quarter of 2016. And similar to the past few quarters, the driver of the increase was continued tailwinds from investment in cash, prime, and corporate derivatives.

Moving on to banking, we had a record year for total fees and for debt underwriting fees. We maintained our No. 1 rank in global IB fees while growing share and we also ranked No. 1 in North America and EMEA. This quarter, IB revenue was $1.6 billion, up 10% year on year, driven by broad strengths across capital markets. Advisory fees were up 2% and we saw good momentum with some large deals closing. We ranked No. 2 for the year in wallets, gaining share, and we completed more deals than any other bank. Equity underwriting fees were up 14%, with indices up across every region and several at or near all-time highs. We maintained leadership positions in wallet and volume across every product globally this year and while we ended up No. 2 in wallet, the difference to No. 1 is only a few basis points. And debt underwriting fees were up 12% as the market remained receptive to new issuance across high grade and leveraged demands and refinancing activity was strong. We maintained our No. 1 rank, we gained share, and this year [Inaudible] the most number of deals in the firm's history.

The overall pipeline remains healthy and at levels similar to last year. Our balance sheets are strong and market conditions favorable. Treasury services revenue of $1.1 billion was up 13%. In addition to higher rates, we continue to see organic growth within the business, as the investments we've made over the past several years have improved our clients' experience across the platform.

Securities services revenue of $1 billion was up 14%, driven by rates and balances, with average deposits up 12% year on year and higher asset-based fees on record AUC given higher market levels globally. Finally, expense of $4.5 billion was up 8% year on year driven by the relative timing of compensation accruals. The comps/revenue ratio for the quarter was 27%, for the year, 28%, broadly in line with prior year. Moving to commercial banking on Page 8, it was another outstanding quarter for the commercial bank, with record net income of $957 million, record revenue of $2.4 billion, and an ROE of 18%, and for the year, net income and revenue were also records.

The businesses fired on all cylinders and delivered an ROE of 17%. For the quarter, revenue included the benefit of a little over $100 million associated with tax reform and in our community development banking business. Even without this benefit, revenue would still be a record, up 14% year on year on higher NII from higher rates as well as deposit and loan growth across businesses. IB revenue of $587 million was down 3% year on year but still a strong performance.

For the full year, we saw record IB revenue of $2.3 billion, up 2%, with particular strength in middle markets, which was up over 50%, compensating for a smaller number of large deals. The pipeline of momentum into the first quarter feels good. Expense of $912 million including the impairment charge, also a little over $100 million, on certain lease equipment which we expect to sell in the first half of this year. Excluding this, we saw an expense growth of 9% as we executed on our technology and product investments. This year we added net 120 new bankers in the business and entered six new markets, giving us a presence in all top 50 MSAs.

Loan balances were up 7% year on year, 1% quarter on quarter. C&I loans were up 6% year on year, driven by continued strength in expansion markets and specialized industries. While sequential growth was up a more modest 1%, we are seeing decent deal flow and pipelines are holding steady, client sentiment continues to be strong, supported by corporate tax reform. CRE saw growth of 9% year on year and 1% quarter on quarter, in line with the industry.

Multifamily lending continued to see tightened pricing on elevated competition. We remain appropriately focused on client selection, given where we are in the cycle and with particular caution around construction lending. Finally, credit remains among the best we've seen. This quarter we saw a benefit of $62 million, largely driven by reserve releases in the oil and gas portfolio, a net charge-off of 4 basis points.Leaving the commercial bank and moving on to asset and wealth management on Page 9.

Asset and wealth management reported net income of $654 million with a pre-tax margin of 30% and an ROE of 28%. Revenue was a record $3.4 billion this quarter, driven by higher management fees on growth in AUM as well as higher NII on deposits and loans. For the full year, net income and revenue were records, with a pre-tax margin of 28% and an ROE of 25%. Expense for the quarter of $2.3 billion was up 8% year on year, driven by a combination of higher compensation as well as a growth [Inaudible] for external fees, which is offset in revenue.

For the quarter we saw long-term net inflow of $30 billion, with positive flows across all asset classes on continued, strong long-term performance. For the full year we had long-term net inflows of $68 billion, driven predominantly by fixed-income, multi-asset, and alternatives. Record AUMs of $2 trillion and overall client assets of $2.8 trillion were up 15% and 14% respectively year on year, reflecting higher market levels globally as well as net inflows. Deposits were down 10% year on year, down 2% sequentially, reflecting continued migration into investment-related assets, the vast majority of which we are retaining and new client flows remain healthy. Finally, we had record loan balances, up 11% year on year, including mortgage, up 14%.

Moving to Page 10 and corporate. Corporate reported a net loss of $2.3 billion, which includes $2.7 billion of the tax reform adjustment. Treasury and [Inaudible] results improved year on year primarily due to the benefit of higher rates.

Finally, turning to Page 11 and the outlook. Before I get to specifics, remember, we do have Investor Day coming up in February. So we will be giving you a lot more guidance there. That leaves me with two structural things to talk about.

The first, staying on the theme of tax reform, a lower corporate tax rate in 2018 well have the effect of reducing the tax equivalent adjustments or growth [Inaudible] revenues. On a run-rate basis, that reduction for the full year would be about $1.2 billion and more than half of that is in the NII. Secondly, effective January 1, 2018, a new revenue recognition accounting rule came into effect, which requires certain expenses to be grossed up that were previously the recognized as contra-revenue. We estimate for the full-year impact will increase both revenues and expenses for the firm by another $1.2 billion, the vast majority of which will be in asset and wealth management with a small amount in the CIB.

So for guidance, expect the first-quarter NII will be down modestly quarter on quarter, reflecting a combination of a lower growth, as I mentioned, as well as normal day count, which offset the benefits of higher rates and growth. And we estimate the first-quarter effective tax rate will be about 17%, reflecting seasonality and stock comp adjustments. So to wrap up, the end of 2017 was constructive, characterized by strong equity markets, higher interest rates, good economic base globally, decent client activity, high levels of confidence, and obviously the enactment of the Tax Cuts and Jobs Act. Against that backdrop, our underlying financial performance in the fourth quarter of 2017 was strong, benefiting from diversification and scale, and consistently delivering for our customers and communities, gaining share across our businesses.

Adjusting for significant items in the year, net income and EPS would have been [Inaudible], driving a healthy 13% return on tangible common equity. We're excited about the landscape and the opportunities for our clients in 2018. We will be there for them and the company is poised to continue to perform. With that, Operator, now we'll take questions.

Questions and Answers:

Operator

Please press *1 on your telephone keypad for a question. We kindly request that you ask one question and only one related follow-up. If you would like to ask additional questions, please press *1 to be reentered into the queue. And our first question comes from Erika Najarian of Bank of America.

Erika Najarian -- Bank of America -- Analyst

Hi. Good morning. So, I do expect you to defer either the response to February 27, Marianne, but I just had to ask the question. The revenue outlook seems to be quite strong for the banking industry generally in 2018 and many investors were wondering if the 55% overhead ratio a long-term target for JP Morgan regardless of the revenue environment or could that potentially be better over the short term as we get a boost in the economy from the tax act?

Marianne Lake -- Chief Financial Officer

You are right. That's probably more of an Investor Day discussion, but what I would tell you is that when we have given that as our sort of medium-term guidance, in our simulation, we kind of imagined an environment that was more normalized in lots of ways. So, we anticipated higher, more normal interest rates, we anticipated the continuation of somewhat benign credit, and we anticipated continuing to invest in the businesses and you've seen us do it in 2017, and we would expect to do it and more in 2018. So, certainly there could be years when we would be below it, and there have been years when we were above it but I think it's at a decent place for us to be aiming for in the near term.

Erika Najarian -- Bank of America -- Analyst

That you. And my follow-up question to that is, a lot of investors are excited about the prospect of stronger economic activity in 2018 leading to greater amount of markets activity and greater lending activity. And if you look back in the 1980s at least for loan growth, loan growth actually stepped down in 1987. I'm wondering if you could share your insights on how you think those activity trends will shape up in 2018.

Marianne Lake -- Chief Financial Officer

Yea. So, I know everybody is eagerly awaiting there to be direct and notable impact of tax reform but we're only a couple of weeks into the year. So, our expectation, as I said before, just really stepping back, is that it will boost growth in the economy. People have different points of view.

Our research team is saying by up to 30 basis points in each of the next two years but know it could be better than that. We do know that there will be puts and takes across our businesses but in general we would expect the sort of certainty that people have been waiting for, coupled with the confidence that we know they've had and the need for people to try and deliver growth to their shareholders should mean that things that they were going to do become more compelling and they might be willing to do more. So, I think you'll see the capital market space potentially react more quickly and I think loan growth may have a bit of a lag but never say never. So, we just need to, I think, be a little patient to see some of that play out but sentiment is strong, tax positions will be improved, profitability will be higher, things that were rich before will be more fairly valued now.

So, I think it should be all very constructive and certainly we would take the upside and support our clients.

Operator

Our next question comes from Jim Mitchell of Buckingham Research.

Jim Mitchell -- Buckingham Research -- Analyst

Hey, good morning. Maybe a question on NII. I want to make sure I understand the moving parts. If I think about, your guidance for the first quarter, down slightly, you have two less days in the quarter, that's maybe almost $300 million sequentially and then half of the impact from the tax act in terms of tax-equivalent adjustments that's going to be [Inaudible] NII, sort of linear and equal.

So that's another $150 million. So if I do the math, that's going to be about $400 million, sort of apples-to-apples benefit from higher rates that you've seen. Is that the way to think about it?

Marianne Lake -- Chief Financial Officer

It's a good model with just one clarification. So, yes, a little more than half of the growth adjustment is NII. Yes, it is broadly linear, for the sake of argument. So, $150 million is not a bad estimate.

Actually, it's more like $160 million but pretty close. The day count is actually not worth 300. It's worth a little bit less than $200 million. So, you've got [Inaudible] headwind, for want of a better word, or call it $300 million and change and then we would have had a combination of the impact of the December hike.

With obviously each hike the impact is less, some gross and other puts and takes. So, call it $350 million of a headwind offsetting growth and the rate hike.

Jim Mitchell -- Buckingham Research -- Analyst

Right. Just to follow up on, it seems like deposit beta's actually slow this quarter and you're expecting that to sort of reaccelerate this year? How do we think about, I guess, beyond 1Q and the benefits of rates?

Marianne Lake -- Chief Financial Officer

Yes. So, I would say, about deposit beta, at this point, you really do have to think about it in a sort of bifurcated way. So, firstly, I would say that the accumulative beta we've experienced, and I wouldn't say we've seen it slow down but it's remained disciplined generally, what we've seen so far in this rate cycle is very similar to what we saw in previous rate cycles. So, it's not like we learned stunning new news from which we can extrapolate and make changes to our expectations.

So, we have no real change in the long-term expectations for reprice and it really is at this point bifurcated. So, retail, checking, and core savings, there's been little to no movement in the industry. Again, given the absolute level of rates, that would be in line with our expectations and on the wholesale space, we're definitely in reprice territory. It is accelerating with every hike and it's different across the spectrum.

So, obviously, more significant in the sort of TS/securities services space. So, my expectation, just given where we are in the absolute level of rates, is on the retail space, we would still see a lot of discipline in the market in 2018 but ultimately we haven't changed our expectations that whatever that pipeline looks like, we're going to get to an overall reprice of above 50% but we'll have to see.

Operator

Our next question is from Betsy Graseck of Morgan Stanley.

Marianne Lake -- Chief Financial Officer

Hi, Betsy.

Operator

Ms. Graseck, your line is open.

Betsy Graseck -- Morgan Stanley -- Analyst

Hi, sorry, I was on mute. Hi, good morning. It feels like we have a once in a lifetime or at least in my lifetime benefit to earnings with this tax change and we've got a lot of PMs asking the question how are managements going to use that. I saw your comment in the deck that, you know, competitive over time, compete away, blah, blah, blah, but I really wonder if you could help give us some insight as to how at a management level you're thinking about strategically using this benefit that you're getting in the various buckets of reinvest in tech, reinvest in people, reinvest in clients? Do you feel like it's equal across those or is there a skew that you're thinking about to take advantage of this because how managements use this benefit is going to be critical for stock performance over the next two to three years.

Marianne Lake -- Chief Financial Officer

I'll give you a framework to think about it if it's helpful, and you can certainly ask a follow-up question, but you are very familiar with the way that we think about sort of our strategy over time and our investment strategy in particular, and investing in our businesses, growth and profitability has always been first and foremost in our minds and, to be honest, we've talked to you before about the fact that we don't constrain ourselves because we have budgetary targets on those activities if we think we can execute well and we see great opportunities. So, expect that the first thing that we would do is to continue to lean into the investment opportunities we have writ large. So, that's bankers, that's offices, that's global expansion to the degree that that's on the cards, that's digital capabilities, payment capabilities, across all of our businesses, and we've been working even before tax reform on identifying where those opportunities are and we want to lean into that. We will also, Jamie said it earlier, we are really pleased that there are some immediate responses for employee benefits and we will be doing that plus more across our stakeholder constituents, and there'll be more to come on that over the next few weeks and we want to focus on that being comprehensive and sustainable.

So, we're really trying to be thoughtful about the things that will matter to our employees and to our customers. And then to the degree that we end up still with earnings that were otherwise above plan, then normal capital strategy comes into play. We've been clear. We think that we are adequately capitalized, that we should expect to have the capital ratio move down slowly over time and our strategy on potentially continuing to see dividend increases and having repurchase programs that allow us to achieve our target ratios, that hasn't changed, it just might be a bigger dollar number.

Operator

Our next question comes from Ken Usdin of Jefferies.

Ken Usdin -- Jefferies -- Analyst

Hi, good morning. Just to move to, I guess, a business question, a couple of things just on the card business. It looks like credit continues to be pretty good. You did build the reserve for growth, as you mentioned, but most of the card revenue rate was also still a little bit down.

Can you just talk a little bit about your outlook for that card business as you look forward?

Marianne Lake -- Chief Financial Officer

Yes. So, I'll just deal with the card-revenue rate real quick, because I think we sort of gave a little bit of this in the third quarter that given the Sapphire Reserve products, given the extraordinary success we had with that in the fourth quarter of 2016, there is annual travel credit renewal that took place in the fourth quarter, which we already told you you would expect, to see the revenue-rate go down. It was contemplated, which is why our full-year revenue rate of 10.6% was in line with our guidance. And as we lap the acquisition costs and reward costs associated with acquiring all of the Sapphire Reserve customers and for that matter our other new products, we're going to see that revenue rate get to 11.25%, if not in the first quarter, in the first half of next year and stabilize out at or above that level.

Ken Usdin -- Jefferies -- Analyst

OK. That's great to hear that's intact. And then consumer credit, broadly speaking, auto's continued to look a little bit better and cards still within your expectation, so a lot of the focus on tax has obviously been on the potential for commercial lending to potentially pick up. How are you guys just thinking about how the consumer behaves and what that means for both consumer loan growth and consumer credit? Thanks.

Marianne Lake -- Chief Financial Officer

Yes. Again, it's nuanced. So, the first question generally that we were getting is the impact on the housing market and given certain specific changes in the tax code, I would say that the overall net-net we would expect that to be not a significant impact on the housing market and demands nationally although that could differ by state. So we feel like that's going to hold up nicely.

And you're right, whether you're talking about consumers or whether you're talking about small businesses, think about small business environment, it's quite positive for them. So, they're going to see higher profitability, higher free cash flow, and for all intents and purposes, the equivalent of an upgrade. So, we would be hopeful that much like the commercial space, that could be the catalyst to see them spend money and hire, and we'll be focusing on that as we think about programs to help. So I think in general it's going to mean that the already very good credit trends we're seeing will be good for longer.

Operator

Our next question comes from Glenn Schorr of Evercore ISI.

Marianne Lake -- Chief Financial Officer

Morning, Glenn.

Glenn Schorr -- Evercore ISI -- Analyst

Hello there. How are you? So, first question on fixed income and I guess the question is, if not now, when. I mean, the industry's gone down, had this multi-multi-year degrade in revenues for lots of structural and cyclical reasons. We're off QE in the U.S.

We're raising rates in the U.S. Europe's doing better. They are still on QE and have a lot of negative rates but we're going to get some changes there. Can you talk about your best guesses in terms of the backdrop for this environment for such an important revenue item? Thanks.

Marianne Lake -- Chief Financial Officer

So, Glenn, I feel like in 2017 we spent so much time talking about year over year, declines in comparable period. It's helpful to, I think, step back and look at the full performance in 2017 for fixed income and for equities and for markets in total. So, acknowledging that the first quarter was quite strong, if you look at the last three quarters, I mean, we were talking about reasonably quiet environment, low volatility, historically tight spread, and yet those businesses individually and together delivered meaningfully above the cost of capital for us. So, maybe not at the sort of at-performance level of 2016, but really good performance.

So, discipline, scale, optionality, those are the ways we think about the fixed-income business. I don't have a crystal ball, I can't tell you when that will be a catalyst for change, fixed-income is a little on the accounts cyclical side, there will be change and we're positioned to continue to be able to grow with our clients. So, our businesses are doing well and I can't tell you when things will become more volatile and obviously that's always an emotional discussion. It will happen and when it does, we will be there to serve our clients and to intermediary for them.

Glenn Schorr -- Evercore ISI -- Analyst

I appreciate that. A follow-up is on Steinhoff and I know that a) you can't predict fraud, but I'm just curious on that as a business in general and lots of other banks were involved but how many other similar types of books are there and can you talk to the nature of those relationships because hindsight's 20:20 and like "Wow, that's a lot of leverage to get somebody on a highly active stock" but it's usually just a customer-flow, simple in and out facilitation business. So, I wonder if you could just talk about a little bit more.

Marianne Lake -- Chief Financial Officer

Yeah. I mean this has got our attention because of the sort of sudden and significant decline, and it is by far and away the largest loss in that business that we've seen since the crisis and it will happen from time to time, maybe not this significantly or this suddenly and remember, that because we've got that in fair value, we marked that down. So, that's not a reserve, that's a mark-to-market on a publicly traded equity at this point that is significantly down. So I would say while we are obviously disappointed with the outcome, it's the business we're in.

It's a large and diversified business that even after this loss is still very profitable. So, it's noteworthy because of its size, its rapidity, and its significance but it's a profitable business and without sort of laboring the point, obviously we go through talking about the potential for there to be [Inaudible] and sudden risk situations and I've been talked about that in our governance processes and sometimes that will happen.

Operator

Our next question comes from Mike Mayo of Wells Fargo Security.

Marianne Lake -- Chief Financial Officer

Good morning, Mike.

Mike Mayo -- Wells Fargo Securities -- Managing Director

Hi. How are you doing?

Marianne Lake -- Chief Financial Officer

Great.

Mike Mayo -- Wells Fargo Securities -- Managing Director

I just wanted to follow up on the tax question. Jamie says on Page 1 of the release that you'll have an accelerated spend for those tax benefits for employees, customers, and communities. I know you kind of answered that, but so how much of that benefit -- I guess you paid $11 billion in taxes last year and that might have been under $7 billion with the lower rate. So, if we assume a $4 billion tax benefit, if that's correct, how much of that would be passed on to the employees, customers, and communities versus hitting the bottom line? And then the philosophical question, if Jamie's there, if he can answer after you, should that be crucial for stock performance, how much you allow to fall to the bottom line?

Marianne Lake -- Chief Financial Officer

Look, I'm not going to give you quantification, but you're not meaningfully wrong about the sort of assessment you made, which is a big, significant positive and most of it will fall through our bottom line in 2018 and beyond and time is an important part to how it plays out. So, we want to do really constructive thoughtful things for all of our constituents but it won't be the significant portion of that.

Jamie Dimon -- Chairman and Chief Executive Officer

I would just add that we have [Inaudible] $300 billion tax benefit next year. There are two major, you should put in the back of your mind, uncertainties. One is the code has to be actually written. So there will be a lot of noise going down the road about what that actually means for various industries and stuff like that.

And the second [Inaudible] ostensibly is competition. Some of it will be competed away. I'm only telling you this because you got to put it in your mind. Don't get so exuberant that everything everywhere falls to the bottom line.

The second is our investment. Marianne's already spoke, we already are fairly aggressive investing for our future and in some places like pushing a string. We can only go so fast in hiring new bankers and doing some things and we may accelerate some of that and on Investor Day we'll be quite clear if we change how we look at that kind of thing. And the other one is, what are we going to do special to help the United States of America as a result of tax change and we think we should, we think there's very good [Inaudible] done it, we think it's time that all of America share broadly, and we're going to have things that we think are good for some employees and think of also stable growth of communities around the world.

So, we're going to give you in the next couple weeks very thoughtful things that we're going to do and it may very well bite into some of that $3.5 billion and so be it. That's what we're supposed to do. We're a bank, we're supposed to help support and grow communities. It will enhance our growth in the future too, by the way, it's not a giveaway.

It's kind of a thoughtful approach to how we should use some of this.

Marianne Lake -- Chief Financial Officer

And I do want to just say, there are two other things just to add to what Jamie said, which is, if some of this is competed way out over time, and gets to a lower cost of credit and cost of borrowing and improved pricing for our customers and allows them to grow their businesses and spend more strongly, there is a feedback loop. Similarly, if at the end of the day it results in some higher dividends and repurchases, that also recycles back into the economy. So, we're very optimistic for the performance of this company, which is extraordinarily client-centric that anything that's good for the economy and our clients will continue to drive long-term profitability for the company. That's No. 1, and No. 2, not to be defensive, you know, you guys will appreciate this more than anyone almost, is, you can do your own math, but if you add up the cost of controls, market, structural reform, capital, and liquidity, much of which with entirely [Inaudible], if you add up the impact that it had on our returns over the last five to 10 years, I mean, it in many ways dwarfs that. So, there will be an element of this that goes back into making sure that the banking system is properly covering cost of equity and it should.

Mike Mayo -- Wells Fargo Securities -- Managing Director

I've one follow-up on that feedback loop. So, you, Marianne, or Jamie, a year from now do you think that the tax code or other factors will result in increase in capital markets activity, increase in corporate lending and increase in CAPEX, which we've been waiting for all decade?

Jamie Dimon -- Chairman and Chief Executive Officer

Again, I think it is really important to note people focus very much what happens to [Inaudible] in the tax reform and I think it's a very good thing. You've seen it with corporations. You've seen it with sentiment. You've seen it with people's plans and things like that.

I think it's very good. I think the far more important thing is that 20 years ago our corporate, federal, and state rate was 40%, [Inaudible] was 40%. Over 20 years they came down to 20% and we stayed at 40%. Over that time, it's driven brains, capital, you see the reinvested money overseas.

One of the accounting firms did a study that 5,000 companies that would've been headquartered here are either headquartered overseas or owned by foreign companies, which I'm not against. This is a huge number. It's the cumulative effect of retained capital and increasing competitive American companies that will drive jobs and wages in the long run. I have absolutely no question that would be far better off year after year if we hadn't done this.

And it's just impossible to tell exactly what it means this month, or this quarter, something like that. So, we're going to be watching just like you and waiting just like you but I don't -- I hate guessing about the effect, like, on capital markets. I don't know. The fact is we look at capital market, we have fabulous people in sales and trade, fabulous research, great technological capability and in the last five years we've dealt with Dodd-Frank, MiFID, all these rules and regulations, [Inaudible], what are the other ones called in Europe? And we've done OK.

I look it at as a big positive. We'd still be there buying and selling securities for clients, issuing securities and, yea, I think if we're right about it in improving American competitive growth in the global economy, it will drive [Inaudible] activity. Let's just wait and see.

Operator

Our next question comes from John McDonald of Bernstein.

John McDonald -- Bernstein -- Analyst

Hi, good morning. Apologies if this is asked. I got cut off for a second. Marianne, I was wondering about charge-offs and credit.

Things look good this quarter for the full year, came in line with your kind of $5 billion charge-off outlook. Just wondering how you're thinking about the credit environment heading into this year. And if the environment remains strong, do you still have some seasoning that might put some upward pressure on charge-offs even in a good environment?

Marianne Lake -- Chief Financial Officer

I would say if you look across the consumer spectrum, ex cards, the performance is like really, really good and should continue to be really good in 2018. So, 2018 feels like very strong performance in consumer. In card, we said at Investor Day that we would expect to continue to charge-off rates go up and we are growing loans. So, a combination of those things will mean we'll have higher charge-offs and some reserve build.

I will tell you that we're not seeing anything that isn't in line with our expectations. So, this is not normalization, deterioration. This is seasoning and maturation of the new advantages and growth. So, if I sort of send you back to what we talked about earlier in the year, it's probably closer to 3.25%, in line with our expectations.

So, we're expecting very much more of the same in the consumer space. And in the wholesale space, credit is really, really good and some of the places where we have been watching for that to essentially [Inaudible] fundamentals are improved and we continue to obviously watch retail and to be cautious given where we are in certain parts of real-estate banking but we're not seeing any fragility right now in our outlook.

John McDonald -- Bernstein -- Analyst

OK. And then just a follow-up on card. You've had some good balanced growth. Are you seeing any change in propensity to revolve from your customers or is your balanced growth coming more from new customers or is there any increase in kind of revolve rate?

Marianne Lake -- Chief Financial Officer

We actually had been on a pretty significant strategic drive to make sure that we had at a DPDC-engaged customer base, if you go back pre-crisis and look at the industry there was lots of [Inaudible] and less-engaged customers. So, we worked really hard over the course of many years to drive engagement, which is why you can see that we have a larger share of spend than we do about [Inaudible] but we've grown both. So, we are getting balances and new customers. We are working on making sure that the right customers are revolving and we're making progress.

So, year on year we've gained share in both and will continue to focus on revolve.

Operator

Our next question comes from Steven Chuback of Nomura Instinet.

Steven Chuback -- Nomura Instinet -- Analyst

Hi. Marianne, I had a question on the tax guidance that you guys have given. The Slide 2 disclosure's really helpful but I really wanted to dig into the comment on the B provision. You know that the ultimate impact for your business shouldn't be material and at the same time, the guidance from some of your foreign bank competitors, suffice it to say, has been much more measured.

I'm wondering if the impact's not that material for you guys but weighs more heavily on the peer set, do you actually see your market-share consolidation opportunity emerging in particular within the repo and sec-lending side?

Marianne Lake -- Chief Financial Officer

Yeah. I mean, obviously the impact is differently situated for the foreign banking and I know that, as Jamie said, there is still a lot of work to be done in terms of implementation and finalization of actual code itself. So, I don't want to guess on how all that will play out. I certainly don't want to guess about the second-order impact of potential consolidation.

Steven Chuback -- Nomura Instinet -- Analyst

All right, fair enough. Well, maybe just try one more on tax, specifically relating to CCAR. I'm assuming that the tax parameters for '18 are broadly consistent with last year which I think is most people's general expectation. You have the lower starting capital ratio from the tax hit.

Your peers will have the same thing but within the new tax law, there's also a somewhat complicated element where it eliminates the ability to carry back NOLs against prior-period income, which could impact your stress ratios. I'm wondering does that at all inform your outlook for the upcoming test, and do you anticipate capital-return capacity to be more constrained just in light of some of those changes?

Marianne Lake -- Chief Financial Officer

OK, there's a lot. So, if you assume that the 2018 structure is much like 2017 with a nice healthy caveat that DTAs, DTLS, and the impact then can be volatile based on the scenario. So with that caveat, I would tell you that not carrying back NOLs has a very particular interplay with foreign tax credits, which means it's not really going to affect us in a meaningful way. There are two things that would change but they also offset.

So, the two things that would change is your absolute level of losses would be higher as the tax rate is lower. So, that would be a negative but against that your NOL carry-forward would be lower and that's a capital deduct. So, in the law of very big numbers with health warnings, plus or minus, at our low point, we think not a significant impact. And then if you were to take a look at our starting-point capital, I'd just make two comments.

The first is, obviously, given all of the conversations we've just had, there is also the strong possibility that we will have higher earnings in the third part of the year and be able to accrete back portions if not all of that capital. And secondly, for what it's worth, our actual spot capital ratios were higher than our CCAR outlook was. So, both from a starting point and test perspective, I feel OK, but that's a really complicated question and we need to really work through it.

Jamie Dimon -- Chairman and Chief Executive Officer

Then there's a new sheriff in town [Inaudible] they're going to be looking at the whole picture. I think, it's probably more important than this one item.

Operator

Our next question is from Gerard Cassidy of RBC.

Gerard Cassidy -- RBC -- Analyst

Thank you. Good morning. Marianne, assuming the economy in 2018-2019 accelerates due to this tax reform, I think, it may imply that we would have higher interest rates and possibly a steeper yield curve. Do you guys have any thoughts on what you might do to the interest sensitivity of the balance sheet? Would you change it or you want to just keep it the way it is?

Marianne Lake -- Chief Financial Officer

Yea. I mean, for what it's worth, we should know our house view on interest rates is for there to be four hikes next year. The Fed Inaudible] is three, the market has two. I would say tax reform and a stronger growth outlook will solidify the path of rate hikes.

So, we've been factoring that into our balance sheet positioning anyway. So, I would not expect there to be a material change in our strategy.

Gerard Cassidy -- RBC -- Analyst

OK. And then in your release in the fourth quarter, you guys said how would the tax change affect your capital-distribution plans and there's no change, the first-hal distribution is going to be based on the 2017 CCAR approval. Is that in terms of the payout ratio on the 2017 CCAR or the nominal dollars because obviously your earnings now are going to be higher in the first half of '18 versus what you got approved for in the CCAR '17, which would imply, if you kept the payout ratio constant, you would actually have a higher nominal payout in the first half of '18.

Marianne Lake -- Chief Financial Officer

Our capital plan approval is on a nominal dollar basis.

Operator

Our next question is from Matt O'Connor of Deutsche Bank.

Matt O'Connor -- Deutsche Bank -- Analyst

Good morning.

Marianne Lake -- Chief Financial Officer

Good morning, Matt. How are you?

Matt O'Connor -- Deutsche Bank -- Analyst

Good, thank you. It's probably a bit early to know how to play this, but as you think about the winners and losers from tax reform, do you think there will be changes in terms of how you come to market, where you come to market? A lot has been written obviously on the impact of some of the high-tax states and how money can flow from there to others and obviously you're in some high-tax states and also in low-tax states. I'm just trying to think through how you might tweak your business model to focus on some of your products in some of those markets.

Marianne Lake -- Chief Financial Officer

Yes. I'd say, in essence, time is our friend, so if you go back and look at, and obviously nothing is exactly like this, but if you go back and look at similar empirical evidence, it would say that any influence in terms of migration and flow of funds is pretty modest and pretty gradual. And if you think about something as first-order as housing in high-tax states, people are pretty situated where they live with their families and their jobs, and higher-income borrowers are typically less price-sensitive. So, I think lots and lots of things come into play.

I think the area that we're thinking about a little more is what's the optimal financing structure for clients, given changes across the capital-market structure, but even in that sense, while you could say debt may be more expensive, it's still probably cheaper than equity, and equity may be more seen as fair value but for JP Morgan it's of course what we do. We do cross-border equities and acquisition financing, liability management, bespoke capital-structure strategies. We do all of it. So, even if there's sort of mixed and optimal structure change, I think we're pretty well-situated.

So, it's early days to be able to say that we would have strategic changes. I think it's early days and I would say that if that was to be the case, I would probably expect them to be quite marginal.

Matt O'Connor -- Deutsche Bank -- Analyst

And then how about just more on aggregate on the consumer underwriting side? If you are feeling more positive about the economy and you're seeing the growth in consumer personal income before the tax cut here and that might accelerate, does it make you more open to loosening underwriting standards a little bit? I feel like in aggregate standards are still fairly tight versus where they were pre-crisis and there could be some opportunity there for you and others?

Marianne Lake -- Chief Financial Officer

I think that may be a fair observation but I also think, to Jamie's earlier point, as much as we would like to imagine that all of this takes effect immediately, you would need to see the benefits of the environment in the income and spending and profitability and creditworthiness of people before you would be able to lean into the changes necessarily. So, maybe but, again, I think it's going to be something that will unfold.

Jamie Dimon -- Chairman and Chief Executive Officer

We haven't changed our standards very much and the one exception that might change over time, which I hope it does actually, is in mortgage lending where, I think, because of service requirements, capital requirements, reporting requirements, various litigation uncertainty, that it has tightened the credit box around people who probably deserve credit -- younger people, first-time buyers, prior defaults -- but that's going to take the agencies working together to set new rules and new guidelines. If that happens, that can actually be really good for growth in America.

Marianne Lake -- Chief Financial Officer

And pretty immediate.

Jamie Dimon -- Chairman and Chief Executive Officer

And pretty immediate. And it's not going back to subprime, it's just opening up the credit box and reducing the cost of the average mortgage and we're hopeful that the agencies will eventually do that.

Operator

Our next question is from Andrew Lim of Societe Generale.

Andrew Lim -- Societe Generale -- Analyst

Hi, morning. Thanks for taking my question. Just want to play devil's advocate for a bit. I've looked at the credit markets and the [Inaudible] has increased across spectrum, especially at the short end rather than the long end and I'm thinking that these high interest rates would feed into high credit losses at some point.

I'm wondering if that was part of your thinking or whether that feeds into your credit-quality models. And if, at what time would you think that the deterioration in credit might start to accelerate?

Marianne Lake -- Chief Financial Officer

So, a couple of things. Just one thing because I think it's worth pointing out that there's been a lot of attention on a flatter yield curve, but you're right, it's driven by higher front-end, which is a good type of flattening, so to speak. So, that's what's been driving sort of NII growth for us and we do expect that that will, together with Feds normalizing its balance sheet ultimately end up with higher [Inaudible] rates. So, we're pretty optimistic about that.

You're right, at some point, typically, you will see potentially higher rates, depending on the speed and inflation and other factors, would be, proceed, potential for a credit cycle. I mean, I suspect this will be no different but that is not something that we see in our models or in the outlook over the near term. So, hopefully, the monetary policy will be gradual and as expected and we will continue to see the front-end rates and everything be rational, and of course there could be surprises but at some point, yes, but not in the near future.

Could you say what's the average maturity of your corporate loan book or across the loan book in general?

It differs.

Jamie Dimon -- Chairman and Chief Executive Officer

It's clearly disclosed in the 10-K, but it's different for every single product, and it also changes, interest rates move around.

Operator

Our next question is from Saul Martinez of UBS.

Saul Martinez -- UBS -- Analyst

Hi. Good morning. So, on your tax Q&A you mentioned what the impact of tax reform is across different businesses from a growth standpoint but you also talk about the potential for competition, being uncertain in terms of how it impacts different businesses and different products. Can you talk to that a little bit and speak to which products and businesses you see more scope for competition, less scope for competition, and how does that influence how you think about investing in, across your different businesses?

Marianne Lake -- Chief Financial Officer

So, I would start by saying that I think we showed at Investor Day last year and if we could do something similar, maybe we will. It would look very similar today, which is if you go below our top-line businesses to the businesses beneath that, the vast majority of our businesses are more than covering their cost of equity by a fair margin today. So, our investment strategy wouldn't be directly impacted by marginal changes in pricing and possibility up or down. We're going to continue to invest in everything that we can do well to improve the customer experience and grow the business.

So, I think we've been pretty consistent on that, not just today but over the course of the last several years. And then, I think, it is uncertain. So, I would just give you the obvious extremes, which is if you have four different organizations competing for a single large-structure transaction and the cost of capital and taxes are direct input to pricing, I'm sure it will feature in the discussion. And if you are talking about a very, very scaled, very, very high-volume business with extraordinarily tight margins, it will probably have ultimately or at least in the very, very near term less impact but, again, I actually think people to be quite disciplined how they think about this.

Jamie Dimon -- Chairman and Chief Executive Officer

Can I give you an example away from finance? Utilities already are being put in a position because part of the rate-base and after-tax return, that they're going to pass it on to consumers, probably 100%. That may be different by state but think of it that way. And Marianne spoke about cap rates and stuff and obviously anything in the marketplace that's being bid at in after-tax rate, you could see a pretty quick effect but go all the way to Hershey candy bar. It's not necessarily clear that if you sell candy or cereals or something like that, you're going to have immediate repricing effect because of a tax-rate change.

So, we run that whole gamut of things. So, we just have to wait and see how it works out. At the end of the day, everyone benefits from more growth and to me that's probably the most important thing.

Saul Martinez -- UBS -- Analyst

Yea. No, that's helpful. One of the businesses that has been doing extremely well in terms of growth and profitability momentum is the commercial-banking business and I feel like I ask this every quarter but, I guess, the question is what you can do for an encore. It's a relevant part of your earnings now and revenues and a big part of the growth but can you just talk to the sustainability of the momentum in terms of balance sheet growth, revenue growth? How much headway is there still to continue to grow in that business?

Jamie Dimon -- Chairman and Chief Executive Officer

Decades. Marianne already mentioned we are now in the top 50 MSAs. We're already [Inaudible] products and services. We built technology in cash-management side.

We're doing a better job serving U.S. middle-market companies for their international needs. It can go on for a long time and we're competitive, we've got very good margins and we're constantly investing, and people have done a great job, we've added specialty finance lines. So just more of the same thing.

Marianne Lake -- Chief Financial Officer

The thing about the commercial bank, it's the absolute nexus of everything we do. It's delivering the whole company to our clients in a way that very few other people can do. So we've been investing in 100 banks a year for a period of time, opening offices, adding capabilities, focusing on digital, and improving the customer experience like in the rest of our business. So credit applied where ultimately there will be a cycle and it will be fine.

That business is really poised to do very well.

Jamie Dimon -- Chairman and Chief Executive Officer

And I would just add, because we shouldn't leave this call without talking about it. In the custody and fund services business, we've got a great new technology. I think it looks like we've gained a little bit share in the emerging markets where we were probably a little bit weak. Service levels have gone way up and I'm embarrassed to say they weren't particularly good a couple years ago.

And treasury services, we're building new international payment system. The banking industry has built a real time -- it hasn't been all rolled out yet -- a real-time payment business. What we've done with the Latin, we feel exceptional about [Inaudible] custody fund services. On the consumer side we have a whole bunch of -- If you look at our digital offering, it's gotten better and better and better.

There's a whole bunch more coming. Zelle and Chase QuickPay, we're not gaining share but we're definitely gaining clients, and we have barely started to market that. That's where real-time P2P has opened. How many banks are part of it now, like 30 to 40, which is going eventually to be -- Everyone's going to be opened up to Zelle.

And then, of course, this year we have beta ready, we spoke a little bit about online, [Inaudible] mobile banking. Some of these things may not work but they're really great products and services and we're pretty excited about it actually.

Operator

Our next question is from Brian Kleinhanzl of KBW.

Brian Kleinhanzl -- KBW -- Analyst

Hi, good morning. I just had one quick question on securities services. Within that, you saw good growth and your assets under custody up over 3% quarter on quarter on annualized but the revenues were up less than 1%. Were there some timing issues when the AUC came on? If you kind of highlight what was the difference between the AUC growth and revenue growth this quarter.

Marianne Lake -- Chief Financial Officer

Yea. In securities services we make money on NII, we make money on transactions, we money on AUC and depending upon whether that's fixed income or equities or whether it's emerging markets or the U.S. will drive the extent of that. So, it's not like you can take the overall revenue of securities services and link it to increases in assets under custody and draw a direct.

I mean, there's obviously a direct relationship but it's not going to necessarily move in line. So, I can tell you that looking at that decomposition of, what's higher market levels and higher flows by region and looking at the portion of our revenues that related to assets under custody that they were in line.

Jamie Dimon -- Chairman and Chief Executive Officer

And full-year effect doesn't happen for 12 months. If you were to [Inaudible] go up by $2 trillion and two-thirds of assets going up but it will take a year before the full-year effect of that is felt. So you see partial effects actually flowing into this quarter.

Brian Kleinhanzl -- KBW -- Analyst

OK, thanks.

Duration: 69 minutes

Call Participants:

Marianne Lake -- Chief Financial Officer

Erika Najarian -- Bank of America -- Analyst

Jim Mitchell -- Buckingham Research -- Analyst

Betsy Graseck -- Morgan Stanley -- Analyst

Ken Usdin -- Jefferies -- Analyst

Glenn Schorr -- Evercore ISI -- Analyst

Mike Mayo -- Wells Fargo Securities -- Managing Director

Jamie Dimon -- Chairman and Chief Executive Officer

John McDonald -- Bernstein -- Analyst

Steven Chuback -- Nomura Instinet -- Analyst

Gerard Cassidy -- RBC -- Analyst

Matt O'Connor -- Deutsche Bank -- Analyst

Andrew Lim -- Societe Generale -- Analyst

Saul Martinez -- UBS -- Analyst

Brian Kleinhanzl -- KBW -- Analyst

More JPM analysis

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