JPMorgan Chase & Co (JPM) Q2 2020 earnings call dated July 14, 2020
Corporate Participants:
Jennifer Piepszak — Chief Financial Officer
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Analysts:
John McDonald — Autonomous Research — Analyst
Betsy Graseck — Morgan Stanley — Analyst
James Mitchell — Seaport Global — Analyst
Brian Kleinhanzl — Keefe, Bruyette, & Woods, Inc. — Analyst
Matthew O’Connor — Analyst — Analyst
Michael Mayo — Wells Fargo Securities — Analyst
Erika Najarian — Bank of America Merrill Lynch — Analyst
Glenn Schorr — Evercore ISI — Analyst
Charles Peabody — Portales Partners — Analyst
Saul Martinez — UBS Investment Bank — Analyst
Gerard Cassidy — RBC Capital Markets — Analyst
Kenneth Usdin — Jefferies — Analyst
Christoph Kotowski — Oppenheimer & Co. — Analyst
Andrew Lim — Societe Generale — Analyst
Presentation:
Operator
Good morning, ladies and gentlemen. Welcome to JPMorgan Chase’s Second Quarter 2020 Earnings Call. [Operator Instructions]
At this time, I would like to turn the call over to JPMorgan Chase’s Chairman and CEO, Jamie Dimon, and Chief Financial Officer, Jennifer Piepszak. Ms. Piepszak, Please go ahead.
Jennifer Piepszak — Chief Financial Officer
Thank you, operator. Good morning, everyone.
I’ll take you through the presentation, which, as always, is available on our website and we ask that you please refer to the disclaimer at the back.
Related: An earnings season where trading business played god
Starting on page 1. The firm reported net income of $4.7 billion, EPS of $1.38 and record revenue of $33.8 billion with a return on tangible common equity of 9%. Included in these results are a number of significant items. First, a credit reserve builds of $8.9 billion and then approximately $700 million of gains in our bridge book and $500 million of gains in credit adjustments and other, both of which represent reversals of some of the losses we took in the first quarter.
As we continue to navigate this challenging and uncertain environment, this quarter’s performance once again demonstrates the benefits of the diversification and scale of our platform. So I’ll just touch on a few highlights here.
CIB reported its highest quarterly revenue on record, with IB fees up 54% and markets revenue up 79% year-on-year, each representing record performances with strength across the board. We saw record consumer deposit growth of 20%, up over $130 billion year-on-year, and firmwide average deposits were $1.9 trillion, up 25% year-on-year and 16% quarter-on-quarter.
Average loans were up 4% year-on-year and quarter-on-quarter, largely reflecting the COVID related loan growth that we saw in March. However, on an end-of-period basis, loans were down 4% quarter-on-quarter due to revolver paydowns as well as lower balances in card and home lending, partially offset by the impact of $28 billion of PPP loans.
And lastly, we increased our CET1 ratio by approximately 90 basis points in the quarter after building approximately $9 billion of reserves and paying nearly $3 billion of common dividends.
As you’ll recall, we started the second quarter on the back of unprecedented levels of business activity in March. On the following pages, I’ll give you an update on some of those key activity metrics we looked at last quarter and share what we’re seeing today. So with that, let’s turn to page 2.
Starting with wholesale on the top of the page. We saw record levels of debt and equity issuance in the quarter as clients sought to pay down the majority of the revolver drawns from March and continued to shore up liquidity while market conditions were receptive supported by extraordinary central bank interventions. The surge in investment grade debt issuance seen in March continued throughout the second quarter, and as high-yield markets reopened, US issuance volumes increased by 19% [Phonetic] compared to the first quarter. In ECM, as markets rebounded to pre COVID levels, May and June together were our two busiest months for equity issuance ever, driven by converts and follow-ons.
Moving to consumer spending behavior on the bottom left. Debit and credit sales volumes, while overall still down, has consistently trended upward since the trough in the second week of April to down just 4% year-on-year in the last two weeks of June. T&E and restaurant spend continued to be down meaningfully, though we had seen some improvement, especially on the back of higher levels of restaurant spend. And most significant improvement we saw was in retail, with a strong recovery in card present volume in the second half of the quarter and consistently strong growth in card-not-present volume throughout the quarter. More recently, we’ve seen the improvement in overall sales growth across the country flatten out, notably, in those states with increasing cases and states with decreasing cases. We continue to see larger year-on-year declines in states that remain partially closed, particularly those in the Northeast and mid-Atlantic regions.
In terms of consumers’ demand for credit, we observe similar recovery trends. In auto, April saw the lowest level of loan and lease originations since the financial crisis. But activity rebounded sharply in May and June, and in fact June ended up the best month for auto originations in our history. And in home lending, retail purchase applications after reaching a low in April recovered to well above pre COVID levels in June due to a strong and broad market recovery.
Continuing on the topic of consumer behavior, let’s turn to page 3 for an update on what we’re seeing around our customer assistance programs. Relative to the peak levels we observed at the beginning of April, we’ve seen a significant decline in new requests for assistance over the quarter. To date, we have provided customer assistance for nearly 1.7 million accounts, representing $79 billion of balances across both our owned and serviced portfolios, and of those accounts, a large percentage having made at least one payment while in the forbearance period, just over 50% in both cards and home lending.
In terms of early reenrollment trends, in card, only a small portion of our customers have completed both the initial 90-day deferral period and reached a payment date, but the majority of those customers resumed payments with less than 20% of accounts requesting additional assistance. And then in home lending, of those whose forbearance period expired in June, most have either been extended at the customer’s request or auto enrolled into new three month forbearances with approximately 40% of the extensions still current. And so, while we’re following the data closely, it’s still too early to draw any conclusions.
Now moving on to page 4 for some more detail about our second quarter results. We recorded revenue of $33.8 billion, which was up $4.3 billion or 15% year-on-year. While net interest income was down approximately $600 million or 4% on lower rates, mostly offset by higher market NII and balance sheet growth, noninterest revenue was up $4.9 billion or 33%, predominantly driven by CIB markets and IB fees. Expenses of $16.9 billion were up approximately $700 million or 4% year-on-year on revenue related expenses, partially offset by continued reduction in structural expenses. This quarter, credit costs were $10.5 billion, including net reserve builds of $8.9 billion and net charge-offs of $1.6 billion.
Let’s turn to page 5 for more detail on the reserve builds. Our net reserve build of $8.9 billion for the quarter consists of $4.6 billion in wholesale and $4.4 billion in consumer, predominantly card. The reserve increase in the first quarter was predicated on an acute but short-lived downturn, with a solid recovery in the second half of the year. And while we have seen some positive momentum in the economy over recent weeks, there does continue to be significant uncertainty around the path of the recovery.
At the bottom of the page, you can see our updated base case. But remember, this is just one of five scenarios we used to derive our allowance for credit losses. Our build is based on the weighted outcome of these scenarios and assumes a more protracted downturn with a slower GDP recovery and an unemployment rate that remains in the double digits through the first half of 2021. In addition to the obvious impact on consumer, this protracted downturn is expected to have a much more broad-based impact across wholesale sectors than we assumed in the first quarter.
Given the increased uncertainty of the macro economic outlook, how customer payment behavior will play out and the future of government stimulus and its ultimate effectiveness as it relates to both consumer and wholesale clients, we put more meaningful weight on the downside scenario this quarter, and so therefore we’re prepared and have reserves for something worse than the base case. And given CECL covers the life of loans, if our assumptions are realized, we wouldn’t expect meaningful additional reserve builds going forward.
Now moving to balance sheet and capital on page 6. We ended the quarter with a CET1 ratio of 12.4%, which is over 100 basis points above our new SCB based minimum of 11.3%. And just to touch on SLR, while our reported ratio is 6.8%, it’s worth noting that we’re not going to rely on temporary relief and so without that our ratio is 5.7%. As we said in late June, unless things change meaningfully, the Board intends to maintain the $0.90 dividend in the third quarter. Given the wide range of potential outcomes going forward, I’d like to spend a few minutes on why we’re comfortable saying that, including the value of our strong and steady earnings stream as well as how we’re managing our capital through this crisis.
So with that, let’s go to page 7. It’s an obvious point, but it’s worth a reminder that since 2018 our average quarterly PPNR of over $13 billion has been generating over 60 basis points of new CET1 capacity per quarter even after having made meaningful investments in our businesses. This powerful earnings stream allows us to grow the franchise and serve our customers and clients when they need us most, and it provides us the capacity to absorb losses and quickly replenish capital in times of stress. While over the last two and a half years we’ve paid out approximately 100% with cumulative earnings, distributing nearly $75 billion of excess capital, we’re now building a significant amount of capital since we suspended our share repurchases. And we believe our capital base remains strong even in more severe scenarios, which you can see on page 8.
Standing here today, we have $34 billion of reserves and $191 billion of CET1 capital, of which $16 billion is excess over and above our regulatory buffers. Our 3.3% SCB translates to $51 billion of capital that is available to pre-fund stress at any time. And on top of that, our 3.5% GSIB surcharge translates to another $54 billion, all that so our $69 billion regulatory minimum is never touched.
And as you know, we prepare for and manage our capital to a number of scenarios and one of them is the extremely adverse scenario that Jamie discussed in the shareholder letter earlier this year. We’ve updated this analysis and it now assumes an even deeper contraction of GDP, down nearly 14% at the end of 2020 versus 4Q ’19 and reported unemployment ending the year at nearly 22%. Even under this scenario, we estimate that we would end the year with a CET1 ratio above 10% and we would be down by that or regulatory minimum would be 10.5%. While we are not likely to voluntarily dip into any of our regulatory buffers, this scenario would require us to do so, but notably only to a small extent.
It’s also worth noting that based on the limited information provided from the Fed about their U and W scenarios, we believe that our extremely adverse scenario simulates an even worse path for the economy over the next 12 months. And even if we get this wrong and our losses are twice as high, we still wouldn’t use the entire SCB.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Okay. Yeah. So, this is Jamie.
I’d just like to amplify a couple of these points. So, we’re showing this example. Obviously, it’s predicated on a lot of assumptions, which we’re not going to give you a lot of detail on, just simply to show that we can bear another $20 billion of loan loss reserves. That $20 billion brings us to an extreme average, which roughly may equate to U or W of the Fed. And we’re going do a lot more analysis than that because obviously we need to be prepared for that.
We dip into advanced CET1 because we’re taking no actions. So, I’ve already told you that advanced capital is very pro-cyclical, so as things get downgraded your RWA goes way up. Your capital base doesn’t change that much but the RWA goes way up, and there’d be lots of actions we would take that we can avoid that from taking place whatsoever. The other thing I want to point out is this extreme average probably can’t happen in one quarter. It will happen several quarters. We don’t really know kind of what July looks like and August and stuff like that. So even if the economy starts to head there, it will take us a couple of quarters before you make the determination that that has a 100% possibility.
Remember, this is saying, we now believe it’s 100%. But of course, things can be worse, by the way, but we’re just trying to show you that how much capital the Company does have. And the dividend — now, I’m going to sound like I’m contradicting myself; I am not, okay? Today, we have all that PPNR, all that earnings, all the things, so we can be foolish to get the future of extreme adverse and cut your dividend, because we can easily go through very, very tough times and never cut the dividend. However, if you enter something like extreme adverse, all of a sudden you have new scenarios which are even worse. You don’t know. So, at one point, the Board will consider cutting the dividend because things can get even worse than extreme adverse and we want to be able to handle anything out there.
The primary concern of the Company is to serve our clients, serve our community through thick or thin and no one should ever worry about JPMorgan Chase. So, there is no intent to do it. But if things get really bad, and we use the word materially and significantly, and that’s something to look at. The other thing by the way is these loan losses are our best estimate of loan losses and not the CCAR type of stuff. You all is doing estimates to show DFAST and Fed adverse. We will not lose that kind of money on credit, okay? And on the next page, Jen’s going to explain some stuff on the — a few slight additional comments.
I also want you to — she said that we’re not going to use temporary buffers. I think that temporary is a funny thing to go into a crisis, and you could use it for a while, but it disappears on March 1 or February 1. So my view is we shouldn’t rely on anything like that.
Jennifer Piepszak — Chief Financial Officer
And all this add, Jamie, to the point on advanced RWA.
If you look on the slide, then you can see we traveled from 13.1% to 10.4%. About half of that is just the RWA increasing and the other half just the [Indecipherable].
So anyway, as Jamie said, moving on to page 9. All of this is against the backdrop of a capital framework that still has opportunities for recalibration. So, while we’ve talked about this for years, it has perhaps never been more important. I’ll start with CCAR, and Jamie just made this point, but it is not predictive of what we actually think would happen. And the best example of this might be the global market shock. It is a significant portion of the SCB and we’ve obviously experienced a very different result here in the first half of 2020.
So, we continue to believe that there are opportunities to rationalize the overall capital framework, including the points we’ve previously made about GSIB. These changes would foster a higher pace of economic growth over time without compromising financial stability.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Yeah.
So, again, I just want to emphasize a couple of things here. So look, the point of CCAR was that banks couldn’t handle extreme stress and if everything goes wrong. CCAR itself is not a predictive forecast of what your results might be. So all the CCAR tests roughly equate to a global financial crisis, and all the CCAR tests always have us losing somewhere between $25 billion and $30 billion over the ensuing nine quarters. But in the ensuing nine quarters, at the Lehman we made $30 billion. We never lost money in a quarter. We take actions, we’re diversified, we’ve got other streams of earnings.
And so we’re not against CCAR because that’s protecting you from the worst of the worst of the worst, but that’s not necessarily predictive. The global market shock, which I think really have $25 billion in counterparty losses. Again, just to be instructive of that. In ’08 and ’09, you had Fannie May go bankrupt, Freddie Mac go bankrupt, you had Bear Stearns effectively, you had Lehman Brothers effectively, you had AIG effectively, you had tons of financial institutions in Europe, tons of counterparty failures, and our trading results in the worst two quarters combined was a loss of $4 billion, not $25 billion.
And of course, it’s quickly made back because as we pointed out, when things get bad in trading, spreads gap out and then also — and you’re making more money trading because — and have recoveries in position. So the stress capital buffer of 3.3% is not indicative of what we would lose, and so — and I hope, over time we can drive that down by taking real actions to a number closer to 2.5%.
GSIB itself, I pointed out before — I’m not against the concept of big banks and more capital and all, but GSIB is — it’s not the same as CCAR. CCAR includes your diversification, your strength, your earnings, your PPNR and things like that. GSIB does not. It’s just a measure of size multiplied over and over and over. It doesn’t include diversification, it doesn’t include margin, it doesn’t include actions, it doesn’t include — and just really not representative at all of, I would say, risk of a company or something like that.
And so, we have enough capital to fund a lot of stuff, which is — we’ve always run the Company that way. We’ve always run the Company so that we can handle adverse times because in my short life time, I’ve seen crises over and over and over and over. We’re not predicting them. We’re just prepared for them.
So, I’ll stop there.
Jennifer Piepszak — Chief Financial Officer
Okay. Thank you.
All right. So let’s go on to the businesses. So I’ll start on page 10 with Consumer and Community Banking.
So CCB reported a net loss of $176 million including reserve builds of $4.6 billion. Revenue of $12.2 billion was down 9% year-on-year driven by deposit margin compression, lower transaction activity and customer relief, partially offset by strong deposit growth and home lending margin expansion. The deposit margin was down 108 basis points year-on-year on a sharp decline in rates. But deposit growth was a record 20% year-on-year, up over $130 billion. We would estimate that approximately 50% of that growth is COVID related due to government stimulus for consumers and small businesses, lower consumer spending and tax payment delays.
Mobile users were up 10% year-on-year. And since the start of the pandemic, we’ve seen increased levels of digital engagement. For example, quick deposit enrollment is up 2 times pre-COVID levels.
As I noted earlier, for consumer lending, the overall activity for the quarter reflected an environment that continued to evolve. Auto loan and lease originations were down 9% year-on-year due to the exit of the Mazda partnership. Excluding this impact, auto originations were up mid single digits. And while the home lending market was favorable, home lending total originations were down 1% year-over-year, driven by declines in correspondent volume substantially offset by an increase in retail volume.
Total CCB loans were down 7% year-on-year, driven by home lending down 14% due to prior loan sales and card down 7% on lower spend, offset by business banking up 59% due to PPP originations.
Expenses of $6.6 billion were down 3% driven by lower travel related benefits, structural and marketing expenses. And lastly, credit costs included the $4.6 billion reserve builds I mentioned earlier and net charge-offs of $1.3 billion driven by card.
Now turning to the Corporate and Investment Bank on page 11. CIB reported net income of $5.5 billion and an ROE of 27% on revenue of $16.4 billion.
Investment banking revenue of $3.4 billion was up 91% year-on-year, largely driven by our strong performance in capital markets as well as the gains on our bridge book which were primarily a function of improved market conditions. IB fees for the quarter were an all-time record, up 54% year-on-year. We maintained our number one rank and grew our market share to 9.8% for the first half of the year.
In advisory, we were up 15% driven by the closing of a few notable transactions. Debt underwriting fees were up 55%. We maintained our number one rank in overall wallet and we’re the leaders in lead-left across leveraged finance. In equity underwriting, fees were up 93% and we grew share by approximately 200 basis points relative to the first quarter.
With regards to outlook, we expect third quarter IB fees to be down both sequentially and year-on-year due to the usual seasonal declines and lower M&A announcements year-to-date. And if the economy begins to stabilize, we expect capital markets to revert to normal levels. However, any sustained period of instability could result in additional demand for liquidity and therefore increased capital markets activity.
Moving to Markets. Total revenue was $9.7 billion, up 79% year-on-year, an all-time record, driven by strong performance throughout the quarter, and it was only later in June that activity began to revert to more normal levels. We saw strength across products and regions from both flow trading and large episodic transactions. While strong buying activity was a continuation of the first quarter theme, our market-making activity this quarter benefited from improved market liquidity, and we were able to better monetize flows.
Fixed income was up 99% year-on-year or 120% adjusted for the gain from the IPO of Tradeweb last year, driven by very active primary and secondary markets across products, particularly in macro. Equities was up 38%, largely driven by strong client activity in equity derivatives and cash.
Looking forward, we expect the slowdown that we started to see towards the end of June to continue. In addition, the second half of last year was very strong, making any year-on-year comparison difficult. But obviously the environment makes forecasting markets’ performance even more challenging than usual.
Wholesale payments revenue of $1.4 billion was down 3% year-on-year, primarily driven by a reporting reclassification in merchant services. Security services revenue of $1.1 billion was up 5% year-on-year as continued elevated volatility in the second quarter drove increased transaction volume and higher average deposit balances. Credit adjustments and other was a gain of $510 million as I mentioned upfront, driven by the tightening of funding spreads on derivatives, and was a partial reversal of the losses in the first quarter. Expenses of $6.8 billion were up 19% compared to the prior year due to revenue related expenses. Finally, credit costs of $2 billion reflect the net reserve builds I referred to earlier.
Now moving on to Commercial Banking on page 12. Commercial Banking reported a net loss of $691 million which included reserve builds of approximately $2.4 billion. Revenue of $2.4 billion was up 5% year-on-year, driven by higher deposits and loans and equity investment gain and higher investment banking revenue, largely offset by lower deposit NII. Record gross investment banking revenues of $851 million were up 44% year-on-year due to increased bond and equity underwriting activity.
Expenses of $899 million were down 3% year-on-year, driven by lower structural expenses. Deposits of $237 billion were up 41% year-on-year as the increase in balances from March have largely remained on our balance sheet as clients look to remain liquid in this environment.
End of period loans were up 7% year-on-year, but down 4% quarter-on-quarter. C&I loans were down 7% quarter-on-quarter as revolver utilization, while still elevated, has declined significantly from the all-time highs in March. However, this was partially offset by the impact of PPP loans. CRE loans were flat, with generally lower originations in both commercial term lending and real estate banking. Credit costs of $2.4 billion included the reserve builds mentioned earlier and $79 million of net charge-offs, roughly half of which were in oil and gas.
Now on to Asset and Wealth Management on page 13. Asset and Wealth Management reported net income of $658 million with pretax margin and ROE of 24%. Revenue of $3.6 billion for the quarter was up 1% year-on-year as growth in average deposit and loan balances along with higher brokerage activity were largely offset by deposit margin compression.
Expenses of $2.5 billion were down 3% year-on-year, with lower structural as well as volume and revenue related expenses, partially offset by continued investments in advisors. Credit costs were $223 million, driven by the reserve builds that I mentioned earlier.
For the quarter, net long-term inflows were $29 billion positive across all channels and all regions, led by fixed income and equity. At the same time, we saw net liquidity inflows of $95 billion, making us the number one institutional money manager globally.
AUM of $2.5 trillion and overall client assets of $3.4 trillion, up 15% and 12% year-on-year respectively, were driven by cumulative net inflows into liquidity and long-term products.
And finally, deposits were up 20% year-on-year on growth in interest-bearing products and loans were up 12%, with strength in both wholesale and mortgage lending.
Now on to Corporate on page 14. Corporate reported a net loss of $568 million. Revenue was a loss of $754 million, down $1.1 billion year-on-year, driven by lower net interest income on lower rates, including the impact of faster prepays on mortgage securities. And expenses of $147 million were down $85 million year-on-year.
Now let’s turn to page 15 for the outlook. You’ll see here that despite the uncertain environment, our latest full year outlook remains largely in line with our previous guidance. Based on the latest insights, we expect net interest income to be approximately $56 billion and adjusted expenses to be approximately $65 billion, which is slightly higher than expected previously, reflecting the outperformance in the second quarter and will ultimately be an outcome of our performance in the second half of the year.
So, to wrap up, against the backdrop of an unprecedented environment, our second quarter performance highlighted the benefits of our diversification and scale and the resulting earnings power of our Company. While the range of outcomes is broader than ever before, our priorities remain unchanged. We are focused on supporting our employees, customers, clients and communities around the globe and on being good stewards of the capital entrusted to us by our shareholders.
I’d like to end by thanking all of those who continue to serve on the front lines of this crisis and our people here at JPMorgan Chase who have demonstrated unwavering fortitude and dedication through these times.
And with that, operator, please open the line for Q&A.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from John McDonald of Autonomous.
John McDonald — Autonomous Research — Analyst
Good morning, Jen and Jamie. Jen, I was wondering if you could give us some incremental color on your commercial exposures to heavily COVID-impacted sectors across CRE and C&I, so thinking oil and gas, travel, retail, just to help us understand the types of areas where your incremental commercial reserve building was directed towards this quarter.
Jennifer Piepszak — Chief Financial Officer
Sure. So I’ll start by saying the most impacted sectors like the ones that you mentioned represents about a third of our overall exposures. More than half of that is investment grade and two-thirds of the non-investment grade is securities.
And in terms of the second quarter downgrades, well, first I’d say, in the first quarter while we were really looking at a deep but short-lived downturn, we were really very much focused on the most impacted sectors. And now that we’re looking at a more protracted downturn, we’re reserved for a much more broad-based impact across sectors. So just to put that in context, the second quarter reserve build, about 40% of that is in the most impacted sectors versus two-thirds of the builds in the first quarter was the most impacted sectors. And then, in terms of the downgrades that we saw in the second quarter, less than a third of those were in the most impacted sectors.
John McDonald — Autonomous Research — Analyst
And for your definition of most impacted sectors, what would you be including in that?
Jennifer Piepszak — Chief Financial Officer
Consumer and retail, oil and gas, real estate, retail and lodging and subsectors as you think about real estate.
John McDonald — Autonomous Research — Analyst
Okay. And just a quick follow-up question. You maintain the NII outlook for the year despite a pretty big drop in net interest margin. Could you talk about the dynamics embedded in that second half outlook for NII and maybe how trading NII might play into the thinking?
Jennifer Piepszak — Chief Financial Officer
Yeah, it’s a great question and you’re spot-on, which is Markets helps NII. So the outperformance in Markets helps NII but can be a headwind on NIM, just given that the NIM is below the average. So yes, it was — maintaining that outlook did have something to do with the outperformance in Markets, you’re right.
Operator
Our next question is from Betsy Graseck of Morgan Stanley.
Betsy Graseck — Morgan Stanley — Analyst
Hi, good morning. Thanks. Jennifer, just to kick off on the question, on page 3, you went through a lot of detail around the forbearance that you’ve been given and the percentage that has been paying you at least once during the deferral period. Could you give us a sense on these different asset classes that you’ve outlined in your base case? What are you assuming those delinquencies end up becoming?
Jennifer Piepszak — Chief Financial Officer
So, I won’t go into specific details, but I’ll just say a couple of things, which is, it is still too early to really read a whole lot into what we’re seeing. The visibility here remains low, I would say, given the amount of support that is out there. But you are right that we are considering these customers to be higher risk given that they are in forbearance program. So we did account for that as we thought about our reserves.
Betsy Graseck — Morgan Stanley — Analyst
Okay. Because I’m thinking, all right, you’ve got the inverse of the right-hand column could be construed as what should be expected to become delinquencies over time. And I’m wondering, as a follow-up question, you mentioned during the prepared remarks that if your assumptions are realized, that you could be basically close to fully reserved for the cycle.
Maybe you could give us a sense as to which assumptions you are talking about because I know you’re expecting an outcome that’s worse than your base case. I was just a little confused about what I should assume your base case is and what assumptions you’re pointing to that, if realized, you’re done on the reserving.
Jennifer Piepszak — Chief Financial Officer
Sure. So, first of all, there are a lot of assumptions, given, as I said, the visibility is still quite low. So assumptions around the economic outlook, and I’ll come back to that, assumptions around consumer payment behavior and then assumptions around stimulus.
So going back to the economic outlook. We have five different scenarios. We did lean in more heavily to the downside scenarios relative then to what we would have otherwise done. Even the Fed has put equal weight on downside scenarios and their base case. So we certainly thought having a conservative bias there was the prudent thing to do. And so, as you look at that slide 5, that is just the base case. So you can see there exiting this year just under 11%. When you then look at the weighted outcome of unemployment across the five scenarios, we end up with double-digit unemployment through the first half of 2021 versus what you see on page 5 there is just the base case, which shows some improvement relative to the fourth quarter getting down to just under 8% by the end of 2021.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Betsy, I’ll just clarify. The base case, if you took Morgan Stanley’s estimates or Mike Feroli or JPMorgan or Fed estimates, for their base case, that is basically the base case. Embedded in that are always assumptions about the stimulus and PPP and all these other things. So that is the base case, and we’re reserved more than that. So therefore if the base case happens, we may be a reserve. I hope the base case happens.
Betsy Graseck — Morgan Stanley — Analyst
Me too.
Operator
Our next question is from Jim Mitchell of Seaport.
James Mitchell — Seaport Global — Analyst
Hey, good morning. Maybe just a quick follow-up on the consumer and delinquencies. Obviously, you had an impact from deferral programs and delinquencies actually — 30 day delinquencies were actually down. Can you talk to what you’re seeing in the non-deferral programs? It doesn’t seem like we’re seeing much stress at all, even in early stage delinquencies. What would you attribute that to? What are you seeing in your non-deferral programs?
Jennifer Piepszak — Chief Financial Officer
I mean, simply, I would attribute it to the amount of support that is out there in the form of stimulus. And so, as I said, the visibility on what we’re dealing with is very, very low, because we’re not seeing right now what you would typically expect to see given the recession and so the way we have to think about reserving is it’s all about the outlook because we’re not actually seeing it today. And so, Jamie has said this many times. May and June will prove to be the easy bumps in terms of its recovery and now we’re really hitting the moment of truth I think in the months ahead.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Yeah. And just to amplify it. In a normal recession, unemployment goes up, delinquencies go up, charge-offs go up, home prices go down. None of that’s true here. Incomes go down, savings go down. Savings are up, incomes are up, home prices are up. So you will see the effect of this recession — it’s not going to see right away because of all the stimulus and the fact 60% or 70% of the unemployed are making more money than they were making when they were working. So it’s just very peculiar times, Jim.
James Mitchell — Seaport Global — Analyst
Yeah. No, it’s fair. Maybe a follow-up on DFAST. Jamie, you made comments about the market shock. We kind of went through a market shock and everyone’s trading held up quite well. Do you see that changing the Fed’s view over time in terms of how they think about stress losses in the trading book? Or is it — or you don’t think that’s too optimistic?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
I don’t expect any change. And like I said, they’re not — what they’re looking at is, they’re making sure a bank can withstand the bad — as if they were the — all the worst bank. They’re not giving credit to banks for things have been good. So I’m not against that concept. I just want to say, if it goes really bad and you do everything totally wrong, what happens to your trading for something like that. And they do the same assumptions like outflows. The outflows they have on liquidity are worse than the outflows of the worst bank in the worst crisis. But they just want to make sure that every bank can withstand that.
Operator
Our next question is from Brian Kleinhanzl of KBW.
Brian Kleinhanzl — Keefe, Bruyette, & Woods, Inc. — Analyst
Great. Thanks. A quick question on the balance sheet. I mean, obviously there was tremendous balance sheet growth as liquidity built up in the quarter, but how are we thinking about on a go-forward basis? Is that expected to roll off over the next couple of quarters? Is that kind of persistent and is expected to stick around or you’re just going to operate with a much larger balance sheet in near term?
Jennifer Piepszak — Chief Financial Officer
So, I’ll start with deposits. I mean, in the first quarter it was very much a wholesale story, and we said we expected to normalize and we have seen that. We started to see that. So, looking ahead on wholesale, I think there are puts and takes. We’ll continue to see revolvers pay down, security services will likely continue to normalize. I think tailwinds for deposits, Fed balance sheet expansion will be slower, but we will continue and we do think we’ll continue to see organic growth. On the consumer side, probably down from here on tax payments as well as the pickup in consumer spending. But in both cases, I think we’ll continue to see very, very strong year-on-year growth both for wholesale and consumer in the latter part of this year.
And then in terms of balance sheet management, I mean, we manage the balance sheet across multiple dimensions: NII, liquidity, capital and interest rate risk. And so we have had $400 billion of deposit growth since the end of last year. And when you consider, as you note, that some of that growth is likely to be transitory and deployment opportunities have been diminished given the rate environment, we have held a decent amount of that in cash. However, we did add about $88 billion in securities here in the second quarter. And on the deposit side, we’ve been very disciplined on pay rates.
Brian Kleinhanzl — Keefe, Bruyette, & Woods, Inc. — Analyst
So, if those deposits have grown, we should expect more to migrate from deposits on the asset side into securities. Are you looking to fund loans on those?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Yes. As the Fed grows the balance sheet, it’s going to end up in deposits, and for the most part, lot of deposits will end up in securities because the loan growth usually during a recession doesn’t go up that much.
Jennifer Piepszak — Chief Financial Officer
Yeah. I mean, we should see — as consumer spending recovers, we should see some growth in card, which will help but we’ll have PPP starting to pay down, and as Jamie said, loan growth, but — likely slower.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
I should point out that — look at the big numbers. We have over $1 trillion between cash held at the Central Bank, which is close to $400 billion, $500 billion, Treasuries which is close to $700 billion and other very liquid assets, mostly good securities. That’s $1 trillion. When people look at the safety and soundness of an institution like this, that is a tremendous sum of money. Some of it’s required; we are required to hold all that liquidity, but some of it’s just because we’re investing considerably.
Brian Kleinhanzl — Keefe, Bruyette, & Woods, Inc. — Analyst
Thanks.
Operator
Our next question is from Matt O’Connor of Deutsche Bank.
Matthew O’Connor — Analyst — Analyst
Good morning. I was just wondering if you could talk a bit about the expected timing of starting to see some charge-offs. Obviously, there is a lot of unknowns with the stimulus and the forbearance, but what are your assumptions in terms of when charge-offs start going up, maybe where they peak and how long will they stay at that level?
Jennifer Piepszak — Chief Financial Officer
It’s really difficult to know. I mean, first we have to start seeing delinquencies. And so, later this year, but next year will be much heavier on charge-offs as you think about realizing the assumptions that we’ve made in the reserves. It’s very — it’s difficult to know. The good thing in CECL is life of loans, so we feel well covered for the scenarios that we’re looking at.
Matthew O’Connor — Analyst — Analyst
And then remind us — you are seeing some creep in the nonperforming assets. Obviously, it’s at low levels, but they are starting to go up. And remind us why that’s not starting to feed into net charge-offs or is this just a timing issue and will in the next quarter or two.
Jennifer Piepszak — Chief Financial Officer
Yeah. When we look at the non-accrual increase in wholesale, half of that is one client. So it’s really — I wouldn’t draw any conclusions from that. And as you say, it’s creeping up off a very low level. So again, we still aren’t seeing what you would expect to see in terms of recessionary indicators.
Operator
Our next question is from Mike Mayo of Wells Fargo.
Michael Mayo — Wells Fargo Securities — Analyst
Hi. Just more on the reserve question. So, if the Fed base case is achieved, then you are over-reserved. If your base case assumptions which are…
Jamie Dimon — Chairman of the Board and Chief Executive Officer
We hope. We hope [Speech Overlap]
Michael Mayo — Wells Fargo Securities — Analyst
Okay. And if your base case assumptions, which are more conservative, are realized, then, okay, you’re done with the reserve building, and if it’s worse, then you have to add more reserves. But since the end of the quarter, we’re seeing an increase in COVID cases in Florida and Texas and California and elsewhere. And isn’t there a link between an increase in COVID cases with deaths, with economic activity? Or how do you think about that?
And I’m staring at slide 2 and I can’t get my eyes off that debit and credit card sales volume, and it seems like it’s flattening off here in June. So just, since the end of the quarter, if you were to kind of mark-to-market your thinking as of this second with what’s happening, do you feel better, worse or the same versus the end of the quarter as it relates to your assumptions?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
So, guidance-wise, we feel exactly the same way that we did at the end of the quarter. That’s sort of mark to market. And Mike, we are very clear. We cannot forecast the future. We don’t know. We are also very clear that — I know at least think, you’re going to have a much murkier economic environment going forward than you had in May and June. And you have to be prepared.
So you’re going to have a lot of ins and outs. You got people who get scared about COVID. Again, talking about the economy, small businesses, big companies, bankruptcies, emerging markets. So it just could be murky. Which is why, if you look at the base case, adverse case and extreme adverse case, they are all possible, and we’re just guessing at the probabilities of those things. That’s all we’re doing.
We are prepared for the worst case. We simply don’t know. I don’t think anyone knows. This, the word unprecedented is rarely used properly, this time, is being used properly. It’s unprecedented what’s going on around the world, and I would say COVID itself is a main attribute. So the Fed’s W case, they made it very clear their W case is that COVID comes back in a big way in the fall and you have to shut down the economy again. And obviously, we got to be prepared too. We don’t know the probably of that. We simply don’t know, and I think, by the way, we’re waiting time, guessing.
Jennifer Piepszak — Chief Financial Officer
And then I would just add, Mike, to clarify that, we are reserved for something worse than the base case, and for all the reasons you said. They informed our decision to rein in a bit more on the downside scenarios. And so while there is a bit of a, we hope, pretty conservative bias here, this does represent our best estimate based upon everything we know which does include the sort of slowdown that you referenced in terms of more recent activity.
Michael Mayo — Wells Fargo Securities — Analyst
All right. And my follow-up would be, kind of in the flip side, during this very difficult time, you’ve grown deposits over the past year equal to the fifth largest bank. I mean, the deposit growth is kind of off the charts here. So, you said half of that is due to COVID. But is the other half due to share gains? So I guess there’s several questions in that. But how much of that is related to digital banking and how much of that do you expect to go away once this crisis has passed?
Jennifer Piepszak — Chief Financial Officer
So, I talked a little bit about kind of how we’re thinking about deposits looking forward. And also, I just clarify, Mike, when we said 50% COVID related, that was on the consumer side. And so that — we do think some of that will leave with tax payments and consumer spending coming back. And then, in terms of how much of it are the share gains, it’s difficult to know at this point. Historically, we have performed well in lower rate environment. And I think you’re right. I think it is because of our digital capabilities and our branch footprint and our people and all the things that we offer that differentiate us in a time like this.
Operator
Our next question is from Erika Najarian from Bank of America.
Erika Najarian — Bank of America Merrill Lynch — Analyst
Hi, good morning. The first question is for Jamie. A lot of investor feedback has indicated that they are encouraged by the fact that banks can remain profitable while absorbing pretty significant provisions which you’ve proven today but are hesitant about bank stocks given the overhang of the DFAST resubmissions in the fourth quarter and what that could imply for the dividend. And I guess — I just, I know you alluded to this in your prepared remarks, but I’m wondering, under the scenario that you see playing out and relative to that 60 basis points of CET1 generation for quarter, what is your view on dividend sustainability outside of that extreme adverse case.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
They’re completely sustainable. And if you — if we enter the extreme adverse case, the Board should and will consider reducing it. And like I pointed out, the extreme adverse case itself is completely sustainable with the dividend. The reason they would consider reducing it is because once you enter like 14% or 15% unemployment, you don’t know the future. So now you’re going to have to — another extreme adverse case, which is going to be 20% unemployment. And therefore, you will protect yourself from that and cutting your dividend is cheap equity.
And so the goal is to sustain the dividends. You can look at the numbers, it’s completely minuscule relative — quarter by quarter. So this decision could be made as you enter these things. And we’re all hoping the base case happens.
Erika Najarian — Bank of America Merrill Lynch — Analyst
And just as a quick follow-up. We also got this question from investors. In the extreme adverse case, is there a preference towards cutting the dividend or a temporary suspension or is there a difference between the two?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
There is no difference between the two. You cut your dividend, you’re going to hopefully put it back when the time comes. And so you know, the temporary suspension just sounds peculiar to suspension. And I’ve done that twice in my life. It’s a prudent thing to do if you might need that capital going forward because things are going to get that terrible or something like that.
Maybe the other thing, you can ask the another question, if the base case happens, we’re going to end up with far too much capital generation and we’ll start buying back stock again, which I hope we can do before it goes way up. So we don’t expect that this year, but I wouldn’t completely rule it out in the fourth quarter.
Operator
And our next question is from Glenn Schorr of Evercore.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Hi, Glenn.
Glenn Schorr — Evercore ISI — Analyst
Hello there. A question for you. So we had this big market rebound in the overall markets and that’s led to a lot of revenue. But given this outlook and the uncertain path that we’ve been talking through this whole time, I’m curious on ways you think about potentially derisking on balance sheet. Now, some of it is just a huge liquidity buildup is a de-risked balance sheet. I get that. But are there proactive things you can do to reduce the high leverage RWA in a more stressed environment? Have you been selling into this recovery is I guess my question.
Jennifer Piepszak — Chief Financial Officer
Dimon?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Well, go ahead.
Jennifer Piepszak — Chief Financial Officer
Well, I’ll just — I guess there’s two components to it, which is the investment securities portfolio and then proactive things we do on RWA, if that answers your question, Glenn. I’ll start with investment securities. We are being cautious and we have opportunistically looked to reduce credit exposure there over the second quarter. And then on RWA, we are — because we’re preparing for a range of outcomes, we are spending a lot of time thinking about if we needed to what could we do. But it is sort of a last resort because we certainly don’t want to have any impact on clients and customers. And so we’re ready. We’re looking at it, but we haven’t done anything I would say proactively at this point. We’re very much focused on helping clients and customers get through this crisis.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
And so let me answer as well. On the consumer side, we, like other banks, have seen — are kind of prudent tightening up of how you do credit. It’s already happened. And obviously you could do some more. But Jen, you had some great numbers about how good credit is. Like I think give those FICO’s numbers you gave me the other day, mostly how much better home lending…
Jennifer Piepszak — Chief Financial Officer
Oh, that was — on the LTV — the weighted average LTV.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Yeah, LTV, yeah.
Jennifer Piepszak — Chief Financial Officer
I mean, it’s really extraordinary. And I was in mortgage. So I should have remembered but I did have to ask. In 2010, our weighted average LTV on the portfolio in home lending was 90% and it’s now 56%.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Right. And you can assume it’s better in credit cards, better in auto. We have less subprime. That’s the consumer side. On the lending, on the business side, we’ve always been prudent, we’re always very tight and careful and stuff like that. Usually what happens with downturns like this, you get all more serious about security and the management team and responsiveness and raising capital. So a lot of these companies have been raising a lot of capital.
On the investment side, and this is kind of a peculiarity of accounting, again, we can actually make it more conservative by putting securities into held to maturity, which we’ve done very little [Indecipherable] I don’t personally understand why that reduces risk, but it does reduce SCB and maybe we’ll do that over time. But the security portfolio is pretty prudent. They are — and in trading, it’s every day. And so trading is — just think of trade as that Daniel and Troy Rohrbaugh and Jason Sippel and the whole team, they are every single day managing those risk and those exposure and you could assume that they’re managing it very, very well and tightly today. And we certainly are not punching through fences or anything like that. We’re trying to be very cautious and serve our clients. And so, yeah, you are more conservative. And reducing RWA, yes, we can, if we wanted to, we can start doing that by all these various things.
Glenn Schorr — Evercore ISI — Analyst
Thanks. One quickly on the consumer side. I’m curious if you’ve had — we’re now four months into the bulk of the lockdown in the United States and some of your branches have been either closed or drive-up only. And we’re watching your deposits grow like a weed. So I’m curious if you’ve learned any lessons that might change your thoughts on the branch network, on your organic growth efforts, as we go forward and come out of this some day.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Yeah. So, first of all, the deposit number. Deposits went up because of PPP; deposits went up because of the payroll checks that people got; deposits went up — the revolvers were taken down by $50 billion or something like that. So almost all that ended up in deposits. And of course, a lot of that’s already reversed and stuff like that. So you got to look at both sides of that. And — but you were going to say something, Jen?
Jennifer Piepszak — Chief Financial Officer
I was just going to add on. I mean, there’s — of course, we’re learning a lot. I mean, I mentioned the great deposit enrollment. But we haven’t learned enough to make any changes to our strategy around branch expansion. In fact, we just opened our 100th branch in market expansion, so are really excited about that. We think will open probably another 75 this year. So we’ll be nearly halfway to the 400 branches that we’ve talked about in market expansion. And so, we’ll see.
We do have — still have about 1,000 branches that are closed. And it’s possible that we learn something that helps us think about accelerating de-densification or consolidation, but it will be at the margin, then we’re not going to make any big changes quickly because we want to make sure that we have the benefit over time of watching our customer behavior. So they can really be the ones that inform our strategy.
Operator
Our next question is from Charles Peabody of Portales Partners.
Charles Peabody — Portales Partners — Analyst
Yes. Good morning. Two questions. One, on page 6, you give the SLR ratio as adjusted for the temporary relief programs on the capital. I wonder if you had a similar ratio for CET1. And part of that question would also be, which would be the more confining ratio starting next March?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
There is no temporary relief in CET1.
Jennifer Piepszak — Chief Financial Officer
Well, CET1, the only — and I’ll not even try to call it relief. There is a phase-in on CECL. But it’s over many years. And so I don’t necessarily think about that as temporary like SLR. SLR, at this point, it is temporary. It is due to expire in the first quarter of next year, which is why we’re very focused on managing that without the exclusions.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
And they’re both — we manage them both. I wouldn’t say one is more than the other. We manage — it’s like 20 different capital and liquidity ratios.
Charles Peabody — Portales Partners — Analyst
And Jamie, FSOC is meeting today behind closed doors. If I understand, there are two topics. One has to do with mortgage — secondary mortgage market liquidity and the other with the COVID stress test overlay. Do you have any thoughts or insights as to what they may be discussing on either of those?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
I don’t. The COVID — but we obviously have some insights. The COVID — obviously, we’re going to run a new stress test. We’re going to run it — we’re going to look at all the Fed cases, U, W and stuff like that because they’ve laid it out. Perfectly reasonable that people refer that kind of stress tests. I think the mortgage markets is a different issue, okay? And we’ve been very consistent that mortgages, believe it or not, are more — far more cost than they should be.
Normally, you’ve been looking at, if you look at the 10-year rate which is like 60 basis point, the mortgage takes me 1.6% or 1.8% instead of the 3.3%. The cause or the reason for that is because the cost of servicing and origination is so high it’s obviously got to be paid through. It’s high because an enormous amount of rules and regulation put in place that a lot not create safety and soundness. Safety and soundness is basic 80% LTV, verify people’s incomes, make sure you’re doing the right kind of stuff. And the second one is because there is probably no securitization market.
The securitization market is important because it reduces your risk-weighted asset and it puts more incentive for banks to put on their balance sheet and the securitization market is a real transfer of risk to somebody else. So we — I think they should change that. They should change it immediately. The beneficiary of that will be non-agency mortgages, which are even more — a lot more expensive than agency mortgages. So once you have a securitization market that people believe in, you have to change Reg A, B a little bit, you’re going to have a much better market, the cost of mortgage will come down and they’ll particularly come down for people at the low rank. I mean, so this should be phased and it should phase right away.
Operator
Our next question is from Saul Martinez of UBS.
Saul Martinez — UBS Investment Bank — Analyst
Thanks for taking my questions. I had a broader question and I just want to get your perspectives on public policy and banks and a little bit more broadly than the discussion about capital planning and stress testing. And I know banks are working hard to be part of the solution this time and not part of the problem. But we’re also having more open discussions about things like inequality and social justice, which in my opinion are long overdue. But I worry that, fair or not, banks are sort of being depicted as being on the wrong side of some of those issues. And I think you see that in things like the mainstream press’s depictions of big banks in PPP and stuff like that.
Again, I’m just curious if you are concerned at all about populist anti-bank policies gaining traction, however you want to define them, whether it’s breaking up the banks, directed lending, rate capture or whatever in a pretty polarized political environment. Or do you think I’m being too alarmist or overly concerned about stuff that is pretty unlikely in our country? So just kind of want to get your perspective just generally on how banks fit into the overall policy and political backdrop.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
I mean, the thing you guys do every single day when you go to work is just do the right things for the right reasons, serve your customers. And we try to do that. We tried very hard to do take care of our employees, to train people — we tried very hard to advance black [Indecipherable] in finance, and of course we make mistakes. And so I understand some of the angst out there. But we try to do the best we can. We get involved in policy like this mortgage thing that would be better for Americans. And we understand that people want banks to help America, and we do.
The most important thing we could do is be a healthy and vibrant bank through this crisis and continue to serve our clients. And remember, responsible lending is good lending. Irresponsible lending is bad lending. So very often we hear that banks should do more. That’s not — irresponsible stuff is responsible. It will be to bad outcomes. And that’s kind of we had last time around. So we try to do it right and we try to listen very carefully when there is criticism and sometimes, and often legitimate, that we could have done better or should do better or try to do better in the future.
Saul Martinez — UBS Investment Bank — Analyst
Okay. That’s helpful. I guess as broad as that question was, I’m going to ask a very narrow question for Jen on your NII guidance. Does that — I presume that includes gains on PPP fees for unforgiven loans and have you — have you quantified that or sized that up in terms of where you think the magnitude of those figures could be?
Jennifer Piepszak — Chief Financial Officer
So we’ve been really clear on PPP which is that we don’t intend to profit from PPP. That doesn’t mean that you won’t have some geography issues. So you’ll have some revenue and then you have expenses and the profit will be near zero. It is an immaterial amount this quarter given these fees are recognized over the lives of the loans. So it’s very little this quarter, both revenue and expenses. And looking out, you’ll see — we’ll see more of that probably in the third and fourth quarter. Again, it will still be zero on the bottom line and even the gross numbers won’t be meaningful in the grand scheme of things.
Operator
Our next question is from Gerard Cassidy of RBC.
Gerard Cassidy — RBC Capital Markets — Analyst
Thank you. Good morning, Jen. Can you share with us the reclassification of the wholesale portfolio that you talked about? How often do you go through that process where you have to look to reclassify new corporate loans? And second, you touched on earlier in a question about some of the COVID related sectors that are being impacted because of what we’re going through. Can you highlight for us what is the most stressed within that COVID group that you mentioned?
Jennifer Piepszak — Chief Financial Officer
So first on the reclassification. We mentioned it was a geography issue in merchant services. It didn’t happen.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
There was no reclassification of wholesale loans.
Jennifer Piepszak — Chief Financial Officer
Yeah. Yeah. And then in terms of the most impacted, I mean, they are the ones that you would expect to see around travel, oil and gas and real estate and retail. So it’s the sectors that you would expect to see, although as I said earlier, and it’s important to note, that from the downgrades that we experienced in the second quarter, less than a third of them were in the most impacted industry. So, really this is — we’re seeing this as being much more broad based.
Gerard Cassidy — RBC Capital Markets — Analyst
Okay. Thank you. And then second. I may have missed this. So I apologize. But in your slide 3, you give us very good detail on the forbearance on the consumer portfolio. Do you have any numbers on the commercial and corporate portfolios that — loans that might be in forbearance and is it more commercial real estate or C&I?
Jennifer Piepszak — Chief Financial Officer
They’re just not meaningful numbers. We would have included them had they been. So I’ll just go back to what we said, which is, we’re just not seeing what you would typically see.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
But they end up in nonperforming.
Jennifer Piepszak — Chief Financial Officer
They end up in nonperforming.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
You don’t have a category in wholesale or commercial the same way you have a category in consumer.
Operator
And our next question is from Ken Usdin of Jefferies.
Kenneth Usdin — Jefferies — Analyst
Thanks. Good morning. Just a question on the points in slides you made about capital and long-term opportunities for recalibration. First, I guess, will you have any dialog with the Fed about the 3.3% SCB as some other banks have mentioned? And then secondly, where do you think we stand on the GSIB recalibration to your points about in a systemic risk not — that shouldn’t impact a bank’s balance sheet?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
We’re not going to just go back to the Fed on the 3.3%. But obviously, we’re looking at why 3.3%, and we can try to adjust our plans going forward to try to reduce that number a little bit. Because we know we have another CCAR coming up in a couple of months. So there is no reason for us to go through extensive amount of work as opposed to fix what’s already there.
And GSIB, look, I’ve always thought GSIB needs a lot of recalibration, but there are things they should have recalibrated for already which is America gold-plated it, which I think was wholly unnecessary. They should have taken cash and treasuries and a whole bunch of stuff out of the calculation. It obviously goes way up when the Fed does things like it’s been recently. And they never adjusted it for growth in the economy or growth in the shadow banking system, which they were supposed to do. So I’m just hoping they go about do that at one point, but these things get so wrapped up in political. People politicize very complicated calculations, which I thought kind of peculiar and funny but my view is that they do the numbers they should do them right, and they’re just not right anymore.
Kenneth Usdin — Jefferies — Analyst
Yeah. And the second question is, just going back to slide 3, you lay out the percent of accounts on this page. Auto seems to be the biggest. And then in the supplement, on page 13, the balance does seem to imply a bigger percent on deferral. Just can you talk a little bit about the differences there and then why do you think you’re seeing more accounts in auto deferring versus other asset classes? Thank you.
Jennifer Piepszak — Chief Financial Officer
Okay. I don’t actually know the answer to reconciling the supplement to slide 3. So Jason and team can follow up with you on that one.
Kenneth Usdin — Jefferies — Analyst
Maybe then just a comment about auto on deferrals. What do you think you’re seeing in that customer base versus others? And do you think that means anything different for forward credit trends?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
No.
Jennifer Piepszak — Chief Financial Officer
No, yeah.
Kenneth Usdin — Jefferies — Analyst
Okay. Thanks very much.
Operator
Our next question is from Chris Kotowski of Oppenheimer.
Christoph Kotowski — Oppenheimer & Co. — Analyst
Yeah. Good morning. Thank you. I guess I just think it was such an extraordinary quarter for capital raising. Dealogic shows over $2 trillion of debt and equity raised in the quarter. And I guess a two part question around that. One is, as you look at that, was a good portion of that in kind of the stressed areas and presumably capital that’s junior to your bank debt and to what extent has all that helped raise the quality of bank loans? And then secondly, looking forward, I mean, did all the companies that needed to and could raise capital do so in the second quarter and therefore we’re looking at kind of a flat spot going forward or do you see this as kind of — like there is an ongoing need for a lot of these companies to continue to raise capital?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Well, I think, first of all, it’s across the board. I mean, you saw as strong companies, weaker companies, high-yield markets opened up, converts — and put converts and equity in there too, people did a lot of capital raise, and I think it was wise, I think a lot of people said they pre-funded a lot of their capital needs to make sure they can get through whatever this crisis means for their company and their industry and stuff like that.
So I don’t think it would be like it was before. So it will definitely come down, but I still think there is opportunity for some people to pre-fund some of that. But it is pre-funding. This is not capital. A lot of those capital was not being raised to go spend. It’s been raised to sit in the balance sheet so that you you’re prepared for whatever comes next. And you’ve heard a lot of companies make statements, and you guys go through yourself about we’ve got two years of cash, we got three years of cash, we got people want to be prepared. I think it’s appropriate.
Christoph Kotowski — Oppenheimer & Co. — Analyst
Okay. That’s it from me. Thank you.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
But just for your models, we don’t expect revenues in investment banking — they will normalize or even come down below normal next quarter and the quarters out. At one point — we can’t predict month by month exactly, and for trading, because no one asked, cut it in half, cut it in half and that’ll probably closer to the future than if you say [Indecipherable] double what it normally runs.
Operator
And our next question is from Andrew Lim of Societe Generale.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Please say that’s the last question.
Andrew Lim — Societe Generale — Analyst
Hi. Good morning. Thanks for taking the questions. And I think the point is straightforward. I just want some clarity really on the major CECL provisioning. And obviously you’ve made some very big provisions based on much more conservative assumptions, but the nature of CECL provisioning [Indecipherable] could mean that in the third quarter if your assumptions do not change, then your provisions should fall down quite considerably versus the second quarter to a much more normal level. I just wanted to see how you thought about that for the third quarter.
Jennifer Piepszak — Chief Financial Officer
Sure. So I will start by saying where we are right now. While there is a conservative bias to where we are right now, it is our best estimate of what we’re facing. We certainly hope that in the future we look back on it as a conservative moment. But this is our best estimate. And so, if our assumptions are realized — and again, our reserve reflects something worse in the base case. So if that’s realized, then we shouldn’t see meaningful reserve builds in the third quarter or if that continues to be [Speech Overlap] third quarter.
Andrew Lim — Societe Generale — Analyst
Yeah. So I mean, in context, would it be similar to quarters that we’ve seen in 2019, for example?
Jennifer Piepszak — Chief Financial Officer
Yes, you have reserves for growth but not for the prices.
Andrew Lim — Societe Generale — Analyst
Yeah, exactly, exactly. That’s very clear. Thanks for that. And then on the CIB trading environment, and obviously we saw June and we’ve seen a bit of a July. Would you say that’s normalized, so a level consistent with what we’ve seen with 2019 or are you still seeing some pretty strong trading following through into the third quarter?
Jamie Dimon — Chairman of the Board and Chief Executive Officer
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I just answered that question. You should assume it’s going to fall in half. We don’t know, it’s only a couple of weeks into this thing, but we don’t assume we have unbelievable trading results going forward. And hopefully we’ll do better than that, but we should — we don’t know. I also just want to point to reserving. Since it’s probabilistic, you can actually change nothing in your assumptions, but the probability is of potential outcomes to put up more reserves.
Operator
We have no further questions at this time.
Jennifer Piepszak — Chief Financial Officer
Thank you.
Jamie Dimon — Chairman of the Board and Chief Executive Officer
Great. Thank you.
Operator
[Operator Closing Remarks]