JPMorgan Chase & Co. (JPM)
February 28, 2012 8:30 am ET
Sarah Youngwood -
Douglas L. Braunstein - Chief Financial Officer
Frank Bisignano - Chief Administrative Officer, Chief Executive Officer of Mortgage Banking and Member of Operating Committee
Ina R. Drew - Chief Investment officer and Member of Operating Committee
S. Todd Maclin - Former Chief Executive Officer of Commercial Banking and Member of Operating Committee
Ryan McInerney -
Unknown Executive -
Gordon A. Smith - Chief Executive Officer of Chase Card Services and Auto Lending and Member of Operating Committee
Douglas B. Petno -
Michael J. Cavanagh - Chief Executive Officer of Treasury and Securities Services Business and Member of Operating Committee
Mary Callahan Erdoes - Chief Executive officer of Asset & Wealth Management and Member of Operating Committee
James E. Staley - Chief Executive Officer of J P Morgan Investment Bank and Member of Operating Committee
James Dimon - Chairman, Chief Executive Officer, Member of Executive Committee, Member of Operating Committee and Member of Stock Committee
Guy Moszkowski - BofA Merrill Lynch, Research Division
Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division
Betsy Graseck - Morgan Stanley, Research Division
A few announcements. Please turn off your cell phones. If you have a question, please wait for the mic because we have people on the webcast. And last, please look at the forward-looking statements disclosure in your materials. With that, I'll turn it to Doug.
Douglas L. Braunstein
So good morning, everyone. I want to thank Sarah for reminding you about the forward-looking statements, otherwise, I've got hoard of lawyers that will come after me afterwards. So I'm going to kick off Investor Day with a number of topics. I'm going to do a little deeper dive on some of the key components for our 2011 performance. Second, I'm going to cover 3 specific risk questions related to the investor questions that we received from you. And then finally, I'm going to talk about capital, how we allocate capital through the LOBs, the return expectations that we have and what that implies in terms of future earnings performance, and then a little bit about the CCAR process.
So with that, just a quick reminder on Page 3, 3 circled numbers. We generated $19 billion in net income last year. That was a record for JPMorgan Chase. We returned a 15% return on tangible common equity. That is best-in-class for the large-cap domestic peer set. And we ended the year with 7.9% Tier 1 Basel III common. We're going to come back to that when we talk about capital.
If you put 2011 into the context of our performance over the last 5 years, I thought it'd be helpful on Page 3 to focus on tangible book value. So a few numbers to highlight from this page. We added $60 billion to our tangible common equity over the last 5 years. That's a 12% compound annual growth rate. That's moving from about $19 per share in tangible book value in 2006 to ending the year a little under $34 a share. That's up 74% over that period of time. Now in addition to that, we added approximately $30 billion to reserves, that's loan loss reserves, repurchase reserves, as well as litigation reserves during that period of time. We also, as you know, returned $13.5 billion to our shareholders in the course of 2011. And I highlight one other number in the upper right, which is an addition of tangible book value, our 5- and our 10-year compound annual growth rates or earnings per share were best-in-class amongst the peers set.
So the other way to think about it is how do you evaluate these returns over time on the assets we deploy. And so on Page 4, I'm looking at our asset returns across the platform here, and there were really 3 measurements. The first one is return on assets. And a number of you in the audience, a number of our competitors, generally comment and compare us on this analysis. We don't really believe this is a good measure in large part because we've got very different businesses with very different assets particularly assets in the Investment Bank, so you've got a large repo book, which is low risk and low yield.
So if you look to the bottom right, remember that we've got a 50%-50% distribution between our Wholesale and our Consumer businesses, as well as NII and NIR. And so for us, the focus is really on the bottom 2. Return on Basel I risk-weighted assets today for a better comparison across peers. And if you look there, we were up 60 basis points in the last 2 years, that is best-in-class in the peer set. And the other way to think about it is an adjusted return, and that's effectively NII, NIR, minus net charge-offs, and comparing that across our risk-weighted assets. And again, we made the same consistent improvement, and you also see we're best-in-class-in our large peer set on that performance.
So with best-in-class performance on EPS growth, $60 billion of tangible book value being built over the period of time, best-in-class return on our risk-weighted assets, how do you deliver on all that? I thought I'd spend the moment highlighting what each of my partners is going to talk about. I'm going to talk a little bit about the accomplishments for the franchise, how we're focused on the consumer and how we cross-sell across the franchise in the next 3 pages.
So on this page, really just focusing in on market share revenue and some key growth statistics on Page 5. I'll just comment on a few. In the Investment Bank, fixed income is up almost twofold during that 5-year period of time. We have market-leading performance at fixed income in 2011. The Commercial Bank, average liabilities up more than 2x over the period of time. In TSS, assets under custody, up $3 trillion. Asset Management, $300 billion worth of assets under management, 2x the number of private bankers in this period of time. CBB, up 14% compound annual growth rate in deposits, $170 billion worth of increase, $60 billion increase in investments under management. Mortgage Banking, a two-fold increase in market share, 3x the number of bankers in the branch. Card, spending up $100 billion; market share, up 3.6%. So if you step back from that and you ask how we generated those market share performance returns, you really have to focus on Page 6, which is really a view from the customers. So what we got here is a number of external and internal metrics that talk about the voice of the customer, and how we've done. I'm not going to go through all these, but I will ask you, if you scan down the Consumer businesses in blue, you're going to see real improvements in our JD Power rankings over the course of last year, our customer satisfaction scores over the -- last year, reduced consumer complaints. And really it is both in our wholesale and our retail organization focusing in on customer, listening to the voice of the customer, providing them quality products and services, and that's driving our performance.
The other component of driving our performance, to those that ask what's the value of the whole? And what we've got here on Page 7 is some select examples, each of my partners is going to talk in detail, about the benefits of being part of this larger franchise, but it is clearly to us a competitive advantage relative to the monoline competitors, and it is helping drive top line growth. So I'll pick 2 examples from this list.
In the IB and CB, we have a partnership for Investment Banking revenues. That number has gone from $700 million 5 years ago to $1.4 billion this year, and that's basically helped the Investment Bank secure our #1 market share in ease over the last 3 years consecutively. The second I focus in is on leveraging the branch network. 45% of the Chase branded cards are sold through the branch network, 50% of retail mortgages are sold through the branch network, and there's a host of benefit to Asset Management and the Commercial Bank through the branches. So all of my partners will focus on that.
I'm going to dive a little deeper into revenue. And on Page 8, last year we showed you a slide on International. We told you this is a focused growth for us, and so we want to keep you posted on our performance. A reminder, our International businesses is almost exclusively our Wholesale businesses. And if you look at the data on this page, you'll see wholesale revenue is up about $3 billion to $25 billion in 2011, about 2/3 of that number comes from EMEA and about 1/2 of that number comes from the Investment Bank. And we've highlighted at the bottom a number of key metrics in the region.
First, you see 5-year compound annual growth rates for all the regions. They are up significantly, 11%, Latin America; 7% in EMEA; 13% in Asia Pacific over the 5 years. You see very significant loan growth in all of the regions. And you see expanded footprint. We opened 9 branches last year, 24 branches in the last 2 years. We're going to continue to invest in International during the course of '12 and beyond. We think it's a very significant growth opportunity for us.
The other driver of growth will be loans. And so on Page 9, we've got a little different look at our loan portfolio. You'll see there are 2-circled numbers on the page at the top. Total loans grew by 4% last year. And on the right, we have a definition of core loans that grew at 14%. So what's the difference between those 2? We began 2011 with approximately $216 billion from what we classify as run-off portfolio loan. Those are primarily loans related for the Washington Mutual acquisition, discontinuation of a number of products that are no longer offered to our customers. That portfolio declined by $36 billion or 16% last year.
Core loan growth on the right was up 14%, actually 25% in the Wholesale businesses, and a number of my partners are going to dive deeper into this. Doug Petno is going to do particularly deep detailed analysis of what's happening in the Commercial Bank loan portfolio and the performance we experienced in 2011.
So I want to spend another moment on the run-off portfolio just to give you a little better understanding of the impact of that. It, obviously, is the drag on NII. On Page 10, what we've done is give you a simulation of what the full impact is for the run-off portfolio. So if you look forward to 2012 and beyond, we've got approximately $25 billion, plus or minus, of that portfolio running off annually. It's mostly in the mortgage bank, but not exclusively there. And you see net interest income expected in 2012 from that run-off to be down $1 billion, about 1/2 of that is in the mortgage bank.
Now when you adjust for expenses and the net charge-offs, you'll see the net income line, we actually lose money on this run-off portfolio. That shouldn't be a surprise to all of you. But the other component is we reduced our capital balances, and we're liberating from this portfolio approximately $2 billion in capital per year. So when you net all of that, and you look over to the right, on a pro forma basis, if you added up the pluses and the minuses, you basically include our return on tangible common equity a little less than 1% as a result of that run-off portfolio.
So with that, I want to spend a quick moment on credit before I leave the loan portfolio. So Page 11 is really a picture of where we ended the year from a credit quality standpoint, and we've taken liberties comparing to some of our peers. So you're seeing net charge-offs on the page down 50% from the peak in 2010. Nonperforming loans down a little under 45% from the peak in 2009. Loan loss reserves to net charge-offs, 240%, that's stronger than all of our other large-cap peers. And our loan loss coverage ratio, loan loss reserve to NPLs is 280%.
On the right chart, we basically show what the loan loss reductions are relative to net charge-offs in 2011. So the way to read the chart is basically for every dollar of net charge-offs reduction, we released $0.40 in reserves. So the lower the number, the more conservative the reserve release approach, and you see our peers there as well.
The final note, just to reiterate something we've been saying, is as we go through the cycle in terms of charge-offs, we would expect our loan loss reserves to normalize at about $15 billion, plus or minus. That ultimately means $10-plus billion will have to be released and put back into capital.
So with that, I want to shift to the liability side of the house. Deposits were up $200 billion year-on-year to $1.1 trillion on Page 12. Core deposit taking business is all set record at the end of 2011, and the cost of deposits you see here declined by 7 basis points. Now this is on interest-bearing deposits only. Some of our competitors actually report total loan deposit basis for cost. And if you did that to us, it will be 30 basis points in aggregate.
For comparison in the CBB, deposit costs for the fourth quarter were 26 basis points, and that would be in line with best-in-class competitors who tend to compare us to them. We're also, I will say, being cautious about the tenor of the growth in certain of our wholesale deposits. We believe approximately $75 billion, plus or minus, to be considered flight-to-quality deposit from this portfolio. They're less sticky in a more robust environment, which we all hope for. But having said that, it impacts our reinvestment opportunities. The result is it reduces NIM, and you see that on Page 13.
So I'm going to talk a little bit about NIM and NII. So I talked a little bit about runoff, mix change, the flight-to-quality, obviously, the low-rate environment. All of that has resulted in $3 billion decline, plus or minus, in our NII for 2011. NIM also declined 32 basis points to $2.74. And there are 2 key takeaways I want you to take in to 2012. The first one is you do expect that those market conditions, the mix issues, I just talked about, that flight-to-quality and the rate environment, is you're going to continue to have NIM under pressure for 2012. It is also going to continue to pressure NII. And for example, we've identified $400 million of net income on the impact in CBB just from this decline in spread in the course of 2012. The second takeaway is we remain positioned for a rising rate environment. So on the right, we basically see a chart that reads, from the middle, that if yields move by 100 basis points, we'll generate $2.3 billion in incremental pretax income.
The other NIM page we've added to our disclosure, so you'll see this in the 10-K, I believe tomorrow, is on Page 14, our core net interest margin. So a number of you have asked for a little more detail, and this is basically it, which it excludes the Investment Bank trading assets and the long-term debt and equity that we allocated in the Investment Bank. We think it's a better peer comparison, but it is still going to be impacted by mix of business, right, so accretable yield, the foreign versus domestic, those some type of things that are differ from companies-to-companies, but you see our core NIM measurement in the fourth quarter with a little under 320 and this number as well will be under pressure in 2012.
I want to spend a couple of moments on expenses on Page 15. You see firm-wide adjusted expense was up $4 billion in 2011 to $49 billion, and there's a footnote describing what adjusted expenses are. $2.7 billion of that change is identified in the chart here. Higher mortgage servicing expense, Frank is going to talk about that; higher FDIC assessments; higher marketing expense, Gordon is going to talk about that; and higher expenses associated with commodities, and Jeff is going to talk about that. $1.2 billion was primarily related to headcount from growth initiatives. I'm going to talk about that on the next page.
But a moment on 2012. We expect adjusted expenses for 2012 to remain flat. And what does that mean? We're going to continue to invest in a whole host of growth initiatives, which are identified on this page and on the next. And that means we're going to generate efficiencies in order to hold our expenses constant but facilitate the growth that we expect to fund in the course of 2012.
A number of you have asked to provide a little bit more detail on that growth trend, and so we've added Page 16, which is really the examples of the LOB initiatives for growth in revenue. And there's a number of other, obviously, initiatives around efficiency. For the first set of numbers on the left, which adds to $1.9 billion, are just the specific expenses incurred in 2011. They're included in the $49 billion of adjusted expenses I just talked about on the previous page, and they're additive during the course of that year.
Now for many of these investments, revenue lags the spend, so you didn't see a lot of revenue associated with these investments. But on the right, what we've tried to do is give you the cumulative impact of not only '11 spend but the spend we've made over '08, '09 and '10, and we'll make in '12 and what the associated net income growth potential is for those investments on the right.
So for example in GCB, we think the spend we've made in '11 and the prior years and we'll make in '12 and '13 results in an estimated $600 million potential add to net income over the course of time, and Mike is going to talk about that. All of these investments, we believe, are accretive to earnings, ROE over the investment horizon. But the fact of the matter is they have reduced our margins in our businesses in 2011.
So with that on expenses, I want to cover 3 risk questions. The first one on Page 18, which is our European exposure. Just a reminder, everybody, before we go through the numbers, these are customers we deal with. They've been long-standing relationships with the bank. We continue to be very active with them. In fact, we think we've picked up market share in much of Europe during the course of this year. The other factor I'd add, since we discussed this at year end, the risk of loss we believe has declined, although it still clearly exist. But the impact of the LTRO, as well as the number of Eurozone actions, at least reduced the probability for now.
In aggregate, our exposure to the Euro 5 is $15 billion. That's down modestly from year end. More than 1/2 of it you see is from traditional credit products. These are principally the -- to nonfinancial institutions, to corporates spread out amongst the number of geographies and industries. Our trading and securities position, if you total it up, it's $19.4 billion, net of collateral and hedging. It's a little under $7 billion. More than 98% of the collateral is cash. And the protection that we brought on the hedging side is largely from investment-grade credit outside of the region. We continue to guide you in a downside scenario. We could lose $5 billion pretax, $3 billion after tax. We're also going to add some incremental disclosure in the 10-K in related to those Euro 5, as well as our other sovereign disclosure, and you'll see that come out tomorrow.
Page 19, literally just a moment on the DOJ Attorney General mortgage settlement. Frank is going to cover the impact to the business and our customers. But from a financial point of view, I wanted to remind you what we provided in our 8-K, which is we don't expect this to have a material impact on our earnings. And that's largely based on the reserve actions that we took during the course of 2011, then maybe modest movements in geographies but not a material impact to earnings.
Page 20 is private label securitization. So this is our exposure to $470 billion approximately, a private label origination. It's from 3-heritage organizations: WaMu, Bear Stearns and Chase. Roughly 1/3 for each of those heritage organizations. Now the 1/3, that's related to WaMu. We do not believe we have repurchased risk for, that as a matter of contract. And on the securities liability side, that has been left at the WaMu subsidiary. So if you take that 1/3 out, you got about $300 billion, plus or minus, in securities that are heritage, Bear and Chase. And there are basically 2 types of claims: Securities claims meaning investors saying we made misleading statements in the prospectus; and repurchase claims, which are responsibility to repurchase loans that are nonconforming with securities. We have $50 billion of securities claims against that $300 billion today. We also have a claim to investigate repurchase of alleged servicing problems for $175 billion of that $300 billion, and that's in the same group that proposed the settlement with Bank of America. We believe, basically, these claims overlap. They're largely related to the same underlying loans, in the same underlying economics, and we do not intend to pay twice for those claims.
Now a number of the analysts in the room have created estimates. The median is $6.5 billion for this liability. There's a low of $3 billion, there's a high of $18 billion. Relative to what we know, we think we're well reserved for this exposure to both of the type of claims we think will come through litigation. But it is going to be a long and a tough process, and we are completely geared up to grind it out through litigation for these liabilities.
So with that, I'm going to turn to Page 22 and talk a little bit about capital and performance and allocation. So Page 22, this is our allocation of the firm's capital for each of the various lines of business. We've provided a little bit more detail here for those that are -- have been asking for it. A number of observations. The first one is this reflects -- the allocations for 2012 reflect full Basel III capital assessment, the RWA associated with it, as well as what we expect to be the pure levels of capital. We incorporate growth and balances over the near term. It incorporates balance runoff, as well as some of the model enhancing as we think we're going to do with the business.
We're targeting 9.5% at the parent level. You see that at the bottom right. The Wholesale businesses are between 9% and 9.5%. The consumer side are between $8 million and $9 million. We think that's going to be consistent with where the peers are, and people are going to tend towards the upper end of the range. And you also see unallocated capital is down materially at the Corporate level. There is a large allocation of capital to CIO Treasury and Corporate, that is delivering very low yields in aggregate.
The last number I want to focus on this page is the circled return on tangible common equity. We think through the cycle, that should be 15%, plus or minus for the firm, and that's at the full 15% buffer level.
Page 23, we've also seen before, we've done this the last 2 years. It's our capital allocation. The returns for each of the lines of business, and all of my partners will talk through their respective returns. If you multiple the 2 together and you add up to what were the excepted earnings at through-the-cycle returns of about $24 billion, plus or minus. The difference in the last 2 years is in 2009, when we showed you this chart, our reported income was $12 billion. Our reported income in 2011 was $19 billion, so we're at least closing that gap.
On 24, I thought I'd walk you through -- a little different perspective on the $24 billion, which is sort of an earnings walk from where we were in 2011 and how we might look getting to 2000-and-whatever for $24 billion. The $19 billion start, you subtract the DVA, which was at $1 billion, and you get earnings of $18 billion at the beginning of this year. And then we adjust net income by 5 large items. And all of that analysis is now done on a net income basis, and we've tax-effect the expenses.
The first and the largest is the mortgage normalization, and Frank is going to walk you through some of the details. $3.5 billion of impact on a net income basis from mortgage foreclosure costs, the reserve, excess reserves or excess servicing costs and the revaluation, closed asset expense, and that's netted against normalizing our production revenues to a more normal rate environment. The impact of that is $3.5 billion to the bottom line over time. We eliminate $2 billion of net income impact for corporate litigation. Eventually, we will be fully reserved for those activities.
Credit gets normalized. The net effect of that is actually neutral on the 2011 performance, meaning as we go through the cycle net charge-offs, we eliminate the reserve releases, which we experienced and those 2, in 2011, effectively netted against each other. And then last is just the full year impact for Durbin, which is about $500 million on the net income line at the margin. That results in $23 billion worth of earnings if you add all of that up. And then there's a list for the growth opportunities. And remember back on Page 16, the potential net income, we've got to generate basically up $1 billion of incremental earnings from those growth initiatives.
The other page to refer to is the NII page in a more normalized rate environment. Remember, 100 basis points equals $2.3 billion of pretax income, and that's the opportunity set relative to earnings. Hopefully, you all found that helpful.
I'm going to spend the last couple of minutes on capital planning, Page 25. You've seen our capital hierarchy before. It's not changed, but we are now making clear we expect to get to a 30% dividend payout ratio on normalized earnings. That is a priority for us over time. But after we fund for our growth initiatives that we talked about, that still leaves a substantial amount of excess capital. We can deploy that for acquisitions. I'll say, it is reasonably unlikely in the current regulatory environment in the near term. And so that leaves repurchases, and at a price range relative to book value, that can be a very attractive alternative, we think, for our shareholders over the long run. And so we've made our CCAR submission basically consistent with the hierarchy I just talked about. You're familiar with the CCAR process. We're going to hear on March 15. The Fed is basically going to evaluate under 3 criteria. The first one is, stress for Basel I. Can you basically afford to return the capital that you're requesting? And they're going to evaluate that relative to our 5% Tier 1 common Basel I ratio. Second, under the Basel III. On a baseline scenario, do you have a trajectory to get to your end point? For us, 9.5% by January, 1, 2019. And then the third is if you have the right processes, system controls, governance in place, you'll be comfortable, if you're the Fed, with the answers to questions #1 and #2.
I thought it would be helpful to use the analyst estimates and our own adjustments to do a simulation for you. So on Page 26, and I would caution you all not to try to do this at home. So if you use analyst estimates for base-case earnings and for dividend, you neutralize for employee issuance, meaning we repurchase as many shares as we issue as relative to compensation. And then you stress the earnings. You see a chart on the right. That basically suggests an 8.8% Tier 1 Basel I common ratio in 2012 under stressed well above the 5% minimum. Now remember the Fed requires you, we would not do this, but we were under stressed scenario, and remember stressed is 8% GDP decline, 13% unemployment, 50% decline in S&P, 20% decline in HPI, a full-blown Eurozone crisis, but you still have to repurchase all your shares. So if you did that, assuming the $9 billion share repurchase we used in 2011, we would end our stressed Tier 1 common ratio approximately 8%, plus or minus. And that would be approximately $35 billion in capital in excess of the 5% minimum.
The other cautionary note here is, remember, the Fed is going to have a different view than the analyst and us on what the revenue expense and stress results were likely to be. But we did give you some sense of the room for margin, if you will.
On Page 27, talk a little bit about the glide path on RWA for the baseline. So on the left, we have our Basel I to Basel III approximately $320 billion more of our RWA. And on the right, we give you a simulation of what the runoff might be for JPMorgan Chase, approximately $100 billion in RWA in the next 2 years, and that's really runoff of the existing portfolio. That's the principal activity.
Model update. Some very, very modest litigation impact in the Investment Bank, and that's offset by growth that we're going to experience in RWA over a period of time. And so you see us ending 2013 with $1.440 trillion in RWA. If you take that RWA, the base-case analyst estimates, and you turn to Page 28, we're providing you with basically 2 views on achieving the 9.5% Tier 1 common Basel III.
On the left is the glide path equal improvement over the next 7 periods to get the January 2019 9.5%, about 200 -- it's about 25 basis points a year. And you would see excess capital to deploy unit per dividend, share repurchase or acquisitions of between $21 billion and $22 billion. On the right, it's an accelerated version. That is you get the 9.5% by 2013. And that shows, based on this estimate, $13 billion to $14 billion per annum in capital deployment. We shared with you at the end of the year, we're going to focus on moving the company, on a Basel III basis, to 9.5% by the end of 2013 with the right side of the page.
With that, I wanted to just close by, at least, highlighting for you the themes that you'll likely to hear from my partners during the course of the day. I'm going to let you read them quickly. But I'll remind you from a capital standpoint, what we just shared with you in terms of the fortress balance sheet, it really does afford us the opportunity to be a source of strength to our clients and are customer-focused. It affords us the opportunity to continue to invest in organic growth to drive the top line over time. And it does allow us the opportunity to return a substantial amount of excess capital for the shareholders. So I hope you enjoy the rest of the day.
I'm going to ask my partner, Frank Bisignano to come up, and I'm giving you a couple of minutes extra for Q&A.
So a few of you have said to me on -- at running NPL [ph], "Who did you get mad to get this assignment?" Or you said, "What did you do wrong or you drew the short straw." And so what I like to talk to you about is the full firm effort that goes into where we are today and managing this going forward. And then secondly, I'd like to -- when you think about the mortgage business, if you think about it in multiple ways, I want to cover that through the agenda. One, a processing business that has $4 billion in top line revenue for us. A business that is driven by risk management and that is both on the credit and market side. And then a customer-centric business that, in fact, has multiple constituents that care very much about the outcome of it. And when we talk about the full firm effort, and what's been done in '11 and then the plans for '12 and forward, I think it's important to think about the efforts you'll hear from all of us today, specifically, my partners Gordon and Todd on One Chase. And you've heard us talk all about that, but think about the business that is focused on the customer, that's customer-centric, it's not a product only and think about the fact we have 51 million households, 63 million customers, so the opportunity if we run this right, and with Gordon and Todd and myself engineering One Chase, the brand, the customer and then the infrastructure, I think, that well positions this business for us going forward.
I think secondly, it's important to recognize that we have fabulous markets and risk management expertise in this company. And when this assignment was taken on by myself, both Jes Staley and Ina Drew, our CIO and our Head of Investment Banking partnered, brought talents to the table, and in fact, began helping me evaluate the processes within the business, whether it'd be the MSR management or market risk in general. And that teamwork has gotten us to a much better place in this business.
And then you'll look at the other areas of the company, this will be a technology and processing story, and the CIO of the company, Guy Chiarello, Chief Information Officer, and technology prowess that was brought here and the leveragability of technology that we've used in the business. And then obviously, you all read about and continue to read about the matters of regulatory and litigation, and the total team effort that's been done here, right, whether it be compliance or legal led by Steve Cutler, and I'll talk more about that.
But it is important to look at the full-firm effort. I don't know that you can win at the mortgage business if you don't treat it as the full-firm effort and treat it as 3 major elements: Customer, processing, risk management, right. So as you look at 2011, I'd like to think about it as the year of repositioning. This business has gone through a tremendous amount in '11. Now when you look at credit, and you see us -- that's what we talked about, what to really think about is that at the peak we were running such higher rates of early delinquency than we see today. And today's '09 and plus delinquency that we talked about at the -- 0.5% is really driven by HARP so you can also look at that as older vintage. Lots of government reform, lots of borrower relief. I'm going to talk about all the things we've done in borrower relief and how much has been accomplished and how much will still be accomplished.
Doug referred to the DOJ/AG settlement. That was a big deal. It's not the end all, be all, but I'd like to say getting problems behind us. This is as an industry is a big deal. And then, yes, the consent order that you heard about in April, which we'll talk a little bit about where we are in that process and how we move that forward. It's not to say there's not more concern out there, but I think '11 was the year to set up to move this business forward.
Now during '11, Chase itself established itself in a lot of ways. I talked a little bit about all the talents around the company that rallied around it. I think, also a big deal that was done is we created something called borrower assistance. And what that was, us taking default management where modifications was occurring and turning it into a customer-facing business. That's 10,000 FTEs dedicated against modifying mortgages, and we'll talk about how that changes over time.
And then we've invested in the front end of the business and you see the results. We added 700 loan officers, and we'll continue to invest in that. I think also, it's important when I talk about technology, we consolidated all our back-end systems, right.
Now we were on LPS. Those who know the mortgage business know that company, and they're down there, but we had 3 versions of LPS, and that may not sound significant, but it's significant when in fact that you're trying to answer a question and you're a representative, or it's significant if there's different data fields out there. So that back-end consolidation is a platform opportunity that was done in the fourth quarter. And then in fact, you'll look at -- and we'll talk about our individual business. What we continually increase short sales and mods at much rapid pace, and if you even looked at the latest article, that may have been even ones in the papers today and yesterday on short-sales volume, we outpace the industry by a lot on these numbers. I think one of the things we think about is we have established ourselves right now, and I think it's a firm position that will continue as the #2 originator of mortgages. But it's through the power of our branch franchise, and that was a great increase. Todd will talk about the power of the branch later.
While doing that, we talked about going from 12 to 5, and by no means, we want to be a fifth place player. But I would also think about that #5 position. Total originations we did as the #5 player was more than the top 4 added up together. So all the big players sat behind us. That was a 2011 picture, and we started in one place in the beginning, and we continue through the journey. And we also tremendously improved our relations, right. Whether it be the military, whether it be advocacy groups, we found it important to partner in all the places that care about mortgages, and that's everywhere across America.
And then of course, we added a lot of talent in our risk and control processes. We took top-quality people both inside and outside the company who had significant positions and put them in a control environment in this business. When you look at all that, what you've found is a business that's -- going to better perform, a business that ultimately will have lower repurchase losses, and in fact, really, really valuing our retail franchise. And the retail franchise is where we believe mortgages will continue to get growing going at us.
We're very strong in our consumer direct. We did more than 275,000 mortgages in our consumer direct. If you want to understand consumer direct, think about Quicken. But we view that, fundamentally, as a very productive platform to originate. But we do believe that our branches are very powerful. And if you look at this slide, in fact, that's Slide #4, this shows that we've had the best retail originations growth on a percentage basis and actual -- real originations growth in our industry.
And so you get to -- it's really important, and I believe that technology and processing are the obsessions that we need to run the front end and the back end of this business, correctly. And that's why you see us focusing also on everything we do for the customer. Because if we analyze those processes, if we drive those processes, and that's what Kevin Waters did on the front end of this business this year, right. It is through that, that you drive down complaints, you drive down problems. You drive up satisfaction. And I believe all that happens while driving down costs. So all of the efficiency and control we build in will actually be less expensive for this business going forward. I think what's important to know is the mortgage business had been one that people really thought about when volumes goes up, cycle time increases.
If you looked at our business over the last half of the year, we were doing 50% more volume, and we had taken cycle time down by 30%-33% and probably had the best-rate lock of any big player in the business.
Now I think it speaks for itself the results yes. We did trim Correspondent a little bit, so when you look at our total performance of originations, it's lower on a percent basis in total, but we do believe the best business out there is the originations of retail loans. We do believe in building a purchase business going forward and really think that long-term mortgage business will be helping people own homes. And so when you look at '11, I think what really we're focused on is what happened in the pretax production end of the business, and we prove that we can be a very profitable at front end.
We also think a good way to look at this business, I really am an advocate of this, is thinking about the ongoing business versus the legacy runoff. And you could if you broke out the '11 business, you would look at a very profitable business. Yes, we resized the MSR, and we think we did that wisely, conservatively. And in fact, that was in our economics. We spent a lot of money on legacy issues and problems. But our go-forward approach will be to run the ongoing concern as a very profitable business with a normalized ROE in about the 15% area. And we believe we can make money both in the front-end servicing and in portfolio management here. I think it's worth looking at the amount of headwinds that was in this business and that will carry through '12. But '12 clearly is the year that you will watch us perform in a way that will close out the past and move forward, right. And of course, we have a lot of servicing and default expense driven by a consent order, driven by a large number of people against modifications.
Now remember, modification, if you go back 3 years ago, was a word that did not have a process against it. Then went through a large redefinition by the government, multiple times. So that's a large nouveau start-up, if you think about it that way, of 10,000 people against it. That's a big drag on expense and other foreclosure-related matters in general that we went through. So a lot of drain, as Doug talked about it. But I think we have pure clarity on what it was, what it is and how it will proceed.
At '12, we like to think about a place we're winning. We see it today. We're 2 months into the year. We understand the year. We have good vision with what's going on there. First and foremost is running a customer-centric business with my partners, Todd and Gordon, as One Chase. And having this be a good product in the branches, a good product to help do business in the branches and serve our footprint very well.
Customer experience, you can continue to count on improving our scores, and we have high aspirations to be the #1 provider, and we have plans on how to do that. And if we're not #1, we'll battle for #1 all the time in the service arena. We spend a relentless amount of time analyzing the problems of the past. And with that, we'll bring technological solutions and process solutions to better manage our business.
We're going to continue to expand the front-end business, as you can count on us adding probably 1,000 new loan officers. But that addition comes without a price of service or quality or timeliness or economic, and we see very strong economics as we continue to bring in front-end systems and front-end processing changes. The control environment we approach this year, like control is foreseen, control is king, we will put the best talent against it. We think it's important to every day analyze defects and then put processes in to make them go away. Those processes will be technologically driven, and they're overseen constantly. We greatly increased the amount of technologists in this business, and I'll talk about how we did it, because we did it through great programs that this company has, like talent reassignment where we moved 300 technologists in one from the credit card division to the mortgage companies. And that talks about the power of the franchise and the partnerships, and where we put people to the highest and best usage. And that's why when you hear us talk about technology, and my question, "How have you guys so much done in such a short period of time?" Well, it's resource allocation and attention, it's the CIO of the company. We brought the CIO of the credit card company over. We have great talent against it. And that is, first and foremost, driven on having a controlled environment and the customer-defect environment going away.
So I think if you build that way and if you continue to do this, you could see why we are optimistic about this business. The fact of the matter is when you talk about the mortgage business, people want to ask the questions, "Well, the refi boom is going down. You're going to see HARP this year, but what about the future?" But we're really looking at positioning a business to help people own homes. Positioning a business to build out what is the core, which is the mortgage is a fundamental product for people. And I think it's important to recognize as others are dropping out, Jamie has always driven us to stay the course. He's done it in every business he's driven us in. And staying the course means, in a very difficult time, staying there for our customers. We are in this business for our customers. People will buy homes. Housing starts here at all-time lows. Household formation is actually at a higher level than housing starts. You will see a change. We are positioned for that change. It may not all happen in the next 2 years but staying the course is really important for us in the business.
Now I did say it is a risk management business, and I will begin to take the risk up here with you. I'm going to ask you 2 questions, right. And the first is, who here has ever applied for a mortgage? Raise your hand if you've ever applied for a mortgage? Everybody's telling the truth? I see some people I know that's likely telling the truth. Okay. Wait, now wait until I say put your hand down yet. No. Okay. Keep your hands up if when you applied for mortgage, it was the largest financial transaction you did it at that time. Anytime in your life, the first mortgage you did was the largest financial, okay. Those who didn't raise their hand, I know who you are. Now you wonder why I say -- security reports know that, so I know that. You wonder why I say -- asked those I questions. I'll show you a video of technology that we brought to market. If you're on the Web, please click on Page 11. Did I follow the instructions right on that? Good. I think this will give you an example of what's already changed.
So I think when we look at this, this is what the customer, during a mortgage process, will have access to, rolled out now. They can move their docs in, they could do business that way. Behind that, we're bringing in a new origination system. That new origination system is proven. It will be in, in the third quarter of this year. We believe it gives us a 2x productivity lift. It is a complete reengineering of our production process. And that reengineering is one that we all believe in, which is functionalization. One of the greatest problems in mortgage originations over time is how people have added staff, down staff and you're watching we do this. We believe in volume incentive businesses that we add intelligently, and we can maintain service at all levels. There's numerous origination system that we're bringing, which we've seen work. We know it works. Will, in fact, manage our workflow in a way that allows us to deliver the best service in the industry. What we did up till now to move from 12 to 5 was what I like to call is brute force management, and now we're moving in '12 to, what I would call state-of-the-art, best-in-the-class, be able to do it forever, build this business forever. And it's really what we believe. We're going to build the business in the branches. We're going to build that online. We're going to go through mobile.
Purchase is a major focus. I think you hear me talking about purchase. But what to really think about is we have 70,000 small business, medium-sized business customers who are realtors, a realtors. Definite resource that are already in our footprint. And our aspiration is that through our good work and our good service that we take our current customers, and they help us in the business that we believe we could be the best at. So think about that source. And we believe that the realtor is the greatest source of purchase business because they care about closing the loan. And that's the business we're in.
76 million homes are owned in this country. More than 50 million of them have mortgages on them. As I said before, household formation is going up. I think this is a great opportunity, and we believe on measuring everything and managing it, every aspect of the origination process. If you look at it, it becomes -- it's been obvious to us over the past year plus and always has been that the mortgage is a key product that running the franchise is very critical to have a strong mortgage business. The affluent will tend to have mortgages with us. And in fact, the value of the household with the mortgage is much greater. And we do believe that, yes, it is possible and probable that the size of the pie might shrink because of refis. We also believe that everything we're doing position us to take a greater percent of the pie up for the business was originally designed for, owning homes. If you look at what the amount of customers we have currently that we can do business with does not include when we talk about the 6 million, I talked about the 50 million before. One is our total customer base for Chase, the other is branch banking customers.
And then another fact that in this year we're very proud of, we do believe we had the most productive sales force. Yes, a lot of it was through HARP. But, yes, that is the business we we're in and that's the business that we designed. And we don't aspire to 10,000, but we will continue to grow that sales force. And it's a growth that is well controlled and is immediately accretive when we put the feet on the street.
We like the economics. At the end of the day, we believe we can make $1.5 billion, plus or minus, a year of this business. And we believe that it does have market sensitivity. It is critical to us in total in our business. What we believe that we can be the lead player in the purchase market in our footprint. That's the objective, well positioned, well organized and will continue to proceed that way.
Now from all the questions, there was clearly people who want to know about repurchase. And I've laid 2 slides out here. But I think the way to think about it is, is that we continue to look at repurchase. We continue to get repurchase demand that exceeded what in fact we've seen in some cases, but that we cure it at a much greater rate. So we our receiving a much greater number of repurchases that have pay history and that we are able to cure, right. And I think when you look at the reserve and you look at what we've seen at -- come at us and you look at the slide on Page 18 and you'll see the declining rates coming in and the overall general performance. And remember, we talked about '05 to '08 vintage and what we've seen in repurchase from there versus current vintage, that in fact, this is a situation that we have well in hand and a situation, which we will manage through the course of the year.
We like the mortgage servicing business. If you go to Page 20, I think it's important to know that this is a business that, right now, has a lot of expense in it, and we will talk about how expense are. But we sit in a position as the third largest servicer, so we run a large processing company. And with our scale, our technology and our ability, this is a business that we will do very well in. Yes, we need to put the problems of the past behind us. And in some ways, the DOJ/AG settlement and the consent order allows us to do that. But we brought a lot of world-class technology into this business. I highlight one right here where I talked about NICE analytics.
This is analytics for every call received, that bubbles it up and analyzes everything that was said on the call. It will be rolled out firm-wide. One of the great things about what we're doing in the company is total leveragability. Any tool we bring into one segment, we make sure is leveraged across all segments. We brought fraud detection tools in another areas of the company. And ultimately, when you look at our short-sale analytics and what we did in the short sale, that was driven by using those same analytics to find where the best short-sales opportunity where and to help the customer. All that improves customer satisfaction, and all that reduces costs. Servicing is a customer satisfaction and a cost business where you have to manage operational risk. We know how to do all of those very well, and we start off with a good position with a $4 billion top line.
Now I think it's really important to understand the amount of energy and effort that's gone into short sales. So first of all, say 2011, $7 billion of principal in short sales, $3 billion of that was effective forgiveness of debt. We prevented twice as many foreclosures as were acted upon. We've offered over 1.2 million modifications. While doing that, we refinanced another million homes. We were the forerunner in CHOCs, home ownership centers, where people in distress can come and actually get counseling. 273,000 customers have come into those, and we will better leverage those, right. The amount of effort we've put in to keeping people in their home has been tremendous. Think about that this year alone, we gave up $400 million of interest income in modifications, right? That is money directly to the borrower. So there has been a tremendous amount of effort keeping people in their homes and a tremendous amount of effort to be able to put people in a position so if not -- if they can't stay in their home, they could do it in a manner like I talked about in short sales. These are not talked about enough, but I think it's important we all understand the amount of effort that goes into this, the amount of resource and the amount of skill.
I think it's also important to understand what's going on in foreclosures. And right now, if you look at what's occurred in foreclosures, I think it's important to know that 54% were non-owner occupied that were foreclosed on in the end, and more than 3/4 of that by the time of sale were vacant. So you do have a lot of walking away from homes going on. A lot of effort, a lot of work, it's important that we recognize it. And when you look at our statistics in total, what you do see is a continued performance improvement in every category. And this all will ultimately drive the expense story, which will be a technology story, a process improvement story, a customer satisfaction story and a declining problem story. And I think when you look at all these numbers, you'd see the declination of outstanding issues, and you'd see the forecast in them.
Doug alluded to the expense savings. He did more than allude to it. He actually pointed right to them and probably had the mortgage at the front of the pack, so it's important that I talk about it. This will be a story of volume decrease, and that's in default. That's in modifications, right, with 10,000 people decked against modifications. The technology we brought in, the better performance in the portfolio, we'll see that decline tremendously. It will be a control and quality initiative story and a process improvement story that allows us to continue to manage this. As early as 1.5 months from now, we will take 1,000 people in the back end of processing and move them to the front end of processing for loan originations.
One of the ratios we work very hard on is the tooth-to-tail ratio, and that will completely change in this business: how many front-end people we have versus how many back-end people we have. But you can see that through that over the longer period in time, you can expect us to take a couple billion dollars out of the expenses, as Doug had laid out, and do that in a methodical, controlled, high-service, well-thought-out way, which, in fact, leverages the talents of this organization so we use all the processes like talent reassignment that I talked before and had to move workloads around the country so we get the best option for people and the best opportunities for our business.
I'll cover DOJ AG settlement, but you've read about it enough that you know everything about it, at least 3 times. I've read most of the research before and after. Some people thought we'd pay as much as 30% of the settlement. Obviously, we paid on the servicing side 21% of the settlement, less on what we did on the refinancing. If you ask me, it was a good step. Anytime you put problems behind you, it's healthy. I think what's most important to recognize is it covered a large part of servicing. It covered a large part of originations. It did not cover, obviously, securitizations and whole loan sales. A lot of questions about MERS. For you in the securities business, think about DTCC. Think about an electronic depository, and think about we have minimal, minimal exposure, if any, relative to the path on this. And it was capped, the total exposure on this. So yes, MERS is an outstanding claim in a few states. I really want you to think about an electronic depository, and there's no backward change to foreclosures or anything that went on.
I think we're in good shape in the implementation of this and the DOJ AG settlement in total. And we have the consent order, which is pretty far along. When you work all those through and you run the expenses out, we look at after or pretax that we could run the servicing business on today's volumes and make it $1 billion. And we think we'd make a good return out of it. I think it's important to recognize that, that's a couple of years, right, we will get -- we will be adding every day. We're bringing -- going to be maniacal about process improvement and what has to happen. And while doing that, you heard Doug talked about basically the run-off portfolio. But I think it's important to recognize because a lot of people go, "You're going to lose net interest margin here." Doug referred to it before. This is a run-off portfolio, which, yes, but we'll redeploy, have the opportunity to redeploy capital, and it will perform much better from a credit perspective. So I think in this run-off scenario, as you look at it, what you see is actually a more profitable model and a way for us to run our business going forward. I think Doug covered it quite elegantly in that manner.
I'd like you to think about the following few closing themes, right, that really I try to address through this. One is we run already a good production business. We will build that business. We're positioned for success. We're not talking about an aspiration that we haven't already shown the output of both when you looked at our cost of origination, the highest producer in the business, and also you see where we moved in the customer set and you see how we can generate a purchase business. The customer experience will be king. Technology, process improvement, investing in the business will be the success factor in driving expense down, improving the control environment and building efficiencies for the future. We feel very good about the returning of capital in the portfolios and how that will work.
We do believe that significant legacy issues have been put behind us. That doesn't mean we've completely closed them out. It doesn't mean we're still not working on actions on the consent order. And it also means that in order to meet the DOJ settlement, to do the $3.7 billion that you saw on that screen of consumer redress, there's work in labor against it. But that's a work in labor we know how to do. It's defined. That will be worked very hard over the next 12 months. You can expect us to report regularly on the progress of that. We see this as a 15% ROE business. And I think when you think about the mortgage company and you think about One Chase and how mortgage sits in One Chase, and it's important that you know that is where we're headed, a customer-centric business. We will run the most profitable best returns as the industry can have, and we'll do it for what's good for the customers. It will be a customer-centric franchise that delivers results across the whole franchise.
So with that, I'll open up for any questions. Guy?
Guy Moszkowski - BofA Merrill Lynch, Research Division
One of the things that you never mentioned in all of this was sort of the...
Guy Moszkowski - BofA Merrill Lynch, Research Division
No, no, no. But it's just -- the big elephant in the room is, going forward, the housing finance system with respect to Fannie and Freddie government involvement. How did you build all of the new systems that you did in such a way that you can plug into whatever that's going to be in the future or devolve into something that's more private...
I think that's really great. And I think when I talked in the beginning about the full benefit of the firm, one of my closest partners, with Jes Staley on this, from a markets perspective has been Matt Zames. And Matt's been working hard with us. And we brought Craig Delany in, another person out of fixed income, on engineering and front-end, so we're ready because there will be a point in time also that private money comes back to this. So that we're engineered for private money. We're engineered to do business with the GSCs, and we're also engineered to hold loans when appropriate. So I think our front-end is designed for all the options. That's really how we're thinking about it. We've actually consolidated under one management all of our originations securitization. So it fits within Jes and my purview, but gets the full benefit of the firm. If you look at most companies, they'll have an investment bank doing securitizations and they'll have a mortgage company doing securitizations. We really think there's great leverage in bringing it all together, and you get the benefit of those good thoughts that on -- as a mortgage company alone, you might not have thought about it. But as a mortgage business sitting within JPMorgan Chase, you engineer it for all the possible options. I think that -- look, I think the GSCs are here. They'll continue to be here. And we're prepared to do business. We're generating more than $0.5 billion of mortgages every day. So when I talk about market risk, I mean $0.5 billion of mortgages every day, having the best market balance that comes in Jes Staley's organization to help, led by Jes and Matt has been fabulous throughout the region [ph] and the thought process of it. Yes, sir?
I'm following up on Guy's question. HARP 2.0, we're hearing a lot of good things out there. So it's bigger than expected. How long do you think that's going to last? Is it going to last all year? Will it die down in the summer? And secondly, with this AG settlement, a lot of U.S. Attorney General is going after a lot of banks on FHA violations. What do you think the impact on the FHA market going forward be?
Well, I think 2 things. First of all, I think HARP 2.0 is bigger than we ever thought at the start. I think it carries through the summer, if the weather will be nice, but people still do wanted to get that return. So -- and we're a big fan of it. And there -- we have the belief that we want to. And it's one of the things that Jamie was very instrumental in helping us think about is we need to be at every table and discussing every item because if not, we may not get it right for the industry. So we've taken a large industry roll and that includes the people in the investment bank and the people on the mortgage bank. So we feel very good about HARP 2.0. It is bigger than people thought. It will last past this summer. The AGs have a job to do. I got to meet a lot of them. I guess I know them very well. And they will do their job. We will continue to run the best business we have, and I don't know in this day and age that anybody on the opposite side of originating merges see the responsibility other than to move towards litigation on issue. So I'm not really concerned about the FHA suits. For us, this is -- but I think the thing you should think about is if -- look at MERS, right, I don't know how many heard about MERS, and it was standing out there as a huge issue in the settlement. When I kept reflecting on it like it's a depository, it does electronic filings that's good for automation of industry. But it became something for somebody to hang on to. So these things are long and arduous. And Steve Cutler could spend a week with you on anyone of them. But we feel well-positioned on all these type of actions.
Obviously, the agreement isn't complete yet, but some people were saying that the servicing standards are more onerous than anticipated, and that puts a huge burden on bank cost-wise and also opens the door for more litigation. What do you think about that?
I don't see any of that. I think we had already moved pretty briskly. We talked about this -- listen, that negotiation went on for a very long time, right. And so we were continually working on improved servicing standards, and that all started even at the consent order time. The single point of contact, the spock that maybe you heard of, which was the largest item in the consent order, ultimately, is a logical thing. And I think in the end, all these things will be less expensive than anyone imagined. When you bring process and technology to them, I wouldn't worry about this as a cost problem at all.
And related to that...
Sarah is in charge, okay?
Recently it was reported that you added a lot of foreign mortgage-backed securities. It seems like the jump was pretty big. I'm not sure if that's your responsibility.
Ina Drew. Ina Drew, our CIO, who might be right there.
Yes, with regards to these securities which were added, could you elaborate a little bit what type of securities exactly they are and how much capital you have to hold against these securities compared to what was the U.S. non-agency mortgage-backed securities?
Ina R. Drew
Yes, they're all very senior, super-senior, top of the capital structure, LTV -- low LTV loans that we were -- have been accumulating through the course really of the last year at fairly distressed prices as they have unfold and deleveraged out of Europe. The Basel I capital, 7%; Basel II restruc, just under 20%. So lower RWA versus most mortgage securities except from agency and the [indiscernible]. We have a mix. We have a mix of covered bonds in there as well so -- but all super-seniors, top of capital structure securities that we've been accumulating at best price through the [indiscernible].
So we just saw a big chunk of market share move in the industry at B of A. They kind of pulled back. I'm just curious, if you talked about a 15% ROE business over time, you talked about licensing the servicing part of the business, and I understand you're focused more on the retail piece of it. But just curious of the thought process behind whether or not to grab a chunk of that market share as it came up for grabs because it's more than I think any of us has ever seen in the business.
Yes. So relative -- like I said, relative to retail generation, we feel very strong that, that course were on in good shape. We're doing a lot of analysis and thinking through the next steps. And when you think about all the things in play right now relative to the correspondent business, you could expect us to run a strong correspondent business and continue to see that grow. We initially pared back or selective in who we had in correspondent. We will use that level of selectivity going forward. And I think it was important for us to get a couple of the issues behind us. We feel very good about that we'll be able to grow it across both businesses.
At this time, I'll turn it over to Todd Maclin. He'll talk to you about the branches and the great job he's done.
S. Todd Maclin
Good morning. Before I get started on my story, I do want to just give a shout out to Frank and the -- all the great folks in the mortgage business, and especially all the new people that came to the table to manage what is probably, in my 30 years, one of the biggest crises the industry has ever had. And Frank is known around these places, being one of our best crisis managers. And as you can only imagine, not a lot of glory all the time in taking on these assignments, so a real sign of partnership. And I'm not sure I can walk and chew and flip slides because you all have it already.
I do want to just point out that I've been in this job for 8 months. But when you're as old as I am and you work at this company, all the jobs used to be in the branches. So 33 years ago, that's where I started. This isn't my first county fair. I do want to -- I want -- I do want to start with Slide 1 and just give you some observations that I've seen in the 8 months since taking this job.
And the first is, if this is a 30%-plus ROE business -- it's really 40% today, but I'm sort of loading it up with all the Basel III capital that you want to. And it's a business that made $3.8 billion in 2011, and it's a business that will grow in the future. And we'll get to headwinds in a second, but just keep in mind that this is a business that will grow in the future.
Secondly, we're the third largest consumer and business bank in the United States. And we have significant presence in 23 states, and we have a large and attractive online and mobile banking client base. And we have a terrific brand, and we have great people.
And thirdly, we are continuing to invest in the future. And technology and equipment not only delights customers, but it lowers cost to serve. We'll talk about that in a minute. And branches and ATMs, we're adding those principally in places where we think the opportunity still exists, post Durbin and post some of the other regulatory requirements. And we're adding a different kind of feel to our branches with more focus on high net-worth clients, business bankers, more -- and more wealth advisers.
We don't necessarily have such a pretty picture for the next couple of years. This is an industry problem, and we have some headwinds to overcome. This graph is a simulation of pretax income, and it assumes only a 4% net growth after 2011. And you'll recognize a lot of these numbers because we've got our three $1 billion opportunities that we've talked about before. That's the Chase Private Client in the branches, Business Banking expansion in the Washington Mutual footprint, heritage footprint and beyond. And it also includes a return on our branches that we built since 2002. And as I mentioned, over the next 2 to 3 years, we're going to introduce a lot of new technology into the branches, in ATMs, and that's going to generate headcount savings for us, and it's going to encourage more transactions going to mobile and ATM and other forms of self-service.
So when you look at the slide, you've got about $1.4 billion in '12 headwinds, and then we've identified $1.5 billion in pretax growth leading into 2015. And then beyond that, sort of 2015-ish, we have assumed that rates will return to normal not too aggressively. And so with all of that, you can assume that we can achieve over $12 billion in pretax earnings by 2020, and you can see the growth rates well.
I'm going to go to Slide 3 and just give you a word on regulation and how we think about it. But the new rules will limit alternatives for consumer banks to grow revenues. And I'll just tell you because I know there's a lot in the news about the CFED. When you look at what we've done so far, we've actually done well beyond what's required. You heard Frank talk about customer experience. And we've taken a much more of a customer experience approach to things like NSF/OD. Because it's not necessarily a pleasant experience for people, and so we're not just following the rules, we're trying to follow what we think will give us the best customer experience. And not everybody has the same hand here. So there are going to be some winners and losers. Not all banks have the opportunity to shift earnings from debit interchange and overdraft, and many banks lack the products and the expertise to go after the rest of the consumer wallet. And so when you add it all up, regulatory reform has cost the industry about $20 billion annually. And rates this year, another, let's say, $4 billion annually.
So Slide 4 shows that the hardest hit customer segment is what we call transaction-only customers. That is customers that really have limited banking needs beyond a checking account and a debit card. And then in this slide, we've segmented our clients according to need. It just illustrates the obvious inverse relationship between banking needs and the contribution that each segment makes. So, look, for example, customers in segment 1, those were on the left, have less than $5,000 in deposit and investments, you should know that we think this customer segment represents about 32% of all U.S. consumers. And post regulation, we estimate that 4 out of 5 of these customers will be unprofitable for banks on a fully loaded basis. And so if you add up sections 1, 2 and 3, which takes you up to $100,000 in deposits and investments -- that's it, that's right -- yes, $100,000 deposits and investments, that makes up about 70% of all the U.S. consumers. And we figure that 2 out of 3 of those customers will be unprofitable for most banks.
This isn't really necessarily a great policy, but it is our future, and it will have consequences for people depending on what their status is and what their options are. And this is sort of a personal favorite slide of mine, not that it really matters, but it shows that the cost of a checking account and it compares it to other consumer services. But I would make the point here, folks, don't expect banks to have much pricing power in this environment. In fact, you can say that some have tried, and we've seen what happens when they do, right? So I think -- the point, I think, is if banks have a lot of fixed cost, the cost of banking services are low when compared to value provided, and it's low relative to other service in a cell phone, a cable TV or a gym membership, and -- but still, we don't expect that you're going to be able to increase them in this environment. And by the way, 85% of our customers have ways to free checking based on our new rules and new treatments.
I think on Slide 6, we just try to emphasize again the value that we provide to customers at minimal or no cost. So, look, here's the message. If you're going to compete in this game, you better have financial strength and scale because it's fixing to get pretty expensive. Customers expect banks to deliver convenience, and they want to have easy access and innovation, and they want to have all the best products and services. And scale is an advantage also when you're managing risk and when you're meeting the requirements of, shall we say, a slightly more stringent regulatory regime.
So financial strength and scale are going to give us the resources to introduce and spend money on technology and equipment and products, and that's going to reduce our cost to serve. And it also gives us products and channel. And frankly, the product capabilities are going to become key in serving the -- where the money is, which is the affluent consumer in the branches and the business customer in the branches.
Slide 7 divides clients into segments according to need to illustrate that we have a larger share of high-value customers. In this example, we've just taken those with more than $100,000 in deposits and investments. And we've determined that we have over a 50% larger share of high-value customers as compared to the U.S. population. And that's probably because we have a premium brand and because we are in the markets that are attractive to affluent customers. So our share of wallet has significant upside opportunity, and we'll be making good progress and have been making good progress in increasing our focus. So we're going to continue to consolidate more of the consumer wallet at Chase.
Slide 8 shows that affluent customers have a broader set of financial services needs. And you have to have to have great products and a full range of what the customers want if you're going to capture the share. And with a full menu of products, you can also bundle and price for value. Without superior credit card, mortgage, deposit and investment offerings, you're just going to leave money on the table and you can't deliver a complete solution. If you look to the second column from the right, the tallest one, and we call that segment 5 or those with a $500,000 deposits and income wallet. Now, folks, for this group, look at the circle in red, 75% of their wallet is in their investments. And it takes investment sophistication. It's not just 401(k)s and somebody else's mutual fund. I think being attached to JPMorgan Asset Management is a huge advantage for us, and we're exploring -- and we're going to exploit this to its fullest, and I say that, Mary Erdoes, it's not just because you're my girlfriend, okay? I mean it.
Let's move to Slide 9. Historically, we've spent the same amount of time with each customer segment. This slide illustrates time spent in the branches, but it also shows that we've generally been fairly democratic in our approach across all our channels. We're going to have to change our approach, and we are changing our approach, and we've got technology and processes and other ways to reduce the time that our bankers have to spend executing transactions. And that gives us more time to spend on sales and marketing management. And, in fact, if you look at our mix of branch folks, I think we've reduced over time 0.6 FTE per branch for transaction people, and we've increased 2.6 FTEs for sales and marketing and related new business activities.
So let's go to Slide 10. So I think I've done all your homework for you here. I think we've established that the environment for the consumer bank has changed, and that lost revenue opportunities have to be replaced with higher share of wallet and customer penetration. And not every bank is going to be prepared for this. And in my view, they're not prepared, positioned, they don’t have the products or services, the attitude about a singular approach, the attitude about moving from a product-centric organizational structure to one where the customer is first.
On this slide then, I'd just like to offer 6 requirements to investors that's new. You can use to predict winners over losers for the next 5 to 10 years in the consumer banking business. And this is going to shock you. Are you're ready for this? I'm going to show why I think we're going to do really well across all 6 of those standards.
Slide 11 covers the first requirement, a strong reputation and the ability to deliver excellent customer experience. We've been on this path about a year, and the chart on the left illustrates that we have one of the strongest brands in the industry, and we score above direct competitors across key brand characteristics. I just used a couple of competitors in this example, but it's true more broadly. And the 2 charts on the right show that delivering a great customer experience has a meaningful impact on financial performance. And if you differentiate yourself with your customers, you get more of their relationship and you win more new clients.
Slide 12 shows the momentum. We have more momentum in customer experience than any other bank. And you can look at Forrester and J.D. Power and some of the other surveys out there. And it's because Gordo, Frank and Todd are universally committed to this commitment. We believe that banking cord and -- card and mortgage are just products and behind them is a customer. And the customer kind of wants to know that -- did all of their business with you matter. We've been out on the road. We've been to the best in the consumer industry folks. We have a lot of great clients, and they open up their doors to us. Folks like Southwest Airlines, Container Store, Ritz Carlton, and we can just go on and on, Home Depot, folks that have gotten this right, have been through turnarounds. And we learned a lot from them, and it convinced us that there's an absolute correlation between how the customer feels about you, particularly affluent customers.
Turn to Slide 13 and you can see it because customer experience is especially important to your higher-end customers. The chart on the left shows that relationship quality, reputation and trust are really important selection criteria and account for 60% of the reasons that affluent customers consolidate with a single bank. On the right, we also see that we earned 8x the wallet of the average relationship here. And we are afforded 60% of the client's total wallet. So being lead is really key to our strategy going forward, and we have the products and the services and the commitment to do it. To get the lead, we're going to start directing more and more treatments of customers who consolidate their business with Chase. And we'll bundle more, and we'll reward for loyalty, we'll reward for relationship and also for wallet share.
So let's move to Slide 14 and go to the reason number 2 that we will succeed, and that's superior product and service offering. Slide 15 isolates the 2 highest value client segments we have: the wealth client in the branches and the small business customer in the branches. Let's start with wealth. Our affluent customers tell us they want to use our branches, but they wanted a more private setting, so we established Chase Private Client to bring convenience to branches but with a higher touch and a better feel. If you guys want to see it, you can see it downstairs in the -- we are downstairs. You can see it down below us. And at the 270 Park branch, you can see it up and down Madison and Fifth Avenue where all you rich people live. But what you will see is a higher level of service. We started this mission a couple of years ago, and we believe we can capture an additional 3% of wallet or $100 billion in additional deposits and investments by 2018.
Let me move to business customers for a second on the right. They are also a significant opportunity. And they have sophisticated needs: commercial card, merchant services, treasury services, online and international. Because even small businesses can have fairly sophisticated needs. And they want a strong bank, and they want a strong brand, and they want a bank that's well-known and well-regarded for commercial banking.
Slide 16, more details on our Chase Private Client. We really got into high gear this past year, and we opened 246 new CPC locations inside our branches. And we immediately captured 22,000 customers, adding $1.6 billion in incremental deposits. And that's really our first year of aggressive expansion. So they just told us that we needed to accelerate, so we're going to move to 1,000 locations by the end of '12, and we think we'll have 75,000 Chase Private Clients. We believe we can add another $12 billion in deposits and investments by the end of 2012. And with 1,000 CPC locations, we think we'll be covering about 55% of our affluent clients that's out there. Is Barry Sommers in the room? Stand up, Barry. You look really nice. Barry runs our CPC and wealth business in the branches. And that's his history and background for many, many years, so you can talk to him at the break.
And then Slide 17 really shows why we're so pleased with Barry and with the results from CPC. Our early growth has really exceeded our expectations, and our greatest opportunity we've concluded in a blinding flash of the obvious are the wealthy people that we already know. We have a very, very high percentage of wealth clients. You saw it earlier. And they are doing their business in a lot of places. And when we introduced them this alternative, and we showed them how good our quality JPMorgan products are and give them asset management and asset allocation formulas that Mary's highest network clients are afforded, the uptake in this product has just been remarkable.
Moving up to Slide 18, Business Banking clients. There's no surprise that larger business customers produce 15x the revenue per relationship. And larger here, we we're just talking about customers with $3 million more in balances. So these are not huge companies. They're just the larger end of business banking. And again, to capture the larger end of business banking, you just have to have a stronger brand. You have to have a more prolific product set, and our reputation in commercial banking doesn't hurt.
It also doesn't hurt to own Chase Paymentech, which is a huge advantage because a lot of our competitors don't own merchant services, and we build and bring in new relationships by cross-selling merchant services and then getting the rest of the wallet. We're also going to introduce more client selection into our processes, and we spend more time and attention going after larger customers where we have the more sophisticated product set to offer.
Slide 19 shows the progress we have with business banking because remember, these are the expansion markets, think sort of WaMu and beyond, where we didn't have these services. And we're seeing productivity in our branches improve as we roll this out, but we're also seeing really, really high-growth rates. And look, across the U.S., our capital position. I saw some of your comments on this in your reports. But our capital position and our capacity is really a strong advantage to lending money. And we've gone to being #1 in volume in SBA this year. If -- we recently -- is Scott Geller here? He's probably out on the road. Scott Geller joined us to run business banking from commercial banking where he was our Head of Risk. And before that, he had 20 years in commercial. And he's very enthusiastic. And given his risk background, he's also comfortable with what we're originating, and it looks like some of the best loans that we've ever originated, and we don't have nearly as much competition.
Let's move to 3, which is convenience in branches, a favorite topic of many of you in the room. So let me just give you a quick reminder on our geographic and physical presence. We have a 10% market share in Texas. You knew I would mention Texas first, didn't you? But we also have a 10% or better share in New York, Louisiana, Michigan, Indiana, Illinois, Arizona, Utah. And we have a 5% to 10% share in California, Oregon, Washington, Ohio, Kentucky. And we have a less than 5% share in Georgia and Florida, but it's growing nicely. In fact, our position, based on third-party research, is that our national consumer deposit share grew more than any other top 10 U.S. consumer bank in '11. And our deposit share gains were even higher in California and Florida and the other expansion markets where we are a relative new player. We also saw -- and this really encouraged this nice share gains in places we've been for years, Chicago, Phoenix, Columbus, Houston, even here in New York City, and that's been very encouraging to us as well.
But I want to talk a little bit about branches and ATMs because they do still matter. But we will acknowledge that the branch economics have changed. What -- we want to be competitive in all our markets, so we're going to build branches where we have an opportunity and we have a good return for investment. But remember, what we build is also going to change, and we're going to use less expensive venues where they're possible. What we build is more CPC room in the branches, more business banking room in the branches, more technology, more self-service.
This Slide 22 shows all the possible locations we have identified utilizing our new algorithms and our new approach, taking into account Durbin as it is, a much lighter approach on NSF/ODs and other fees that might have driven more revenues in the past than they're going to in the future. But this is just the possible locations. You see in the middle the number, 900 possible locations for 2012 and beyond. But I want to just emphasize because a lot of people, I think, are concerned about this, that we evaluate them all, and we use all the relative -- all the realities of consumer banking economics, and we approve each and every one, one at a time, and we change our mind. So we started this year in January with a lift. I think it was around 175. It was 260 before. How are you doing, Mike? Can you hear me okay right where you were sitting staring at me? This is for you, baby. We approve them all one at a time. And we won't get -- if we don't get the return on investment, we're not going to build them. And we if we change our mind in 6 months because something is happening with usage or how they're being applied, we won't build them.
And -- but I got to tell you, when we look at places like California and Florida where we have gaps to fill, remember, what we acquired there was a decent branch network. But they hadn't exactly been investing at it at Washington Mutual for 3 or 4 years. They had much or more of a -- they were much more of a free checking shop, and we're trying to go up scale. So all I'm trying to say is, is that we have reduced our plans, and we've changed our algorithms, but there's still high opportunity locations out there.
Slide 23 shows a little bit of this. You can see our '12 forward pipeline. We're writing it to a 3-plus breakeven and a 6-plus or minus payback. 90% of them are going to be in medium and high opportunities. Cost to build goes up because we're making them fancier. You'll have more room for self-service and more room for rich people and business customers. But consumer deposits are valuable, and we do think -- and we don't think it's aggressive to say that at some point, the rate curve does go back to something that approaches reasonable, okay? And if you didn't think that was going to happen 2015, you pick your year, then you might take a different view. But we're not counting on it tomorrow, the next day, and we're being very conservative about what it could become.
Slide 24 isolates our new builds to show how they're doing. And I think there's a lot of questions about -- are you sorry about what you built before? And the answer is no because the yellow line really shows what we built up to '11. And I suspect, before Durbin, if we had written this line, it would look a little different. But it's all net positive, and it's still the billion dollars by 2018 that we told you it'd be. And then the blue line takes everything that we're going to build going forward. Except here, we got real conservative, and we said, "What if we built all 900 of them? What if we added the 900 from the page -- 2 pages before that I said we're going to look at one at a time, and I said we may or may not build if things change? What if we built all of them and added them to our pipe?" Well, what it says is in 2018, we pass what we built from '02 to '11 so it's accretive, if you will. And you'd like the ROIs, and you'd like the ROEs on these things as well. So our pace of new builds is, let's call it, 150 to 200, but it's going to change, and it's going to change according to opportunity, according to what our competitors are doing and according to what people are doing in our branches as we introduce more technology into the branches.
Slide 25 shows that branches help our other businesses grow even though they don't pay us anything for it. Right, Doug? Don't pay much. Now but all kidding aside, even really rich people like going into branches. We originate a lot of cards. We originate a bunch of mortgages, treasury and security services delivers coin and currency and is able to get fulsome relationship because of what they're able to do with the branch. Asset Management uses it as a network for expanding in this affluent market. So we all think that the branch benefits this place very broadly, and we don't use those economics when we figure out what I showed you before, whether or not to build the next one.
So let's move to 26 and so kind of whip that horse to death. And let's talk about this next requirement, which is the capacity to invest and innovate. 27 acknowledges that if we had under-invested in technology and equipment and branches and ATMs, we would have had improved financial results. That's what you can see on the right-hand side. And -- but we also know, from what I showed you earlier, that these investments will drive down cost to serve and will include -- improve our revenues. We do acknowledge that as bank earnings have suffered, we know a lot of our competitors are under-investing, and we're taking that into account as we look at our investment opportunities like branches and ATMs. But we've continued to invest, and we think we have shown that it will produce growth. So let's move to the item number 5, which is -- this is really important. It's importance that we all have to acknowledge the reality but also the opportunity to improve our cost to serve. And this shows that our investment in digital on Slide 29, investment in digital, mobile, ATM is reducing teller and branch activity, and therefore -- thereby lowering our transaction cost. In fact, 90% of all our transactions are now automated. Teller transactions and branch visits are dropping for transaction-only purposes in favor of mobile, ATM and online banking. And we have big plans to transform our service model using technology and data to better understand our clients, their needs and to serve those needs of our clients on transactions more effectively. We think it's also a way to delight customers. Think about when you used to go to the airport and wait in line, and now you go up to a machine, there's much more self-service, and you get what you want, and you hand them your bags and you move on. So imagine, in the context of what we're doing and what you'll see outside this room what we could accomplish.
We penciled in $500 million in cost-to-serve savings over the next 3-plus years as fewer people are needed to process the same number of transactions. A lot of that cost to serve though could be -- that cost-to-serve number could and should increase. And the only reason we're being conservative about it is because we're not going to torture people in the process of getting them to go to self-service. We're going to show them how. We're going to be patient about it. We're not going to lose customers or lose customer experience over it, and we think it'll happen naturally. And whether it's 2 to 3 years from now or more quickly will be a function of how well we execute.
Ryan McInerney is in the room, and he's going to come up in a second to tell you what we're developing with our key vendors. And during the break, you'll see it outside the room. I think a lot of it is out towards the front door. But suffice it to say that branch and ATM self-service has the capacity to be a game changer for us. And for those of you that traveled to Europe, you've seen it in action there. It just has to be built here for a lot more volume because these markets are so much bigger, which leads me to the last requirement, and that's the requirement of the capacity to adapt, okay. And we're going through a lot of change as a company as it relates to our consumer business. One of those examples I would use is regulation. It's here to stay, and it's going to have an impact on the consumer banking operating environment. And it's going to take scale and financial strength to meet the new rules or regulation because there are -- there is more regulation and there are more regulators.
The cost and required duties of regulation are really harder on smaller banks because without scale, capital and resources, they have a tougher time meeting the new standards. And while we aren't going to fight these rules, we're going to leave it to the legislators and others to focus on regulatory policies. And instead, we're just going to meet the laws of the land. We're going to recognize that we can't compete effectively if we're running afoul of our regulators in any way. I'll give you an example on that conversation about branches we were having. If we build branches to meet our CRA duties and responsibilities, we're going to build every one of them. It doesn't matter what they cost because we have such a beautiful opportunity serving consumers that whatever cost branches are to meet regulatory requirements is small in comparison to the opportunity. We're going to invest in meeting new standards. We're going to recognize we can't compete effectively without doing so. It's going to take more time and resources, but we've got the scale and the capacity to do it.
Slide 33 provides another example of adaptation. You heard Frank mentioned it when he was up here, and that's just whole One Chase thing. It is no small path, folks, to go from the way most banks are organized today which is very product and channel-centric to where you are customer first or total customer centric. And perhaps some are farther along than others, but there's a ton of examples of people out there that have really stayed within much more of a banking mortgage and credit card separation. And it's not a new subject for us because we've been on this path for a number of years. But I think Frank, Gordon and Todd are committed to moving and accelerating that path more quickly, in part, because, well, the organization is ready for this. We've got a lot of our problems behind us, and we can start to invest in the technology and resources to do it. And we're really committed to tearing down the wall -- everybody's ready that book, Tearing Down the Walls, haven't you? But we're all committed to tearing down the walls between our banking, mortgage, card and lending products.
There are significant opportunities to simplify payment systems, improve data collection, interpretation of customer activities and data so you can use it to sell better, target market, stream services, and it's all designed really around a single client view. And over time, we'll merge activities and systems in ways that make sense and save money. I could give you an example in terms of just -- we have a vast number of payment systems across the place, and Frank and his technology team has started to attack that issue to see whether we need all 16 or 17 of those payment systems to delight our customers.
And another example is on the revenue side where we've made a lot of progress, but there's still credit card customers without banking relationships and vice versa. There's also a significant card spent by our banking customers with our competitors, and we see it, and we know where it is because we've seen it in our payment system, and we've started to try and to address that. And we're doing this so far without really -- one of the things Jamie has harped on is give people value for tenure, giving people value for performance, give people value for multiple products. And I think there's a huge opportunity there that we will develop over time.
So I'm going to stop here where I started and just make a few points, and then we'll open it up to questions. Actually, I'm going to bring Ryan up, and then we'll open it up to questions. I think the bottom line is that we have a consumer and business banking business that's well-positioned on these 6 key points. We're going to be a growth business after a couple of years of headwinds. We have a superior brand with the consumer, and we intend to be a leader in customer experience. We have significant competitive advantages, and we plan to continue to capitalize on them with superior products, services and financial strength and stability. And we can afford to invest in the future, and we're going to continue to do so wisely. We will achieve cost-to-serve savings, and we will add customers and share of customer wallet.
So with that, I think what I'll do is ask Ryan McInerney to come up and tell you a little bit about the technology that you're going to see outside during the break, and then I'll come up and answer any questions you have. Thanks.
Good morning, everyone. Todd shared with you some statistics that showed how our customers have really embraced technology to change the way they do everyday banking with us. What I'd like to do is take just a few moments and share with you how we've taken technology inside the 4 walls of the branch to start to transform how we interact with our customer, with the goal of giving them a much better customer experience, but also just being more efficient reducing cost. And importantly, I'm going to take through it for a couple of minutes, but I'd also like to invite you to come test it for yourselves at the break. Almost everything I'm going to talk about today, we've got set up at a demo zone. The best way to learn about this technology and get a sense of the power of it is really to use it yourselves.
So I'll take you quickly through what we're doing to redesign our teller lines and the teller experiences, how we're issuing debit cards, and soon, credit cards differently, and also how we're using video and other technology to bring the service and sales expertise we have to all of our branches. And we do believe that it's early in the evolution of this, and some of it's had different levels of maturation versus others, but they'll meaningfully change how we work with our customers in our branches and how we staff our branches.
So first, I'll talk about the teller lines. We started a couple of years ago with a simple goal, really understand how do our customers interact with us in our branches and why are they coming in to do business with us at the teller line? Not just what are they doing, but why are they coming in, why are they working with us at the teller line? And then together with Guy Chiarello and his team, challenged ourselves and say, "How can we use technology to deliver them a better experience, more efficient and more effective at the teller line?" And we've been testing this in about one dozen branches now for the better part of the year. And we really landed on 2 innovations which we think will change how we serve customers in our branches.
The first is something we call self-service teller stations. And a self-service teller station at its core is a machine. It does everything an ATM does and a lot more, designed to be part of the branch environment, part of the teller line. And we've been testing this in about 1/2 dozen branches, some branches were the entire teller line of self-service teller stations, some branches were part of the line of self-service teller stations, and we still have full service teller interaction. What we've learned is with our partners and through technology what hardware solutions work best, what software solutions work best and importantly, how does it change how we staff the branch and how we work with customers to migrate transactions they used to do face-to-face so they can do it on their own.
In the branches where we've had this technology in place, we've seen great results. We've seen about 1/3 of our customers that used to come in every month and pay their credit card bill with a teller, they now do it on their own at a self-service teller station. 2/3 of our customers that would come in to make deposits are now doing them at self-service teller stations. And more than 90% of our customers that would come in to work with the teller to withdraw cash are now doing it themselves at one of these self-service teller stations. So it's early, but we see great promise for how this technology will change the interaction in our branches and deliver a more efficient staffing model.
We've also challenged ourselves to use technology to change the way we do business in face-to-face interactions at the teller station. If you think about it, if you're a Chase customer, and you want to make a deposit or withdraw with us, the teller line is still the one place where you need a pen, a piece of paper and sometimes a calculator. You can go to our ATMs, you can use our mobile devices, and you can do it at much more efficient way. And what we've tried to do is take that same technology using some tablet technology at the teller line to deliver a much more efficient and a much more effective experience for our customers and for our tellers. And we think through the process, not only can we stop pushing around what amounts to about 1 billion pieces of paper every year at our teller line, but significantly streamline the processes that our branch employees have to just to go through and all of our support group have to be prepared to move that paper around. The feedback from our customers and from our people so far has been great. The interactions are quicker. They're more efficient. They're more accurate. And we think as a result, this will help us also transform how we staff our branches.
For the last couple of years, we've also been instantly issuing debit cards in about 60 branches around the country. We've been piloting different hardware solutions, different software solutions to transform how we interact with customers when they open new accounts and also change the experience for somebody when they need a replacement card. Later this year, we'll be incorporating credit card and we'll be rolling this technology out to more of our branches across the country, especially in the biggest metro areas that we operate.
If you step back and think about it for a second, we issue 20 million pieces of plastic a year for new accounts that are open in the branches and for the replacement of credit cards and debit cards. And if you think about the experience that you could have with a new customer sitting down with a banker, opening up a new account, instantly getting your debit card, your credit card personalized, when you leave the branch and being able to use it. What we found over years of piloting this to a more engaged customer, they use the product more accurately and more quickly, and we have higher retention on those customers. We also find that it's a great experience for people that need a replacement card. I lost my wallet. I need a card. It's been stolen. I can come into a branch, get it on the spot and go on living my life.
We've also been using video. I think like a lot of us in this room, we've become more comfortable using whether it's Skype or iChat or whatever it is. And the same things true of our customers. So we focus on branches where we wouldn't otherwise be able to support a full-time sales specialist, a financial adviser, a loan officer, a business banker, or wouldn't be able to justify the specialized service capabilities we have in some branches. And what we found is video is a great way to deliver those capabilities to a number of our branches. So we've been taking mortgage applications with loan officers that are positioned in the central location and providing in-language service to our customers as well.
Finally, just to give you a glimpse of some of the other things we're working on, working with our partners to redesign our ATM experience top to bottom. We continue to believe that ATMs will play a very important role in self-service going forward, and we're experimenting with new user interfaces, new form factors, new technologies, new features and functionality. We're working in our branches with our bankers to create mobile demonstration zones so they can coach our customers on how to use online and mobile technology to serve themselves, and then also introducing tablet technology to help our banker sales process, both before a customer meets with the banker using iPad in some of our branches so they can self-profile themselves, also soon as part of the sales process where our bankers would be able to present products and services to our customers using tablet technology and also allow them to sign various documents electronically.
So this said, the best way to experience this stuff is at the break. We'd love to answer any questions you have there, as well as you get a chance to use some of the technology. Thank you very much. I'd like to bring Todd back up for Q&A.
S. Todd Maclin
[indiscernible] most of the slides [indiscernible].
Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division
Last century, 1980 or 1990. So I'm just wondering...
S. Todd Maclin
How do you really feel about it though?
Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division
I mean, you have 6,000 branches. You might open 6,000 more, you'll modify base and returns. You're saying you don't have pricing power, it's kind of ugly the next few years...
S. Todd Maclin
not 900, 6,900.
Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division
Well, 900 to 2012 and then you said maybe 6,000 over time.
S. Todd Maclin
Right, so I'm confused. We have a list of 900 for 2012 forward. So if this is kind of like your report. Some of the facts are a little distorted, but go ahead. What's your question?
Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division
Maybe you're still in 1982. So I mean, you have the slide here, so you could go up to 6,400 additional -- 6,000 additional branches, 6,400 -- what page is it? Where are we?
S. Todd Maclin
Anyway, just ask the question, Mike, and I'll answer it.
Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division
The question is, I mean, even my young kids know we have too many branches around here, and I get -- you're going to have more whiz-bang branches in terms of private clients, business banking and...
S. Todd Maclin
What I said was we're going to moderate our build of branches, okay? We're going to moderate how many we build. And we're going to -- and when you start predicting the future, we would acknowledge with everybody else out there that it is entirely possible that they could go away one day. And if we -- they do, we will make a lot more money than we're making right now, okay? But until they do, we're going to make sure we've got them so no one else can take our locations. And we're going to change what happens inside them, which you can see outside. But it would be foolish and others have tried, if you go back to '86, have tried to do things to mess with their branch network, and it has been a disaster. So I do agree that we have to be super careful in this area, and I do agree that over time, it is very possible to moderate. One other point I want to make, we said 150 to 200. We close and we consolidate a bunch every year, and that's down from that number.
How much are you closing?
S. Todd Maclin
I don't know if we disclose it, but it's, say, just for round numbers, it might be 40 to 60 in a year. There's a lot going on. They're separate subjects. We only have 2% of our branches in our total fleet that don't cover their marginal costs, and we only have 5% of our branches in our total fleet that don't cover their fully loaded costs. So I would just say this is a very, very scientific, with an overlay of art and you got to be super careful because branches are not that expensive relative to all the opportunity and the other expenses that we have in running this place given our scale.
So I stand correct on the total branches. I got that close to 2,000. But still, Slide 23...
S. Todd Maclin
I'm -- we're -- yes. Again, let's -- you and I can have a conversation about this anytime you want, but just suffice it to say, I'm using 30 years of experience, 7 years of great history running our Commercial Banking business. I'm 8 months into this job, and I'm applying all the God-given judgment I've got about banking, and I'm going to be super careful about building branches. And you're right, there are all kinds of pitfalls if we do it foolishly. And when they go away, we will make more money.
Just one follow-up, so I mean, Slide 23, you say you're breaking even in 3 years, whereas in the past, you broke even in 4 years.
S. Todd Maclin
Because we're not building as many and because we're applying new algorithms and new economics so that we're more selective about what we build.
How many of those branches with the new -- with the whiz-bang features and everything else have you built? And what kind of track record do you have in those branches?
S. Todd Maclin
It's very early stages, yes. So again, if we're -- we can't tell you right now how many we'll introduce this year. That's why it's a 3-year process. But in a couple of years, we can have 1,000 of them or 2,000. The equipments there is, it's again -- this is, again, where art really matters because if you get in there and jam it down people's throats, you're going to get the short-term expense base. If you look at what some of our competitors are doing, God bless them. Their expenses are going down a lot more than ours are. We have the capital and the stability and a strong brand, and we're not going to mess it up in the short term over those expenses, but you better believe we're going to move as fast as we can to make transactions more self-service in ways that delight customers. That's our plan. Thanks. Yes, sir?
I was referring to your Slide 4 here, and it's -- interesting. I mean, it's -- basically, you're saying 1/2 of your customers are unprofitable under the new regulatory regime. Segments 1, 2 and 3 are 70% of the total, and 70% of them are unprofitable roughly. I mean...
S. Todd Maclin
Yes. I'm trying to give you a proxy for what the banking industry has to look forward to if you don't take into account business bank clients and getting more of the affluent wealth wallet.
Right. So I mean, it just seems to me what you're asking is you're asking the affluent 1/2 of your customers to subsidize the less affluent 1/2. And in the long run, that's got to be an unsustainable business model. Doesn't your service to each customer segment need to pay for itself?
S. Todd Maclin
I don't think necessarily that's true in Consumer or in any other business. I don't think that if you segment customers in any other customer segment you could say that the guy that goes to Home Depot to buy a nail apron has to subsidize the person that goes in there to build a new swimming pool. But what I think you have to do is you have to get your cost and where you spend your time to the fullest extent possible more in line with where the opportunity is, and the self-service side of things is a huge advantage relative to what it cost when it's just tellers and teller lines. So the transaction costs to serve can come down quite a bit.
But if a company like Green Dot is going to charge a $9 a month fee for its prepaid debit cards, why can't the bank?
S. Todd Maclin
When the world lets us charge something more akin to your gym membership or your card will be right there with them and we'll follow on pricing, but I think our view is, is that in this environment, we're just not going to rock that boat. And we've got a brand and a franchise to where we can make it up other ways over time. But if your premise is, is that $12 checking is going to go to $20, I accept that as a possibility, and we'll celebrate when it happens. But we're not going to worry about it until it does. Yes, sir, over here.
Yes, Todd, I was just -- we've heard a lot about the One Chase initiative or philosophy, if you will, but by the same token, we've also heard a lot about some of the headwinds in the different businesses in terms of whether it's Mortgage, Consumer Business Banking. One of the things that's been missing or like kind of gets to ear [ph], as you think about the challenges is what are the leverage points in these businesses kind of particularly kind of near term? As you think about the challenges over the next couple of years on the regulatory side, rates and so forth, what are those leverage points we should be thinking about the concept One Chase will integrate into these businesses?
S. Todd Maclin
Right. I think I tried to cover them on the walk forward because I think that is a great question. It's cost to serve, right? And I'm just going to talk about CBB because it's cost to serve. And I want to make the point if the headwinds are circumstantial that you just don't go out and price for it. When somebody takes interchange and changes it for all time, it's not like it goes, okay, well they changed this, so therefore, what am I going to do about it? That's -- it's a customer- and market-driven what you do about it. So I would say cost to serve will come down naturally, and there are ways to do it, and we're going to be careful about how we do it. And then I would say that our increase in wallet share and our expansion of our business banking businesses that those 2 areas have more than the $1.4 billion of the headwinds I outlined to make up for them. So again, the execution of this is do you believe or not that more than 3% or 4% of the people that have their wealth with us and their investment, is it possible that it could go from 3% to 4%, 4% to 5%, 5% to 6%. And if the answer is yes, it's about $200 million for every point, right? So the point is -- and if you look at what we've done in CPC, which you got the slides, the uptake on that has been phenomenal, and all we did -- and Barry deserves a lot of credit -- but what we did is we created a special place, and we started treating them special. And we said, "If you want to get in this area, give us $250,000 to $500,000 of your money." And a lot of them sit down and write us a check on the spot because they've got it in another bank. So when you combine specialized services and specialized approach in the -- with the branches and with convenience and when you present them with one of these new CPC bankers who we've hired from a lot of places that we compete with, that when I asked them, I said, why are people -- why is your uptake so high? What's different here versus where you work before? And he said the customers walk in the door every day. So again, I'm -- I realized I'm 8 months into this job, and I've got to prove it to you all just like we've done before. But what I'm saying to you is I see of no reason why we can't achieve reasonable market share gains in the affluent customer mix in the branch and with the business customer in the branch. And I think the early results we presented in the deck showed that we're going to get there. And then somewhere in the future, the rate curve gets back to normal folks, and then, you -- pick a year and it cures all these ills because most of this underinvesting by their banks is in response to a rate curve that's flat as a board. And we just happen to be -- forgive us for this. But we just happen to believe that, that's not the future of consumer banking for all time. Yes, Betsy?
Todd, on Page 21, you gave us your geographic map, and you spoke a lot about the branch-based opportunity you have. Could you talk a little bit about what you're trying to do to capture all those locations where you don't have physical presence but you could attract a banking relationship via the Internet capabilities that you've got, Internet banking?
S. Todd Maclin
Yes. I think Gordon's going to talk about that a little bit in a minute, but let me just say that the Internet only without branches, in our view, for the next few years is not that lucrative. And what's more interesting to us is to pick a few towns that have -- and I'm not going to tell you which ones -- but that have a natural connection to our existing footprint and just go attack them and attack them because they have weak banks in those markets, and they have -- and it wouldn't take that much in the way of new builds to expand into those markets, and they have the characteristics in terms of customers. And we could add marketing and advertising because we might already be in the state or in an adjacent market. So I think, for me, that's going to be more -- my focus is on where could we go create a Chase location. And we'll start with the smaller towns, for example, and if it works, then someday, we may attack Boston. Because when you look at the Internet businesses and we've studied them all, it just doesn't convince us that it's a business for us without branches. Now there's a product opportunity. I mean, Gordon has 50 million customers, and a lot of them are not in markets that we serve in the branches. And there's mortgage opportunities by the same token, but when it comes to the holistic branch approach, just not convinced it's there. But we're going to continue to look at it. Thanks, everybody.
We have a 15-minute break.
Everybody, can you please start sitting? Excuse me, we're going to resume very soon.
Gordon A. Smith
All right, everyone. Good morning. Could we entice everyone to back away from the coffee and start to grab a seat. We'll get started in just a minute or 2 here. If we could start to close the doors, Mary, could you start pulling the one for me over there? Doug, could you grab that door? Thanks, man. Start closing the doors. That's very good, Doug. That's very good. Give a minute here for everyone to grab their seat.
All right. Welcome back, everyone. Good morning. My name is Gordon Smith. I'm going to go through the Credit Card business this morning. Todd was saying that he was 8 months in his job the first time I laid out for you the strategy for Credit Card. It was at this meeting in 2008. We laid out at that time that we were going to reorganize the business around affluent levels, which we did. We said to you that we would invest heavily in new products and services, things like Chase Sapphire, Chase -- things like Ultimate Rewards, which we did. We said that they would rationalize our co-brand business and really focus on the key large relationships. And that, we did also.
So what I'm going to do this morning, just start -- we'll move to Page 1, just go quickly through the executive summary, and then over the next couple of pages, I will give you a little bit of a sense of what has our progress been since the commitments that we made to all of you, our owners, at last year's Investor Day meeting. Now and going to the top of Page 1, outstandings have stabilized around $120 billion as we exited the year. Charge-off rates in the fourth quarter were below -- are on average through the cycle targets of plus or minus 4.50%. They came in at 4.33%. And we saw some good improvements in revenue margin. I'm going to cover each of these.
We've continued to invest heavily in the business. I'm going to talk a little bit about expenses. I'm going to talk little bit about how we look at investments we make, and probably, most importantly, I'm also going to talk about the level of flexibility that we have in those expenses because I think there's often concern around the degree to which those expenses have become fixed in our system.
Engagement levels continue to increase across all of our market segments, and we continue to gain share. We've gained share consistently since 2007. The Paymentech business continues to perform extremely well. Our leadership team there under the direction of Mike Duffy has been together since the early 1990s, and they continue to really do a terrific job. And then we'll talk a little bit about the investments that we've been making in mobile and e-commerce, and we're starting to pick up some really exciting momentum there.
So let's turn now to Page 3, I think. Sorry, yes, Page 3 in your books. And we are staying consistent with the guidance that we gave you last year, plus or minus 20% return on equity for the Card business. We made one relatively small change, which is in the Mass Affluent segment. We'd articulated that 13% to 17% are expected of return on equity range. We have revised that from 13% to 17% to between 15% and 18%, not enough to change the overall picture. But basically, we've seen the last 3 year's worth of vintages look a little stronger than we expected, as we continue to improve our credit management. The overall portfolio was performing a little bit better, so largely, it was a result of just looking at the data. We expect that the Auto business will deliver plus or minus 18%, as that market segment begins to normalize from the recession of 2008 and 2009, so again, reiterating the guidance that we gave last year of return on equity of plus or minus 20%.
Turn to Page 4. Give you a little bit of history of how we're doing pretax, pre-loan loss reserve income, how I measure the business, how Jamie really measures us. He doesn't give us benefit for either building or releasing reserve. So that's how we track the business, net sales and then end of period outstanding. You can see that the business turned back end profitability in the fourth quarter of '10 and continues to show good momentum through the fourth quarter. Also, the first quarter of '10, we started to see positive sales growth. That continues. And to give you a sense of January, we were up 13% year-over-year, grossed marginally over 13%. February growth in sales as at the end of day, last Friday was up just over 14% year-on-year growth.
We made -- and just to touch on investments, I'll go there in a little bit more detail in a moment. We made some pretty significant investments last year. And something which none of you will ever see, will never be in commercials, and will not be advertised, but improvements in our point-of-sale infrastructure and capabilities. We're invested heavily in new technologies that bring new data, new analytic tools through the point of sale, and very simply, what that should mean is many fewer customers, whether they're traveling abroad or they're in the United States, will be disrupted with that point-of-sale decline because we have much better predicted models for figuring out which is a fraud and which is a high-value customer.
The big implementation went live right before Thanksgiving. We're very pleased to get that in before the holiday season. That was key for our merchants. We don't want to disrupt our merchants. We don't want to disrupt our card members, and obviously, we wanted to get the maximum benefit. And if we have missed the pre-Thanksgiving, that would have taken us through to kind of mid-January before we implemented that. So a big and important change. You can see how end of year [ph] is about outstanding. They're starting to stabilize. And I'll show you another chart on that in a moment or 2.
Turn to Page 5. As we look at revenue margin, we continue to see a positive trend, we are not for a moment suggesting in the box at the bottom that we are outperforming our competitors, we just said we're moving to a range of between 12% and 12.5%. We're in that range now, as we see better engagements from our customers, more spending, better stabilization of the outstanding and actually, I think, gives us some opportunity here to market where some of our competitors have higher fees and less value in their rewards. We think that's an opportunity for us to continue to gain share. So between 12% and 12.5% is our target range. We think it's the fair place to price our products, and we're pleased with the momentum that we built last year.
If we turn now to Page 6, you'll see on Page 6 that does describe runoff -- the run-off portfolios on loans. You can see, as we were in 2009, over $36 billion worth of business that we in effect wanted to run off, and we've made excellent progress down to $15 billion, although Jamie often likes to remind me that we charge the large piece of that off. So Jamie, thank you. Words of motivation there. And the -- but then if you look at the core business, we're starting to see steady growth there in the core receivables, which is in par again. But our expectations for the receivables growth this year are going to be adding in a very modest low-single-digit growth.
Let me turn to Page 7. Net charge-off rate, 30-day delinquencies, 30- to 90-day delinquency buckets, all continuing to look very strong, but largely, I think, the chapter is closing on reserve releases. Jamie and Doug said that they will be greatly reduced this year, which they will be. That will be some type of reserve releases in the first half of the year. But clearly, we are reaching the point now where those numbers will be much lower. But we've seen very, very encouraging, very strong credit performance across each one of our segments. I alluded to Mass Affluent earlier, but very good strong credit performance.
Let me turn now on Page 8, a little bit to marketing and operating expense first on the left-hand side of the page. But before I do this, let me just put it in context a little bit. As I introduced -- we started this journey in 2008. In 2008 and '09, we said as I started that we will build a bunch of products, and we'll build a bunch of services, and we moved heavily our investment dollars into technology. And as Frank Bisignano said, my teammate on One Chase, that we were then able -- as we finish that work, start to move our technology resources onto other businesses that needed that support because within the card business, we've delivered the new products that I articulated to you in '08 and '09. So having the product built and in the market. Then, we started to set up our marketing of the product. Obviously, it doesn't make much sense to build and then not to market them. You see a substantial runup. If you think about 2009 as a real low point for all the obvious reasons that we recall about 2009. It is a real low point in the level of marketing that was taking place. But I expect that we will see -- and I'll explain a little bit about how we think about marketing investments on the next page. We should expect to see marketing investments moderate a little bit this year. And we should also see overall operating largely flat, down a fraction. And we will continue to invest -- you'll see within the back 1/2 of this presentation. We'll continue to self fund our investments in the future.
I do want to just go through the right-hand side of this page where you see that what we've put here is core operating expense. Think about that as running the business day to day without any form of investment. But this would include occupancy and equipment and technology people and core sensors and voice response systems. All of those things would be in these numbers. And so between 2009 and 2011, we've taken about $225 million of expense out of those core processes. Yes, we put them back into investments, but I wanted to give you a sense that we continue to drive efficiency and effectiveness through all of these processes. And as you look at our operating expenses, it isn't that there is just a general inflation taking place across the board. So very tight expense management.
Now tend never to use this page without our business reviews that we have with Jamie because we measure ourselves on the whole number, the number that you see, but I just wanted to be able to describe for you the fact that we continue to drive costs out of our core operations.
Now let me turn to marketing just for a moment or 2. We have a very rigorous process that we go through. We evaluate more than 2,000 marketing investments every quarter. We go through it at a very granular level. For everyone, we have the P&L with a full set of business metrics. We have set of projections, spot assumptions and expectations that we go back and measure ourselves against. We look at what are we think are the most attractive dollars. So what happens is that each of the general managers of our businesses have an expectation of what they might get in marketing dollars. But they're all held centrally. And Ray Fischer, who many of you know, and I hold those dollars, and we release them based on proof of what's working most effectively. So good programs, running well, we'll overinvest. Other areas, we'll pull back. And so we go through this process every month, and then as we sit down with Jamie and Doug and other members of the operating committee in our business unit reviews, we'll look at it, and we'll say to them, "Listen, we think that there's more money that we could spend here." We'll leave an opportunity on the table, and we'll look at it across the firm and decide what it is that we want to do.
The other fact I would leave in your mind is if you think about the marketing expense that we have and think about kind of a 90-day runway, we could cut, if we needed to, marketing expense by about 50% over a 90-day runway. And so these are not fixed expenses. And with a longer runway, we can likely cut closer to 70%. We have a great deal of flexibility in terms of how we put those dollars to work, the level that we're marketing. And you'll see in a couple of slides that we're very pleased with the returns that we are getting on those investments.
If we turn to Page 12 (sic) [Page 10] , again, just to reiterate our through-the-cycle targets, revenue margins, 12% to 12.5%; expenses including marketing, plus or minus 4.5%. We are over that in the fourth quarter at 4.8%. But net charge-offs, we are under our 4.5% net charge-off rate by about roughly an equal low amount, $13 billion. The difference between the $13 billion and the $16.5 billion, as Doug said, is the other $3.5 billion are trying to also -- and again, expectations of 20% return on equity through the cycle.
So let's just take a little look at a few slides here in terms of how our new accounts, how those marketing dollars are performing in terms of bringing new accounts into the business. So we see a 25% increase, again, from '09, which is a low level and sales volumes up almost 100%. It's terrific performance, and you can see the performances across both our proprietary business, Chase-branded business and our co-brand portfolio. If we turn to the overall portfolio, the number of customers that are sales active with us, up about 500 basis points since 2009, and the sales per active, up almost 38%.
On Page 14, I've used this slide for you before, but gives you the kind of later stage at the industry levels. And particularly, we're getting is very encouraging to see the type of growth that we're seeing in the kind of the travel and entertainment section and business to business.
Now I would just -- as strong as of these numbers look, the first part of 2011 looks very strong, too. Then, we got into the debt dealing, and all of those things appear to derail consumer confidence and growth for 4 or 5 months on the back half of 2011. And so let's hope that we see no derailing factors this year. But a strong performance at this point.
We continue to gain market share, as Doug said, about 300 basis points, a little over 300 basis points from 2007. If we look at the numbers, we haven't yet seen Bank of America or Citi gaining traction. I'm sure, ultimately, they will. Capital One bank has really started to accelerate over the course of the last 18 months, and I think we're starting to see very strong competition from them. Steady solid growth from Discover and American Express, also Grand Noel [ph], but it appears that they seem to be starting to slow or decelerate their growth as 2011 progressed.
Go to Page 16, the power of the franchise. Both Todd and Frank talked a little bit about this in each of their presentations. But we got a terrific lift in our Commercial Card business from Mike's Treasury Services organization, almost 1/2 of our revenue coming from that business. If we look at the middle market Credit Card business, the newspaper just launched, Doug generates greater than 40% of our revenues from that business. Both of these are relatively small businesses at this point but growing quickly. And then the partnership that we have with a retail bank, 1.3 million cards every year. And I think as both Todd and Ryan described, a really strong channel in the branches for us to be able to deliver service and it's a great deal of work that we're doing to continue to evolve out there.
Turning to Page 17. Paymentech, strong growth under Mike and team. We're growing of actually about twice the rate of the industry overall, and about 34% of all of Mike's new acquisitions are coming through the retail branch, so very powerful. Those of you who followed us for a long while will know that we dissolved our partnership with First Data in 2008. We said we were going to invest heavily in this business. We really liked it, and we have been working to move all of our industry types, which is unusual for the industry under one platform so that we will drive down our cost to be more efficient and drive the consistency of customer experience. That work will be finished this year and so have continued at this pace since 2008. And we're very pleased with the performance that we see from Chase Paymentech.
And we'll talk now just a little bit about our digital strategy and some of the numbers that we're seeing and some of the growth in this business. We just really feel that this is a segment. And many of you ask me is it a threat or is it an opportunity. Every evolving technology has to be considered in some way, a threat, but it's our job to turn it into an opportunity. And I think when we look at the distribution channels that we have, whether it's through the branches, whether it's our $50 million credit card companies, whether our partnerships with the multiple co-brand partners that we have, I think we have all of the assets that we need to be just hugely successful in this space. And I'm going to show you some numbers that'll give you a sense of the momentum. And remember, these are investments that we've been making over the last number of years, and I think you'll see the consumer adoption is being very rapid. Chase.com, #1 most visited banking portal; $85 billion in e-commerce sales volume, making us amongst the largest players in the U.S. The online channel is used 6x more frequently as the phone and 5x more frequently than the branch. That's a really positive thing. Because as Todd was describing earlier, it's got to take away those transaction-based activities from the branch and allows our team in the branches to be much more consultative and value add for our customers. And digital channels that we do increased our customer engagement. Mobile payments, 15 million registered viewers -- registered users, growing at 600,000 a month. Huge growth for this year-on-year [ph] . $33 billion in payment transfers last year, and Chase Mobile generates more payment volume than eBay, PayPal, Amazon and Apple combined. I'll show you a chart in that in just a moment. And Chase Paymentech happens to be the largest merchant processor -- amongst the largest merchant processors in the e-commerce space.
Unique visitors you see is there at almost 30 million unique visitors and up 17% January to January, so growing very quickly.
Chase e-commerce total debit and credit card sales volumes, 25% increase in 2011 over '10. and Paymentech e-commerce volume up a little bit over 20%. The average quarterly service interactions for retail consumer households by channels, you just see that the web and mobile are dominating. And we're investing heavily in making sure that those user experiences online and on mobile are easy for the customer to use, clean, easy to navigate screens, quick through for the customers to be able to move through. And that's what builds -- I hate to say it, sticky relationship -- a lasting relationship with the consumer. And then you can see the our historic channels of branch, call center and voice response all beginning to shrink. And that's why as I say, there is a downward pressure overall on expenses because we are seeing fewer inbound calls. We're seeing much more self-service from those digital and online channels.
The average -- and I'm now on Page 24. The average quarterly number of deposits per consumer household, you can see that the branch is seeing fewer of those and more and more going onto the e-payment and the new ATM. But I hope you've all tried the new ATMs where you can deposit multiple checks and cash. Now you may all have been like me, and the first time -- and I hate to admit it, but the first time I tentatively hear -- held a bunch of $20s to put into the machine, I wasn't quite sure how well it would work. Would it really count them all? Or would I be rushing into the branch to say I'm $20 short? And I think consumers feel that way because they have to get used to technology, and it's been a fabulous innovation. Really heavy use of check deposit and cash deposit into the ATMs. And the next wave of ATMs that Ryan alluded to will actually going to recycle that cash, too. What does that mean? When Jamie puts the cash in the machine, Gordon will better get it out. So I think you'd rather like that. Jamie, maybe we could just have a dry run at that if that's okay with you. But the key thing there is it begins to cut our cost of replenishing the ATMs and so on, so a powerful change.
Go to Page 25. Active Chase Mobile users on the left-hand side, almost a 60% increase from '11 to '12. And then you see all the various new products. We've launched QuickPay, QuickDeposit. Credit card bill pay has been there for a while. And you see the growth rate because these products are being used and being used extensively. They will drive down our cost structure over time. They will make the relationship with the customer more lasting and deeper, and these are the right things to invest in. So I hope that -- as I've described in the presentation, you saw what we did in '08. We said that we'll launch new rewards programs and new card products. You see now, we've never seen growth at 12%, 13%, 14% since the early days of First USA, which was back some time in the 1990s. So those investments, now you can see them in the market. Now they're performing. These are the early days of our investments, particularly in the mobile space, and you can see the rapid adoption that we are hopping on.
I'm just watching my time a little bit here. I covered earlier Page 26, the magnitude of our mobile payment volume. You'd expect that from us as we're a bank.
Now in terms of -- on Page 27, we've really broken our strategy down into mobile wallets, probably we are partnering. We just announced a partnership with Isis. Mobile merchant solutions, so you can convert using square your handheld device into a point-of-sale service, so whether that's an iPhone or a BlackBerry or an Android. And we're seeing very rapid growth there. And then in the mobile, in the person-to-person payment space, lots of opportunity growing quickly. And again, these are all the capabilities that get customers to really put all of their spending on their Chase credit and debit and banking products.
If we go to the time line on Page 28, you can see that there's a bunch of things that we've already announced and are in the market. And then as we go through this year and next year, you'll see a constant cycle of new products, new functionality, new capability. And the way we manage this is we have a 6-quarter rolling schedule of implementation. So we have a product roadmap. We know what functionality to use that customers are looking for from us, and we lay out over the next 6 quarters what it is we want to bring to market, how we're going to invest in them and what we think the returns for those will be.
So before I open for questions, just a few key themes on 29. I think that our performance has been consistent with the metrics that we described for you this time last year. We expect our expenses to be largely flat to marginally down, as we continue to self fund the innovations that I've described for you and new ones, which are in the pipeline. As we put dollars to work, we try very hard to put money behind what we know will be tried and true investments and some amount of money, which is relatively small on much more R&D activities. And we're trying to put money to work in areas that we have a very high confidence level will have good returns for all of you.
I hope you see our engagement in the digital channel. It's going to be explosive growth, and that really started for us in 2010. Our market share gains continue to grow and actually moderately accelerate. I realize you've been waiting for us to grow loan. That's now stabilizing. You saw the impact between core and runoff. And so I think that the we passed through the worst of that cycle. And credit continues to perform very strongly, but our reserve releases will be coming to the end of their -- of that chapter.
So with that, we open for questions and hopefully capture the 9-minute backflow, the 5-minute backflow you're asking for.
Gordon, so I think it was...
Gordon A. Smith
I think it was designed to up charge their lower-volume customers and therefore, benefit their higher-volume customers, but curious if you can talk about how Visa's newly implemented price changes impacted you guys as one of their biggest customers.
Gordon A. Smith
Yes, Visa shared with us recently their networking participation [ph] [indiscernible] I think I described it as interest, the name of it [ph] may have changed most recently. We think it's a bad thing. I think it's a bad thing. It raises price for many merchants. I think it's bad for the merchants. I think it's bad for the merchant processor, and I think it's bad for the industry. We are Visa's largest global customers, they know our point of view. But we should -- we have no influence on their pricing in any way, and we think it's a bad thing.
Will it increase your costs in 2012 and beyond?
Gordon A. Smith
We're still evaluating exactly what it'll do to our costs. Jamie said for those of you who didn't do it online, if it does, it's a really bad thing. But we think increasing costs of costs of [ph] industry is a bad thing. And I think we pay them plenty as it is. And I didn't edit that comment at all. Next question. Betsy?
You got a great close through environments that I feel like has not yet been fully harvested so to speak. Maybe if can you give us a little bit of a sense as to what you're doing in terms of mix up there. And in particular, I also just you wanted to tease out a little bit, the private label, which you've been walking away from. How much more is left to walk away from your portfolio? And why are you walking away it if the closed book should halt that [ph]?
Gordon A. Smith
Yes. So a couple of things, Betsy, we just launching in something, which is in test in Denver, which is a Chase offers capability. So working with merchants. You've seen other people there do it in the marketplace, working with merchants to help drive more business for the merchants and offer discounts to the customers. A big difference here, what we can do though, as many of those people who are out there who are doing offers today to consumers, and you know some of the big names. They really can't tell what the impact is on the merchant and did that customer become a repeat customer. And so from the merchant perspective, they made a marketing investment. And what was the return on that? With the data that we have, we absolutely can do that, and our whole intention here is to say, "How do we help the merchant to build his or her business and have a great deal for the card member and build loyalty either way?" So that work is just in test literally as we speak in Denver. The private label business is one -- when we launched the strategy in 2008, we talked about lifelong engaged relationships. It may have sounded like a soundbite. It's what we really live by. And I described, I think, at the conference in Boston in November that we had more than a 50% improvement in retention rates or drop in attrition amongst our customers. And so as much as we want to bring customers in once and really win that business, all of their business and keep them for the long haul. The private label business is much more of the a transaction-based business. It's much more about -- I go into the store and I get -- I want to buy a tie. You might think I need one. I buy a tie and I'm going to get an extra 20% off if I buy with retailers X, Y or Z products. Very transactional, very little relationship value. The returns, we didn't think will particularly be good, so largely, we are done, very few relationships there for us still to exit. And generally on the co-brand side of the brand business, we are at the footprint that we wanted to be in, so we live by all the contracts that we had. And as they expired, we let them expire. Our big relationships, we've extended them all for a really long period. And we've launched a whole bunch of new products. We launched new products last year for the United Continental merger. We did a Ritz-Carlton product. We've done new Disney products, a whole suite of new products and just keeping those value propositions strong for the partner and for our joint customers.
Also, back in that presentation in Boston you mentioned that you are well ahead of your plan for sales growth, but a little behind plan on receivables growth. As you look into 2012, what things are you doing either from a product standpoint or a customer segment that you're going to be addressing to emphasize receivables with?
Gordon A. Smith
Yes. So we -- so just a little bit of a history for anyone who didn't follow it last year. If we give guidance of 120, midyear is everything started to get feeling stressed. We brought that down to 115. And then as we exited the year, we made 120. So it was a little bit of a u. We ended up in the right place. We're just going to keep focus on bringing in the right customers. and I really think about our product as a payment product. And customers decide they want to pay in 30 days or in 90 days or 3 years, so we're going to keep focus on giving customers really great payment products, things like group to loosen [ph] to help them to manage their own financial budget. And then these capabilities that we've described that Jack Stephenson and his team have been working on allow you all of the power that come in with a handheld device. That is going to power it I think, but it -- I don't expect to see robust growth this year in loans even for us in the industry.
The New York Times had an article about how much Target knows about its customers and much more down to the SKU than the issuers or the acquirers know. And from that point of view, it seems that the retailers know so much more. It's not really clear how you can add value to -- for the payments process. And are you really tilting at windmills in that regard, either through the cards or through mobile and other forms?
Gordon A. Smith
So the short answer to the question would be no. I don't think we're tilting windmills at all. We actually haven't -- we don't have the SKU data, so let's just be clear about that. I don't know that you bought a size 34.5, 32 shirt. I don't know that. And we haven't really found the need to know that. And what we do have is that we see the customer's spending profile across all of their spending internationally and in the United States. But on demand from [ph] of all of the issues that we have to deal with, our lack of data isn't one of them. So I actually feel very good about that. I'm glad Target have been using what they have. They're a great company. But we certainly have...
It's not a point of you're having data. Just seems they have so much more data that are so much useful that it's hard to see how you can make the data that you have useful to them.
Gordon A. Smith
Yes. I guess, we -- one of our competitors laid out a couple of years ago the value of all the data that they had and that they were the only people that could do it. And so we just put an independent team together and said that let's just take that and look at every one of those data elements and say, can we replicate exactly what we've articulated, and the answer 100% is yes. So I haven't done that with Target. Leaving this meeting, we will. But data is not a challenge for us. If anything, we're still learning how to really best use all the data that we have. Am I done?
So thank you very much. Thank you, everyone, very much. Doug, over to you.
Douglas B. Petno
Good morning, everyone. Almost lunch. And for those who I have not yet met, and I guess a lot of you at this point, I'm Doug Petno. I have a very difficult task of following in Todd Maclin's footsteps as the new head of the Commercial Bank. I was Todd's COO, sort of a layup, I wasn't going to say that. I was Todd's COO, plus apprentice for the 1.5 years, but I've been with JPMorgan for 23 years. And prior to joining the Commercial Bank, I was running our Global Natural Resources Investment Banking business. So if many of my points today sound familiar, it won't be because I have this thick Texas accent. I'm going to declare my love to any of my coworkers or anything. Todd has dealt me a very strong hand. We have a tremendous franchise in the Commercial Bank. We have a vibrant and growing customer base. Our people and products are best in class and I believe differentiating from our competitors. We've talked a lot about the power of this platform. This business fits right in the middle of the family of JPMorgan Chase companies, which I think really add real incremental value. And although there are some headwinds out there and the market is somewhat choppy, we believe a lot of what's going on out there plays to our strengths and creates real opportunity for us.
So if we can look at Page 3, I think our 2011 results speak best to the strength of the business. But despite continued low rates and a fairly anemic and volatile economic backdrop, we posted record results. Our approach has been consistent, and we firmly believe that if we do 3 things through the cycle we can deliver profitable growth. We want to expand and deepen our client relationships. We want to invest consistently in the franchise, and we want to maintain our risk and expense discipline. So last year, we added clients in every market. We added bankers and we opened offices in several high potential markets. We added more international relationships. We had record investment banking earnings in a somewhat choppy market, and we continue to invest in technology, compliance, risk and our control infrastructure.
On risk, we cut our NPLs nearly in 1/2 to 94 basis points, and our net charge-offs for the year were nearly down to precrisis levels at about 18 basis points. And then on expenses, we met our overhead ratio target of 35%, which is, I believe, among the best in the industry. So overall for the year, we have record earnings, we had record revenue. We had record IB revenue, and we ended the year with record deposits. And we grew net income 14% and delivered a very strong return on equity.
If you move to Page 4, just to give you a sense for how that -- how the commercial bank overall contributed to these results. Middle Market Banking is about half our revenues, lots of good stuff going on in Middle Market, 17% loan growth, 7 consecutive quarters of loan growth. We added over 1,200 customers in the Middle Market. Corporate Client Banking, just as a reminder that the upper end of our C&I customer base, typically public companies with revenues north of $500 million. These business is very well connected with the investment bank and has grown substantially, as we've increased our focus on winning lead transactions and delivering investment banking and industry solutions.
Commercial Term lending, as a reminder, we acquired that business from Washington Mutual, each in percent of revenue. We generated over $500 million in earnings last year. We're now the #1 multifamily lender in the country, and we've increased our originations substantially and have successfully integrated the Citibank acquisition that we concluded in late 2010.
At Real Estate Banking -- our Real Estate Banking team focuses on high-quality sponsors with institutional quality assets. At year 2, our originations have increased significantly as the market fundamentals from our standpoint support that. And just because I know they're listening, I want to include the rest of this Commercial Bank businesses: Chase Equipment Finance, our leasing business. Chase Business Credit is our asset-based lending business, and we have our Community Development Banking business.
If you move to Page 5, you've seen versions of this, this morning. It's meant to shine a very bright light on the power of our platform. Our products, our footprint, our coverage capability, our talent are all substantially more robust because of where we sit as a part of this bigger enterprise. We have 23,000 C&I clients in the Commercial Bank, over 35,000 real estate clients, and we cover them from over 120 locations nationally. And so we're able to deliver not only the Commercial Banking product suite but all of the products for JPMorgan Chase.
So just some highlights and some of these were discussed already. The Commercial Bank contributed 25% of the domestic investment banking fees in 2011, and we led over 225 capital markets transactions last year for Commercial Banking customers. Our Middle Market franchise business -- there was a debate earlier about the value of branches. Our Middle Market franchise and expansion efforts could not be nearly as viable without this branch network we have in place. It give us a brand, it gives us a presence. We can benefit from their advertising. Our customers directly tell us that, in fact, 50% of our customers and many of their employees use our branches.
We are leveraging the worldwide footprint and the investment of the Global Corporate Bank to deliver international solutions to the Commercial Banking customers. And then Treasury Services accounts for about 35% of our revenues. So the investments that Mike's making in technology and product capability serve our clients very well. So I could go on and on, and there's much more described on this page, but what I'd tell you as equally as exciting is the movement of management across this institution, as we've seen real benefits from that. Our lines of business have become even stronger and have formed even stronger partnerships, have become much greater mix knitted together.
Page 6, if you look at Page 6, you can see our expense discipline. Our revenue growth create tremendous operating leverage for the business. So despite low rates, we were able to grind our overhead ratio down to about 35%. And our strategy on expenses is quite simple. We really try to stay in shape on a daily basis. We do our sit-ups every day. We don't wake up one day and believe that if we do 2,000 sit-ups today, we'll suddenly be well conditioned. We tried. It is fairly traumatic. It would be traumatic on a business to do that. We rigorously budget and track our expenses across all businesses, and we are constantly looking at the best way to use our scale, to use technology and create efficiency, use offshoring to help our expense line. Importantly, we've done all this without sacrificing the many investment opportunities in front of us.
So during 2011, we hired over 600 employees, including bankers, underwriters, risk professionals, appraisers and compliance officers. These investments are in our expense numbers for 2011, and we'll make this business much more valuable over time. We've been very focused on an improving banker productivity, so over the last 5 years, the revenues per banker have almost doubled from about $3.5 million per banker to over $6.3 million today, and our revenues per relationship have, in fact, doubled over that same time frame.
Moving to Page 7. So if you think about what drove our growth in this past year, very much bread-and-butter banking, more loans, more deposits across the franchise while maintaining our risk management discipline. On the loan side overall of the business, we've increased our loans for 6 consecutive quarters. And for 2011, our loans were up $13 billion or about 13%. Each of our business lines contributed to this growth and with substantial loan growth across those C&I businesses. And I'll give you more detail on where the loan growth is coming from in a moment. But just to put any fear you might have at ease, we've been able to generate this growth without -- while very much holding the line on our underwriting standards and credit discipline. So we track religiously loss given defaults, debt service coverage, loan to values, credit grades, pricing on all originations. We've really seen no degradation across any of those measures.
If you look about deposits, a huge growth in deposits in 2011, record deposits for the business, almost double where we were prior to the crisis. What's really driving that deposit growth? Many of you asked about flight-to-quality. We don't think flight-to-quality is the primary driver. Our customers right now have very limited reinvestment options. So given macro concerns that they have, they're just electing to keep their cash in the bank. And most companies haven't lived through what we just lived through, aren't going to reach for yield on any exotic investments. The prefer the simplicity and security of just keeping the cash with us.
More on loan growth. So hopefully, Page 8 can give you a better sense for loan demand and our loan growth drivers. So we've broken out loan growth for the Commercial Bank by client type and by industry. And while the industry overall -- where the banking industry overall have seen a pickup in C&I growth, I think the story is somewhat different at every bank. I'll speak for us. Not much of the growth came from utilization. Utilization was up modestly about 1%. So most of the growth for us came from market share adds and some strict refinancing.
The takeaways, as you look across our client segments, are as follows: Corporate Client Banking, again, which is our larger corporate client base, they grew loans 43%. Middle Market grew loans 17%. We took substantial share across the large end of our C&I portfolio. We added over 110 new agencies. So this is taking lead positions for great companies, strong credits where we're delighted to add more exposure, simply moving up the food chain and its syndicate so to speak. And we're continuing to do that so far this year. If you look at our loan growth by industry, broad base of demand across all industries, across a range of industries. You can see on the bottom of Page 8, customers are borrowing for refinancing. They're borrowing to buy their corporate headquarters. They're borrowing for some M&A activity. Our leasing businesses has generated about $1 billion of loans. So $1 billion of our $13 billion in loan growth came in the form of the lease. The customer's purchasing equipment. And we've benefited, as I said, from the overall growth in C&I across the industry, but we've also taken share. And our shares come from not just weakened or distracted regional competitors. It's also taken share from some of our larger competitors. There aren't as focused at the moment at the lower end of the middle market.
In terms of expansion, we've grown loans there. 10% of our loan growth came from our expansion markets, by definition, market share gains. And then for both of our real estate business, which in contrast to many of our competitors, grew modestly. So many of our competitors are seeing real estate and run-off lows.
Again, to put your fears at ease, I think it's very important to note that when making these lending decisions, we're modeling higher capital deployment in the business to make our loan pricing decisions and as we evaluate each of our business components.
Quickly on Page 9, just some thoughts on sort of the state C&I marketplace. Our customers are in excellent shape, speaking generally. Cost structures have adapted to the new environment. They're more liquid. They're less levered. Where it's possible, they've taken advantage of long-term debt markets. They're very optimistic overall but in general, lack confidence. As we look to budget for 2012, we assume it would look very much like 2011, somewhat anemic economic recovery with periods of volatility, maybe some hotspots in the market. And we're watching gasoline prices right now, that's something that impacts our customer base quite significantly.
In terms of competition, where there's been some disruption and there's certainly some retrenchment by European banks, for every responsible C&I loan right now is pretty competitive. It's all the usual suspects. So we continue to believe that banks are going to have to differentiate themselves to win business.
So the real estate on Page 10. We're very encouraged by what we're seeing in the commercial real estate market. Core markets like New York, Washington and San Francisco have shown very significant signs of recovery. Fundamentals are continuing to improve in most property types, multi-family, particularly strong right now. The outlook across all asset classes is generally positive, but I would say still somewhat subdued. Most notable in some of the secondary and tertiary market. And so we really see a big step change in the jobs outlook and the unemployment picture. We're not going to see a whole broad based recovery on real estate.
Many of our competitors right now are kind of off the field. They're working through problems or the lags that we in this sector. And the CMBS market has been somewhat erratic, very present in the first half of last year and sort of market shift down somewhere around the broader market volatility in the second half of 2011. So right now, given all these spreads and underwriting standards are kind of in our fairway, we're very encouraged by that, and it seems attractive from our standpoint.
Let me spend a moment on Page 11 to give you a reminder as to the cornerstones of our risk management strategy. Quite simply, pick the best companies, the best industries, the best management teams, work hard to maintain granularity so we avoid large exposures to single borrowers, single industries, single geographies. We manage our cyclical risk very carefully. Most notably, for real estate, we have well-established circuit breakers in place, where we pull out of the market if it's not where we want it to be.
In terms of our C&I business, we have about, as I said, 23,000 customers. We've had a relationship with a middle-market client by an average of 15 years, so we know these management teams. We know these businesses. We know how they behave through all types of market environments. We have no large exposures to high-risk sectors, so we don't have a dedicated LBO or private equity coverage team. We have no direct Eurozone exposure. Our international loans is typically guaranteed or cash-secured, and our muni portfolios, very granular and high-quality. We have 2,000 municipal borrowers.
In terms of real estate, we continue to focus on very strong sponsors to stabilize properties. At the moment, we have very limited construction risk on our real estate portfolio. I think very noteworthy, 1/2 of our real estate exposure was originated after 2009. In terms of our CTL or in multi-family real estate business, 35,000 investors, average loan is $1.1 million. These are stabilized properties we buy hold, individually underwritten by our own appraisers. And just to give you a sense for where that market was in 2011, our average LTV on a multi-family standpoint is 62%. And we have very strong debt service coverage. So we feel very good. The combination of the multi-family fundamentals and where the structure and prices are in that market are encouraging.
So how is that credit discipline translated into results? If we move to page 12, we really believe that we've delivered best-in-class credit performance. These 2 graphs show our NPLs and net charge-offs relative to our key peers through the last credit cycle. Overall, our NPLs came down by almost half. We have just over $1 billion in NPLs against current loss reserves of about $2.6 billion. So we have about 2.5x coverage of our NPL. Right now, we have very little stress in our C&I book, with NPLs and our net charge-offs at pre-priced levels, so we feel like we're very adequately reserved as we sit here today.
So even with all that, I know some of you worry about the long list of wildest market headwinds for banks, so I thought I would just touch briefly on some of the major challenges for the industry and how we believe we're well positioned against each. In terms of just increased capital and the shifting regulatory environment, our current business is already generating very high returns. So last year, close to 30%. We have multiple revenue sources to supplement our lending revenues. One point I would make on this is we will not move out on the risk spectrum to compensate for more capital being in the business. We don't have to. We think the business on its own, with our risk appetite, would generate sufficient returns.
In terms of Eurozone concerns, there's been the expectation that a large portfolio of property is coming to market. We're getting ready to look at those. Some have already been out there in the market, so we think there will be more chances to buy portfolios, but we're going to maintain our discipline, much like we did in our Citibank purchase, our discipline in our portfolio granularity. In terms of the threat of a double dip, it's all about client selection. We still like to pick the best clients. Those clients, in fact, are in better shape now than they were heading into the last crisis. Our loan portfolio is in better shape now than it was heading into the last crisis. We have substantial loan loss reserves, as I said. We also have a high proportion of annuity and business revenue in our income statement, where we have seriously got an earnings profile.
In terms of sustainable rates, the only comment I'd make there is we posted record earnings last year in a somewhat low rate environment. And in terms of loan demand, as I said, relative to our competition, we've got a growth strategy on real estate. We're able to grow real estate loan last year, and we have greenfield C&I loan opportunities in our expansion markets, which should generate activity, loan activity going forward.
And in terms of an ultimate recovery in the markets, hopefully, it happens one day with sustainability. We have record deposits. At some point, those deposits are going to be incredibly precious. Utilization also will follow in our recovery. And we've made substantial investments in this business over the last few years. We think the benefits of those will really start to show as the market starts to recover.
So where do we go from here? The opportunities to grow our business are exciting and robust. I just want to spend some time this morning updating you on 4 of our key growth opportunities. On Page 15, our middle market expansion, we have made great progress building out our middle market footprint. And when we're complete, it should be a complete national footprint. We're targeting places like Los Angeles, San Francisco, Miami, Philadelphia, Boston, and once our business is fully mature, we'll be a national leader with a presence in 40 of the top 50 MSAs. As you can see, our strategy is to add market presence in top 6 of the top 10 MSA and 19 of the top 50. So the total number of attractive prospects in these new markets for us is about 15,000, which amounts to about 70% of our existing middle market client prospects. I was just down in Florida a few weeks ago. We did a bus tour, several of us, around the state, very encouraging. So Florida is one of our standout expansion markets. It had over 60 new relationships last year. It's operating margin-positive, and so I think it's emblematic of what we're doing in other markets.
I'd also like to make a point: We're not in a hurry. We take our long-term view on these markets. These aren't loan production offices. We've exported our culture and our credit acumen into these markets. So our credit executive in Florida came from Michigan. He's an old NBD guy who has trained in our credit program. We have a lot of confidence that we're running the same playbook in these new businesses. And we're complementing our teams in these markets with select outside hires to bring some local knowledge. The point I'd make there is not only are best clients in these markets interested in joining us, a lot of the best bankers are as well. So from that standpoint, it's a great value we're building out in expanding our footprint.
That's Investment Banking. It's something that's near and dear to my heart. There's a huge opportunity here for us. We passed the $1 billion mark a few years ago. We've set a new mark of $2 billion. The 2 big revenue opportunities for us are syndicated loan and M&A.
If you just look at Page 16, you can see the forward calendar of scheduled maturities. The non-investment grade financing, over $1 trillion over the next 5 years. We're not going to want all of that. There's, I'm sure, some stuff in there that we would not want to finance, but it's directionally a good indicator for the forward outlook of financing activity. There's huge opportunity for us to bring capital structure ideas and market assets to our customers. It plays to our strengths, and we're very focused on it.
In terms of M&A, the best way to you a sense for scale on that opportunity is the bottom right. For 2011, 1/2 of the M&As fees paid in for North America were for transactions from below $1 billion in size. So those types of transactions are going to fall into the sweet spot of our customer base. We've doubled down our efforts to focus on doing more advisory work in Commercial Bank. Last year, M&A fees were up 50% for us, and we feel like, again, it's the sweet spot of our customer base. We have a world-class advisory business, and we hope to take more share and be a adviser to more of our customers.
In terms of our other Investment Banking products, we're going to do more FX rates in commodity risk management across the board of our Commercial Banking footprint. It's all about focus. It's all about feet on the street, and we have dedicated -- 4 dedicated and focused resources across our product lines.
International is another differentiating product capability for us. Interestingly, we did a survey of our middle market customers last spring, and about 45% said that they expected that their international revenues could amount to up to 75% of their revenue base over the next 5 years. Our Commercial Banking clients are part of the value chain and a part of the supply chain to large multinationals, so just like the large multinational moving overseas in search of diversification, growth, cost-cutting, et cetera. And we're one of the few banks that, we believe, could set up to help them as they do that and deliver those services locally across the country. So last year alone, we grew our international revenues by over 41%. Right now, we have 2,500 Commercial Banking clients that are using those international services and our FX solutions in international markets. And this number has grown by about 20% since we launched the business 6 years ago. Our overseas loans are up 26%, and our overseas deposits are up 30% year-over-year. I think even more important than all of that is it's very much a wedge product for us, in many cases, when we take over a lead role as a bank because of our international capability. So I think the revenue opportunity is bigger that just what we'll capture simply in overseas revenue.
You can now move to Page 18 to talk a little bit about real estate. Again, much like syndicated loans, huge forward calendar of maturities, $1.4 trillion of maturities over the next 5 years, which is, in itself, an opportunity. More importantly, though, is we like the sector fundamentals. We like where asset values are. We like what's carrying the market in terms of pricing and terms. Our portfolio is in great shape, so we have very limited problems to work through. And in many ways, you could consider us underinvested. If you put us at our CTL business, we only have got $8 billion of commercial real estate. That's very light than many of our commercial banking peers. So with these dynamics, we see room to grow the portfolio. Our team is in place, and they're focused, but we will certainly proceed with caution -- I mentioned the circuit breakers, the well-defined circuit breakers. If conditions change, the market changes, we'll tap or slam the brakes as appropriate.
CTL is a very much the same story. We particularly like this asset class. Multi-family fundamentals are very strong and competitively, in many markets, we're the last man standing. Over the last 2 years, we've fully integrated this business into our platform. We have the scale. We have resources, technology of being the #1 multi-family lender, to be the absolute low-cost provider, and it's a big advantage for us. So again, right now, the combination of market underwriting standards, pricing, and terms make this a great opportunity for us. And the pipeline so far this year is very strong.
In terms of what all this means, we are standing by our prior guidance and financial targets for the business. I'm now on Page 21. So for growth, you've heard about some of our key growth opportunities for expansion, and IB targets will remain the same. We think middle market expansions can generate between $400 million and $500 million of earnings over the long term. And again, we're very much going to take our time in these markets. The operating margin is positive in those markets. And we think that given our brand and our product visibility, that's a very reasonable target for us.
Let's talk about Investment Banking. It used to be $1 billion target, now a $2 billion target, and we believe if the market gives us some cooperation, we've got the resources in place to meet that objective. We have not yet set an international target for the business, but as I've described, we see in those an incredible opportunity. And as our customer base becomes more and more global, we hope to grow that revenue base for the Commercial Bank.
We're setting a target, overseas revenue target of $400 million to $500 million. When benchmarked against last year, these revenues were about $200 million. In terms of our overhead ratio, we're standing by our overhead ratio of 35%. We believe it's achievable even in this rate environment, and we believe it's the right cost structure for this business. And in terms of credit cost, I think core to the success of the Commercial Bank has always been our credit discipline and our credit rigor. We will maintain that focus and our target of 50 basis points of net charge-offs through the cycle.
And then on returns, we're standing by our ROE target. We remain confident we can deliver over 20% ROE in this business. Our 2011 results reflect many of the challenges in the industry, and we believe if we fully loaded our 2011 results, we'd still have a very high ROE, certainly high relative to the target and our competitors.
So I'll leave you with a page that, hopefully, looks familiar. It's in the materials last year. I did that just to underscore the point that we're very focused on executing a proven model: pick the best customers, deliver the entire firm, reinvest in the business, watch our nickels and dimes, manage our cyclical risk very closely. We remain very excited about the investments we've made through the last several years and actually believe our best days are ahead of us for the Commercial Bank. And with that, I'd be happy to take any questions right now.
Yes. You explained your market share gains, but why don't you think loan utilization has improved more whether for your or for the industry?
Douglas B. Petno
Well, I referenced these record levels of liquidity. I actually think also going through the crisis, having lived through the crisis, many of our customers tell us that they’re going to keep more cash liquidity. Their boards ask for it. They sleep better knowing that. So it may never return to normal or to historical averages, but I think that's the primary driver. We actually think for it normalize, our customers, they have burn through some of the excess liquidity before they'll go to the revolver for financing.
I think a lot of people got excited with the C&I loan growth in the industry, and you talked about a lot of it being market share, not necessarily economic growth. Can balance sheets like JPMorgan grow just through market shares international and stealing business from the small guys? Or do we really need economic growth for these balance sheets to grow, especially at these levels?
Douglas B. Petno
I actually think it's a little of each. I think the industry overall did see C&I pick up. We saw it a lot in the fourth quarter. We believe that markets are going to eventually return and that companies will finance themselves. Customers I talk to have a lot of pent-up appetite to invest. I think once you see sort of some of the bigger macro overhangs in the market start to clear up, more certainty about these regulatory conditions that are food safety, healthcare or tax relief, that many small businesses are ready to build and to expand their businesses and add capacity. And that's going to happen eventually. So I think the underlying fundamentals are there. I think some of our growth was just organic growth. But we're very confident, as I said, in our footprint and our strategy to take share. And I think there is a lot that gets lost in the averaging. We think a lot of the overall commercial bank loan growth specifics were blurred by what's going on with the runoff in real estate. Any questions?
And you alluded to an Investment Banking opportunity and the fact that a large percentage of M&A deals are actually relatively strong transactions [indiscernible] with the Investment Banking that you're working. So from a capacity perspective, did they really have the capacity to work with you or [indiscernible] M&A [indiscernible], or are you developing the advisory capabilities within the Commercial Bank?
Douglas B. Petno
That's a great question. We had, in the last year, established a dedicated team. It's very much designed to be a sell-side team, so 23,000 clients in the middle market. Most are private, but we believe if we can bring to them the capabilities of advisory -- when they're looking for liquidity, we could be a best-in-class -- asking to advise them on all branches of their decision tree. If you're going to go public, we have a world-class equity business. Many consider ESOPs as an alternative, and they look at liquidity. We have ESOP advisory business. If they want to sell all or part of their company, we have the dedicated Commercial Bank M&A team. This dedication and the focus on our customer base is absolutely important. We're hitting on the right thing here. The IB, by definition, goes elephant hunting, so that's why we've sort of built a team dedicated against our customer base. But we really feel like that this positive product capability allows us to passionately advise our customers. And we think there's going to be a lot of opportunity to bring that out there for us. That's the biggest footprint that we have.
Great. And just as a follow-up, could you comment on the pricing or the economics of that size of transaction compared to [indiscernible]? Or your traditional Commercial Bank business?
Douglas B. Petno
That's a good question as well. I think we're trying to -- and first maybe say -- we're looking at it archly in the context of the overall revenue opportunity and then speak to the power of the platform. We're in the middle of the transaction. We're the adviser. This probability of the proceeds from the sale end up in their business are much higher. The probability that we finance the buyer is much higher. So there's a revenue opportunity around the M&A business for the firm that's greater than simply M&A fee. So we want to be -- that's why we have our own self-contained team that we're trying to control that can be a little bit more nimble on the fees, recognizing that there's a lot more at stake other than the straight advisory fee. On average, they tend to be smaller. But if you look at what happens when you have a set of fee structures or associated financing, this will produce lucrative opportunities.
Doug, you alluded to international opportunities. Could you provide a little more color in terms of geography of where those opportunities might be over the next 3 to 5 years? And specifically to their products, I know you mentioned infrastructure. I know that's a big push for your operation. But are there any other areas or any other geographies that you can [indiscernible]?
Douglas B. Petno
We have the global corporate bank, which you'll hear about. We don't have Commercial Banking people at every place around the world, but the global corporate bank does. We have them in sort of the more commonly -- more common markets. So right now, 1/2 of our revenues are in EMEA, mostly Europe. We have a team in Brazil. We have teams in Asia. So it's all the usual suspects, so it's Brazil, it's China, it's Europe. And the products are largely FX-related, and it's largely global cash management simplification. A great example is we had a 125-year-old company middle market customer in Tulsa grew all over the world. With the Bank of Oklahoma customer, they had 40 banking relationships globally. We simplified it down to one multi-currency lending facility, to one simple global treasury system, saved them $1.5 million and presented a good revenue opportunity for us as well. So that's kind of what we're doing. These are smaller companies. The other example is the baker of the bread for McDonald's, Chicago middle market client going into China. They're following other large fast food chains into South Africa and Korea. We're helping them from an advisory context. We give them access to our senior country officers. We advise them on foreign exchange and regulatory issues, and in the process, we get the operating business, the operating treasury business in those markets and likely the foreign exchange hedging business that comes out of that. Brennan, go ahead.
Last one. You guys are hungry.
So I guess following up on that, given some of the problems in some of the European banks, would you also consider maybe buying a local commercial bank in a different geography altogether?
Douglas B. Petno
I would refer that to Jamie. What I can say is we're not -- and just to make sure we're clear, we don't have a Commercial Banking business in Brazil. These are U.S. companies that are going overseas, so we're using our global presence to help them. I think we've got, as I hopefully articulated, we feel like we've got a lot of opportunity to grow the business domestically without taking any of the sovereign risk or local form market risk of building out a Commercial Banking business in a foreign country. But never say never. I'd let Jamie answer that with respect to buying a big commercial bank with a broader international footprint.
How's that? All right, everybody. I think we have maybe one logistics point on lunch. Thank you.
We're now going to break for lunch, where we will be joined by senior members of JPMorgan. You have all received e-mails with your room and table assignments, so please check e-mails. We have a little bit more than one hour for lunch, and we will start the afternoon session promptly at 1:15.
Michael J. Cavanagh
Everybody, won't you come on in? Okay, Doug Braunstein here now. So very good. All righty, folks. I'm Mike Cavanagh, Treasury & Securities Services. We're going to get the afternoon of the wholesale businesses going. So I'll lead off. I'd give people a second. As you guys know, I've been doing this about 18 months now, and much as I miss my old job, I was ably replaced by Doug, and I got to stay. That was a much better lunch than I ever served as CFO. But I know they focus on expenses. So the bad news is those were all leftovers from last week. But anyway, I'm excited about being in TSS as I was 18 months ago when I joined, and Slide 1 here gives you a feeling for why. It's a damn good business. These are processing businesses. As you know, they have the great characteristics of being less capital-intensive. They've got great margins and attractive returns on capital. They require scale, huge scale, built, as you know, over decades and decades of investment in client relationship, people, systems, footprint and products, which means they've got big barriers to entry. And of course, they're global, which I'm going to talk about some of the strong secular trends later on. So we love these businesses. But the second point on this first page is that not only are they great businesses by their nature, but that we at JPMorgan Chase have leading franchises in these businesses that we've been continually investing in right through the tough recent years. So in Treasury Services on the left, you see that we've got -- we do business with 84% of the Fortune 500 and more importantly, even 79% of the Global 500. We're the leading player in U.S. dollar payments, which is still the most important currency for global payments, and a strong platform from which to extend our offering internationally to multinational corporates, which is a big focus. We've been investing heavily, as you see, in international capabilities, enhancing our capabilities in 20 countries recently and adding client coverage, with 75 bankers added recently in Global Corporate Bank, and I'll get to that. We've increased by 19% last year the number of clients that do more than $1 million of international Treasury Services revenues with it. And we're seeing benefits on the Treasury Services side, with international revenues up 22% in '11. On the WSS side, we do business with an outstanding list of asset manager clients all around the world. As a global custodian, we ended 2011 with record assets under custody of $16.9 trillion. And that's been growing, just so you know, growing at just shy of 4% over the past 5 years since 2006 on a compound annual rate. And if you back out acquisitions done by our competitors, our growth rate is actually slightly ahead of others. And this business, WSS, is already well positioned to take advantage of global trends. 62% of the revenues of the business are outside North America. And I think that's the highest revenue mix of any of our JPMorgan businesses internationally.
So to wrap up this page, we love these businesses. We're blessed with leading franchises in them, and we're deeply committed to them over the long term.
So moving now to Slide 2, let me just drive the point home a little bit more on how attractive these businesses are by taking a look at the 2011 financials. So even reading all your reports, even in an environment as challenging as it was with interest rates low, market -- financial markets and economic activity relatively weak and higher regulatory burdens, et cetera, et cetera, the business still produced a 17% return on equity, a 24% pretax margin and $1.2 billion in net income, none of which are bad numbers, except, of course, for the fact that they're below the long-term potential of the business in a normalized environment. Now another interesting number that's not on the page is that the peak earnings of this business before the crisis were slightly less than those 2011 results, and that was $1.1 billion in 2006, when interest rates and the like provided actually a lift, a little bit of a tailwind to the business. So you think about that 5-year gap, and we're earning more than we were then. And to beat the horse a little bit more on that, in the 4 years that stood between 2006 and 2011, those 4 years' average annual profits of $1.4 billion, or 25% higher than the precrisis peak, was the worst year producing $1.1 billion in profit and the worst quarter annualized producing $950 million in profit. And that was the worst financial crisis of our lifetime.
So the point really of this is that these businesses produce durable and recurring earnings, and they're incredibly important to you as you think about the power and value of JPMorgan Chase as a whole. And lastly, before I leave this page on 2011, I just want to say that, from my vantage point of running the business, is that we have very good momentum as we entered 2012, and I won't talk about it too much, but I will say a few things. We've assembled a great new management team. We've got strong leadership from inside and outside the company that have joined me in building this business from here. Some of them were with you at lunch, and a lot will be around later on at cocktails. So please get a chance to say hi. You can read for yourself on this page that all the key drivers of the business are trending in the right direction relative to the competition. And in 2011, the year-over-year profit versus '10 showed a modest increase, which I feel good about given the investments for the future that were embedded in those results.
So let's move to -- for the rest of the Slide 3, we'll go all about the future from here on by referencing back to what I talked about for the business last year. So the performance target for this business is a 25% plus or minus pretax margin -- sorry, return on equity, which equates to about a 35% pretax margin. You'll recall from Doug's presentation that we'll use 9% under Basel III as the capitalization rate for the business, which amounts to about $7.5 billion of capital, and that would produce about $1.9 billion in earnings, up to 25% ROE target, all consistent with what Doug talked about this morning. On the left of this page is what we're going to do to get there, and that's going be driving margin improvement in more or less the existing business while, at the same time, investing to capture the international growth opportunities that I'll talk about. So these are the things that we control, and together, they'll deliver about 1/2 the improvement towards our targets over these next several years, and that will include progress in 2012, when our plan is to deliver a couple hundred million dollars increase in pretax profit. As you know, that's expected to happen without getting too much help from interest rates.
The other 1/2 is the normalization of spreads when, and I know some of you will say if, interest rates rise, and we'll cover a little bit more of that later on. So the pause to your unanswered question, many of you have asked and have read about as to whether we're properly balancing near-term earnings pressures with the pace of the investments we're making in this and other business. At least for TSS, my answer is an emphatic yes. And so specifically, and we'll go through it, we're making all of the right investments for the future of the business at the fastest pace we can actually manage. So worrying about earnings is not getting in the way of our investment agenda, but at the same time, as I just said, we expect to deliver profit growth in 2012, '13 and so forth so that when conditions -- operating conditions do improve, we'll have maximized the future earnings potential of the business and the long-term revenue growth potential of the business.
So now -- and I want to put that back to what Doug said about expenses. Our plan for 2012 in this business is to manage and do all that I just described while holding our expenses in TSS nearly flat to where they were in 2011. We'll try really hard for flat, but we're definitely going be nearly flat. On Slide 3, let's start to go into how we're going to get some of that margin improvement opportunity. So I'm going to go through 3 slides, the 3 of these together. I don't go through bits and pieces of $1 here, $1 there. But together, these 3 slides represent about 3 to 5 pretax margin points. So on Slide 4, you see the first element, which is the opportunity to drive revenue growth and improved margins by leveraging the full firm of JPMorgan. You've seen versions of this slide from my partners, and it makes a point just as well for TSS, so we're deeply connected to the other business lines to the benefit of TSS and the benefit of the other businesses. But I want to hit harder on it for purposes of TSS because I feel there's a lot more we can do in the wholesale businesses by harnessing the combined capabilities of TSS and, in particular, the Investment Bank. And if you go to the bottom left, I hit on some of the key themes there. First is that the client relationship we have in TSS and the Investment Bank overlap about 80% of the time. And so to take advantage of that, we've been dramatically improving the coordinated planning of our client relationship. And TSS is going to be a major beneficiary of this effort as we have all of our senior client executives asking for TSS business in a way that we've never seen in the past, so much so that when my pal, Jimmy Lee, is not out winning marquee IPO mandates, he proudly comes around the floor and reports into me on his latest TSS pitching effort. So it's great to have the partnership, and I'd say in all my years working at this institution and others, the coordination across this wholesale business, and you'll hear from Jess and Mary, is at the highest level I've seen. And on this point of planning around clients together, it makes sense to everybody involved, and it makes sense to our clients. So we're not doing something unnatural here because what we see is that in those relationships where TSS and investment banking are deeply involved with the client. Those are the strongest client relationships of the firm, and they are the ones that draw the greatest commitment of resources in terms of coverage globally, product solutions and importantly, capital. And that profile, that kind of client is the one where we're in the best position to win new business across the whole plate, regardless of which division. So that's a virtuous cycle, and we're just deliberately trying to reinforce that by all the things we do.
The second thing in that box is what I call differentiated client solutions, where we're combining the capability, the Investment Banking/TSS have developed solutions for clients that we couldn't -- that each of the 2 businesses do it alone. So some examples here are listed. You've got prime custody, where we combine the financing, reporting and client services of our prime brokerage division in the Investment Bank with a segregated custody of TSS, which is the real differentiator in the hedge fund space. You got supply chains finance, the trade finance product in TSS, which is very often, these days, integrated with the capital and financing dialogue that our investment bankers are having with clients. And then given -- probably the most important in my mind looking ahead given the impending changes in market structure, the completeness of our capabilities from trade execution and just as market business trade on through the post-trade services in TSS and WSS position us really well to help investor clients navigate all the changes that are coming their way, and helping them manage their collateral is one -- just one example of where those -- that power will come together.
And finally, in that box is what we're calling value for scale, which is our effort to leverage the operations and technology functions for us in TSS and Investment Bank. And with Frank Bisignano, when he's wearing his CAO uniform, we're looking at about $1.6 billion total current expense across 7 different work streams, things that range from securities processing, what each business does to some degree today, the foreign office operations. We have middle offices and back offices. We have Treasuries Services and Investment Bank and all the foreign offices we have in the world. Putting those together, we think, is the big opportunity to reengineer our processes and deliver better service at a lower price, much the same as Frank talked about earlier this morning. So the important take away from this page is that all these opportunities exist because our wholesale businesses operate together as part of JPMorgan. And while some of our universal banking competitors do attempt to do some of it, I would say, and I don't think I'm going out on a limb saying it, none of them have the collective capability of the caliber we have when you put our wholesale businesses together. And then mono-line competitors, whether they're investment banks or trust banks, don't have these advantages at all. So the bottom line for me is I wouldn't trade our competitive position in the wholesale businesses for anybody else's. And just to answer a legitimate question that Mike raised, Mike Mayo, about whether we'd unlock value, which is a fair challenge to the management team, by spinning off our processing businesses for all the reasons I've just described, that's not the way I would get at the answer that we're all seeking, which is to unlock the value because these businesses really can operate with a client much better together than apart.
So next page, Slide 4 -- Slide 5, rather, is the second piece of margin improvement story, and that's traditional expense efficiencies. I've had a lot of you ask the question why at JPMorgan Chase, we don't have an announced and branded expense-cutting program, and my answer is that you shouldn't mistake that for lack of focus on the expense side. I would say it's embedded in our DNA. But just as an aside, I'd like to see how many people remember that before Jamie branded the so-called fortress balance sheet, we were as well-known for our association with the tagline "waste cutting equals investing." Ring any bells? And we haven't forgotten what that means at all.
Remember that, Jim? So I won't read the page on this one here, but it does encompass all the key things you would expect in running efficient management, which is important for TSS, whether that's investing in new generation technology platforms, lowering the cost of developing technologies through offshoring or constantly improving our processes to streamline experience and lower cost. So there's a lot of underlying projects for the items on this page. We manage them one by one, and they roll up. And I'm presenting them here at a high-level, but they roll up to several points of margin improvement all by themselves.
And then the last, Slide 6, the last leg of this margin improvement story is really about more disciplined management of the business, ensuring that our resources are directed at efforts that have attractive risk-adjusted returns and away from those that don't. So there's just 2 things that are highlighted in this page. Our managing client profitability, where both Treasury Services and Securities Services in the past year, we've changed our management structure, adding general managers that sit on top of the client management and sales organization, with bottom line P&L accountability for the totality of those client relationships, whereas previously, those organizations focus on generating new business, and global product organizations focused on the P&L. And we're already seeing much better dialogue between the 2 sides of the house, so to speak. That's resulting in better prioritization of product development and better client selection and client planning. And it's pretty simple stuff, but it should be pretty powerful.
The second item at the bottom the page is the progress we made in 2011 in both shedding some subscale non-core activities and exiting client business where the risk profile shifted over the years, especially in recent years. So it's pruning and tending to the garden, so to speak. On the shedding subscale businesses, an example of that where we -- we exited the logistics business and trade finance, where we did the wonderful job of handling our trade finance clients' paper documentations in customs offices. It wasn't core at all. It didn't have the value-added we thought it would, so we've gotten out of that. And then dealing with shift in risk profile. When you think about the higher cost to KYC and AML and the risk associated with that, we've done a look through just a higher cost of compliance and risk and have pared back on certain portions of the client base, including some corresponding banking relationships in some tougher jurisdictions.
So the bulk of the financial impact of all that is behind us having taken some exit costs in 2011, but it's really beyond these specific items. This is really about getting all the managers in the division highly focused on risk-adjusted returns and all aspects of everything they do, and you see it in every meeting. Every risk committee meeting, we're talking about every business review, and I think it's going to pay big dividends over years to come.
So let me shift gears and now spend a few minutes on international growth. You can see quick points on this page is simply that both Treasury Services and Securities Services are, today, very international franchises. More than 1/2 of the combined revenue, around 15,000 people or 1/2 the headcount and a large portion of the client base outside North America. And on the bottom, you can see what I've already talked about, high recent growth rate in both businesses on the international front. And we've already talked about it, the main gap in our international franchise is really providing Treasury Services capabilities specific to the needs of multinational corporate clients. We already have a very substantial international banking franchise, financial institution franchise.
So moving now to Slide 8, it's good to have these global franchises the way they are today, and when you marry it with the existing globally active client base that JPMorgan has, you see that we just set ourselves up really nicely for the macro trends that you see here in terms of cross-border payments and investment flow. And really, the point I want to make, it came up at the end -- with a question at the end of Doug Petno's, there's a lot of local banks around the world that have the opportunity to participate in growth in their own local market. But our focus is really on participating in cross-border activities of corporates and investors, and really, it's us and only a handful of other banks that are set up today with existing global networks and the wherewithal to continue to invest in them in order to meet the needs of -- cross-border needs of sophisticated global clients. And that's why we're so excited about this opportunity.
So the whole design, if you go to Slide 9, the whole design of our international expansion is really based on just that, establishing network capabilities in present that meets the needs of globally active clients. And that's really, for us, through the lens of the global corporate bank, where we've targeted about 3,500 multinational corporations, most of whom, almost all of them, are existing clients of the bank. And Jess and I, we manage this together, but I'll just give you a quick update now and we can embellish a little bit later on. What you see here is in brown, where based upon client feedback, we already have capabilities across the wholesale businesses that meet the needs of the clients I just described. And in green are the markets where we are continuing to invest heavily so that over the next couple of years, we'll have the capabilities our clients want in those regions as well.
The gaps we're filling there include branches, payment solutions, local lending capability, adding coverage resources across all the different products that we're delivering. And so we'll, of course, keep going after we close those gaps to keep pace with the ongoing evolution of our client needs, but the point is in the next couple of years, we'll very well have closed the gap that exists today.
If you move to Slide 10, you see that the results so far are very encouraging and as is the feedback from our clients as we go out and talk to them about what we intend to do over these coming years. On the left, you see the year-over-year revenue growth in a couple of categories that are under the wing of Corporate Banking efforts. Cash management, which is in Treasury Services, you see there that that business has the longest sales cycle. There's embedded business already. We have to be out talking to clients. It will take time to dislodge. But if you look at the 14% growth year-over-year against a goal over 5 years from 2010 of doubling revenues there, we feel pretty good about the progress. Trade finance in the middle, up substantially year-over-year. That's the lead product in this effort, and it's well ahead of plans, thanks in part to the pullback of the European banks, which we've already talked about. It's yet to be seen how permanent that pullback is or those trends are. But the point I'd make is that we're quite happy with the growth we've experienced, and we are working very hard, obviously, since this is an entrée product into client relationships -- international client relationships to convert this into other international business, whether it be cash management, commodities, FX, what have you.
And so I'll leave it -- the final one there, I'll leave it for Jess to talk about, the IB markets business, so flow, FX, derivatives and the like, up sharply as well last year. And so we're very happy to see that kind of growth, and it'll play into exactly the demystifying market stuff that Jess will talk about a little later on. To a answer question, though, on this page about the risk profile and what we're doing internationally, I will make the point that more than 90% of the growth year-over-year is with existing JPMorgan clients, which gives me a lot of comfort on the risk front, names we already know, not new names to us at all. But about 1/2 of the revenue growth that we're seeing is with those clients doing something new with this, either a new product internationally or a new geography internationally, which goes to the progress point of what you see here.
And then finally, to put back to one of Doug's slides from this morning, this really shows to me that we're on track for the incremental $1 billion in pretax profits from this initiative that we talked about for the first time last year over 5 years' time.
If you move to Slide 11, final slide on international, where I thought I'd give you just a sampling, as I did last year, of the type of client wins that we've experienced recently. And I'm not going to spend time talking through each one, but as you can see with a quick scan here, these are sophisticated global institutions using us for a variety of solutions that span all regions of the world. And the point of this example is simply that we're very capable today of winning the type of business that our future plans call for. So what really matters from here is that we continue to execute on our investment priorities and that we're very consistent and patient in our client culling efforts and coverage efforts. And if we do these things, not only do we hit the $1 billion, but as I said earlier, we set the wholesale businesses up for decades to come with permanently higher revenue growth rates having really supplemented our international capabilities.
So before I open it up to Q&A, let me just hit a couple of topics that are, I know, were on people's minds Q&A-wise. So on Slide 12, interest rates. A question I often get is about the nature of the substantial deposit growth we saw year-over-year, about $100 billion. And we break that down into about $40 billion of that being core growth. That's real franchise growth related to -- largely attributable to our -- more than 1/2 from our international growth. And the other $60 billion or so does relate to the low rate environment. So not balances we expect necessarily to stay long if the environment gets more robust, but we pay very little for the deposits. We think about the cost of FDIC charges, so where the deposits will be, they will have little effect on the P&L.
On the bottom of the page, you see the exposure -- interest rates in TSS. And no different than last year, we substantially benefit when rates rise and the current compression in spreads goes away. The benefit of the first 100 basis points is about $400 million, $350 million from the short end, $50 million from the long end. And we get the full -- this is really the impact of spreads being so compressed at low rates. But once we're up 200 basis points or so from here is when we get our full compression back, and that's what, going back to Page 2 or 3, adds 6 pretax margin points to business. Two questions I get here in particular is what if rates stay low forever? And basically, if rates stay static, don't follow the forward curve, that would hurt us by about $50 million this year relative to what we'd otherwise assume. And you do that for another year and another year, at least for these next several, you'd add about another 50 each of the year. So on an $8 billion revenue business, it's manageable. A second-order effect obviously would be more of a concern. And the second question I get that relates to this is differences in our pretax margins relative to competitors in these businesses. And it's a very important thing. We do this internally all the time to adjust the way interest rate risk exposure is taking the best. We can do it looking at competitors, and it drives substantial differences when you're trying to compare operating margins. So barring differences that are really there related to international mix and type of businesses, I feel pretty good about how our margins in these businesses back up with competition. But obviously, I'll feel better when we deliver the margin improvement that I've talked about earlier.
The same issue is true when we think about acquisitions. We've got to do an evaluation of whether the earnings of our target company are driven by open interest rate exposure. We wouldn't pay a multiple -- or earnings' worth, nothing more than the interest rate exposure that we could take ourselves. And when we talk about doing M&A at the right price, that's one part of what we mean by that.
And then the other topic on questions is regulation, and the key point I'd make here, yes, there's a lot of different regulatory things going on TSS is engaged in, but these things don't affect in any significant way the strategy of the business when compared to what some of my colleagues and partners have to deal with. So without a doubt, you see on the upper right, it's driven costs higher, control functions, risk, finance, legal, compliance, up about $100 million in the past 3 years, and FDIC cost, up about $170 million. I don't expect to see that kind of growth rate from here forward. It'll be managed like any other expense.
I do want to comment quickly, though, on regulation on liquidity. TSS is a business that makes major contributions to what I think is the unparalleled liquidity of JPMorgan Chase overall, which was demonstrated over the past 5 years. But the Basel III liquidity rules are coming. In my mind, they have serious issues that we hope to see changed. That includes deposit runoff assumptions for financial institutions and the types of assets that qualify as liquid, to name a couple. So even if the final rules are unchanged from the current draft, TSS would still be a major positive contributor to JPMorgan's liquidity under Basel III, but we would nonetheless be compelled by the kind of rules that are being proposed to take a very hard look at the liquidity we provide to other financial institutions and also the way in which we value the deposit they leave with us. I'm not at all concerned for JPMorgan Chase, but I do question whether that's a good answer for the system overall, so stay tuned on that. So the bottom line here is that we have a lot of work to do on regulation, but we can handle it better than marginal players in these businesses can handle. And all of this is trickling right through to our clients, and with our proficiency in dealing with all these issues and our expertise in that, we're very focused on figuring out how to make a positive out of it and bring value to our relationships with our clients.
And so that's it. The final page is just the summary. As I said, we think these are great businesses with great momentum. We have great plans to realize margin improvements in the business. The international growth opportunity got great traction and will add much to the business as well. The near-term pressures, whether it be rates or regulatory, are largely in the run rate of the business. And lastly, we reaffirmed the targets of this business being a 25% ROE business, with a plan to deliver earnings increases in the near term in 2012.
So with that, hopefully, I covered a lot of the questions you're going to ask, but let's see.
You can correct my math, if you like, but the processing fees to assets under custody look like they've been around the same levels the last year, around an all-time low for you and for the pure-plays. It seems like the processing players are beating each other up on price. And every year, we ask the same question, are you going to do anything about it, or you're passing on all the benefits to your customers? Where is the price competition there?
Michael J. Cavanagh
The price competition is high but abated somewhat. I mean, the big change in which you pointed out is, over the past several years, from '06 and now, ancillary fee sources from FX to sec lending have really come down. If you actually look at underlying custody fees, probably something flattish to down 3%, which, in a scale business, is not the kind of price erosion that's inconsistent with delivering the same thing for better prices. That's part of what we should try and deliver for our clients. So long term-wise, I feel like with the advantages we have in the processing businesses and the plans we have to drive margin improvement -- we like the businesses in our hand. We're going to run it for profitability, though.
Going once, going twice. Great. Okay, well, I'm going to introduce my partner, Mary Erdoes, who manages Asset Management, which is probably the best and most loved business in JPMorgan Chase.
Mary Callahan Erdoes
I'm Mary Erdoes, happily married to Philip Erdoes, from Oklahoma and responsible for this great Asset Management business, which I think is a real gem inside the company not only because each and every one of you in this room are in the same industry but because the way we are set up with both an investment management franchise as well as a global private banking franchise provide steady and reliable growth for the business. We require very little capital, and we have proven to have solid margins even since 2008 as we have heavily invested in this business in order to set ourselves up for much future growth in many years to come. So I'd like to just take you through a little bit of a deeper dive on the financials in terms of what we have done for the past several years, and this is really -- the takeaway of managing this business through the crisis are fourfold.
Number one, this business has made money and has actually grown revenues every single year, except for 2008. We have had strong investment performance not just in existing products but we have also continued to innovate and create new strategies globally. We have gained market share almost across the board in everything we do, and we continue to invest in the future, most notably on the distribution side, where we are trying to match how we get these products into the hands of clients around the world with the fantastic franchise of the global product that we have developed over many decades. Just looking through some of these numbers that I want to call out, each and every red circle is a record. And this generally happens almost every year as we continue to grow this business at a pretty steady pace. $9.5 billion in revenues. Again, we have grown that year after year, except for a pause in 2008. 26% margin in the business last year. There are many questions you all have had as to whether that is a first-in-class margin, and I will take you through a deeper dive in that later in the presentation. 25% healthy ROE in this business environment, and the performance I have already spoken to, 5-year investment performance, 78% of our assets beating benchmark is very strong, as well as the number of new innovative strategies we have, which I will take a moment to point out later in the presentation.
If you look at the gain in market share, it's across-the-board in terms of the private bank, loans, mortgages, deposits, assets under management, assets under supervision, which are both to manage -- assets we manage in-house, as well was brokerage assets, loans, et cetera. And then I want to just make a highlight here of the U.S. mutual fund business. This is a business that we were barely in only a decade ago. We were in 19th place in terms of active management mutual fund manager back in 2006, and we have continued to grow that business aggressively. We are now in seventh place, and last year, we were the #2 active manager in terms of flows. I'm going to take you through the breakdown of that and where that's coming from.
So great work there, a little bit more work that we have to do on the international, so we'll spend some time on that. But you can see that we have continued to grow the distribution forth across private bankers, brokers and investment management sales. I point your eye to the 7 71 in international private bankers. That is a 16% compounded annual growth rate over the years and a place where we have put tremendous efforts. That is not the same as international investment management sales, and that is where we are going to continue to think about focusing our efforts. I am taking George Gatch, who is responsible for growing that U.S. mutual funds business, and I am naming him Head of the Global Funds business next week. So we will hopefully see great progress in that business. Well, yes or no.
Turning to Page 2. Just as a grounding for those of you who aren't as familiar about how we run the Asset Management businesses inside of JPMorgan is really much like Mike's business. There are 2 main sides. There's a Global Wealth Management business. Think of it as an ultra-high net worth private banking business. And on the far right side is a $1.3 trillion active management business, which, of course, provides money market funds all the way through to alternatives, private equity, hedge, muni fund. And in the middle, we have an additional alternative business, which is the Highbridge Gávea platform, a $27 billion alternative asset management platform. What's important to know is that this business is run very separate and distinct from the company because of its fiduciary nature. We manage money for clients. We don't co-mingle bank capital. We have run this as a fiduciary business for over a century. What's equally important to know is the things that run across the bottom are very tied into the company.
We get the leverage and scale to be able to manage this part of the business across tech ops, legal, compliance, risk and the things that are increasingly important and I find as a competitive advantage today to those that are going to have a harder time as boutique asset managers or private banks to be able to stay up with all that you need to do to be able to invest in things like technology, cyber security, visualization tools for your traders and your portfolio managers, to continue to find ways to add alpha. So very important business that is both separate and combined with the company.
I want to take a deeper dive into those 2 sides of the business on Page 3. On the left-hand side is the Global Wealth Management business. We have grown our revenues in the private bank ever since I can remember. We have grown them almost every single quarter since I can remember. The growth continues to come from more feet on the street. Last year, we grow this -- grew the front office at 8%, but very importantly, 21% growth in front office on an international footprint, that's in Latin America, Europe, Asia, et cetera. And is it working? Yes. International Private Banking revenues grew 11% last year, much stronger than the U.S. as it was a difficult year in the marketplace. What's not on the page is that we continue to add about 3,000 new clients in the Private Banking space every year. That has been going on since 2008. We thought it was a phenomenon on the crisis. It has actually now become a footprint for our 3,000 clients in the Private Banking space. We do not do not count a client until they bring several million dollars inside of our bank.
On the Investment Management side, revenues were up 4% last year, almost across the board except for our cash business, which I will be spending some time on. We have grown flows over the last 11 consecutive quarters and very importantly, into every single asset class, which is unique in the industry. Our Alternatives business is very important for us, and that grew at 21% across private equity, hedge funds, global real assets last year and doesn't even account for yet things that we just raised money for, like last year, our first year of owning Gávea. We raised a private equity fund for them in local Brazil, and we are now the largest private equity manager in Brazil.
Turn to Page 4, a new page for you. This is the same page, so I am not going to harp on this page. But after having listened to the presentation, I did -- first, I just want to show you 2 examples, and then I just want to spend a second with my own perspective working inside this company and trying to bring it to life for each and every one of you and understanding what we're trying to say here. It's obvious, some of the numbers Tod had mentioned, sort of the JPMorgan Asset Management being the Intel inside of his retail business and all that Barry Sommers is doing, $40 billion in assets just over the past couple of years. $40 billion in assets for the retail branches where people walk in and want their money managed. This is a franchise that hasn't even begun to see its full potential.
In the Investment Bank, we talked about the fact that the Global Private Bank of JPMorgan is actually a very ultra high-net worth business, 2,884 frontline people, 2,884 globally. We compete with people that have 15,000 and 18,000 brokers just in the U.S. When we go head-to-head with an IPO in the investment banking space, we place just as much, and we place it globally. It's a very, very powerful connection for the rest of the firm. But what's hard to convey to you is that this doesn't happen because we spend time daily doing corrosive things like paying each other back and forth, $0.05 if you introduce me to somebody, you pay me a revenue share on this, I'm going to spend -- I'm going to have a whole accounting department that tries to figure out how to help you understand what retribution I get if I take you to a meeting. It's a culture that starts at the top of the firm, and you don't go to a meeting with the client unless you have all of the pieces of JPMorgan represented that you think can help solve that client's problem. And that's what these pages are trying to show. And if you lived inside of here, you would feel it every day. We just spent 3 days together, the 300 senior leaders from JPMorgan Chase, down in Florida the week before last, before the famous golf tour that has been talked about. Each and every person, whether you're a senior country officer of Paris or whether you're a new sales person who's leading our efforts in Singapore, is sitting there understanding the power of the franchise and figuring out ways to bring that to each and every client that we serve around the world.
So let's take a deeper dive into the Asset Management drivers of the business. This is not a new page for you, you know this. Everything in Asset Management starts with investment performance. If you don't have good investment performance, you are not in business for very long. We spend every waking moment thinking about generating alpha, and I'm happy to say that is getting a little easier this year than it was last year. We have never stopped investing in this talent: portfolio managers, research, traders, the infrastructure, the technology. Everything that they need, not only to make the great alpha investments that they do today, but innovative new products as our clients ask for more and more solutions. That will lead to distribution if you have matched globally the right kind of people around the world. And if you have enough alpha generators, you always have something for the distribution to be able to be out there in front of clients. And that's equally important because you can't ramp up and down a distribution force depending on whether each and every one of your products is working at any one given time.
With that, we target flows to be about 5% of our asset base every year. That has actually been running at about 9% since 2008, and I'm going to take a little bit of a deeper dive into that in the Page 4, too. We don't target a margin. We target disciplined expense management, and margin is a byproduct of that. Our margin should run through the cycle at about 35%. It is not near that, and it is on purpose that it is not near that because we are trying to take advantage of the fact that a lot of our competitors are internally focused and are retrenching, and we want to continue to accelerate. And so let's dive into the margins.
Turning to Page 6. Our target margin, 35%. We have held steady in the 30s and recently been running at a 26% margin. What does that look like? Well, if you just take out things that we didn't have to do to accelerate growth, and I am not talking about BAU growth, we always invest in our people, our process, our procedures, support staff. But new areas, new markets, brand-new offices, if you took that out, just over the past 2 years, in our heaviest year of investment was 2010, with the impact of it residing in 2011, you would be at a steady 30-plus percent margin. And we make no apologies for that. We want it to be where it is in order to set ourselves up for growth in the future.
If you look at the chart on the right, many of you say, "Why don't you have a T. Rowe margin?" They are best-in-class. And they are, but they do not everything that Asset Management does. They're an excellent equity manager, and they're not in all the places that we are in the world. And they don't have a Private Banking business, and they don't have an alternative business. And so our margin is a blend of many of those things. Now I don't normally go into detail on our margins, but it comes up time and time again and I want to take you through a little bit of a deeper dive. Let's go to the next page.
We are really 2 sides of the business. One is the Global Wealth Management business at a 28% margin last year. It is best-in-class of our competitors that publish themselves. I have been running the Private Banking business before taking over Asset Management for a very long period of time, and I can tell you years of being held up to people that have 40%, 38% margins, why don't you look like x? And we felt we were doing the right thing. And as a matter of fact, most of those xs are either not on the page anymore or at the very bottom of the page. The Global Wealth Management business is not a business where you can skimp or not invest, particularly in your risk management compliance parts of the business. It is very important that you do that business right, and you never grow it too fast and you invest in the control of it.
On the Investment Management side, the other side of the business, the traditional Investment Management business is running at a 36% margin. That is why we continue to invest in our retail distribution, upgrading a lot of what we're doing and continue to invest in new strategies. And when you add in Highbridge, Gávea, some onetime non-client litigation, as well as accounting for the Gávea purchase of the end of last year, we are at a 25% margin for last year, and we expect that to rebound quite nicely.
Looking forward on Page 8. You could have a nice margin. The question is, are you set up for the future? Just looking at the revenue growth, Betsy has asked some really good questions about international growth and whether it is working. We have continued to grow revenues across the board at a compounded annual growth rate of 9%, but we have put the pedal to the metal in international only after the crisis of 2008. And our compounded annual growth rate since then has been 16% in those international markets. But make no mistake, it is only 36% of our business. It needs to be 50%, and we have a lot of work to do there. Long-term flows, I've already talked about. And when you look at the long-term flows over the last 3 years, JPMorgan Asset Management is really ahead of the pack of those who report publicly, and we are setting ourselves up for what we think is going to be a very strong years, many years to come.
Let's look at how we look at that alpha. This is my iPad. This is what I look at every day. I have about 10 views. This is a 3-year performance. I have daily, weekly, year-to-date, 3-year. I have it on -- this is on an AUM-size basis. I also have it on a flow basis, and I have it on a relative basis, which is this. I also have it on an absolute basis, and each and every one of those, if it's green, it's fine. If it's red, it either goes to the investment committee because the performance is a problem or it goes to the distribution group to where we have a conversation about why we're not selling as much of it as we should out there. And so this is really a statement of all the great things that we do. And you can see that if you turn to Page 10.
70% of our assets have been outperforming. They're in the first and second quartile. Our 1-year numbers are weaker, but those are also embedded in the 3- and 5-year numbers, which are quite strong. And so when you look down at those 4 boxes on the bottom left, each and every one of those asset classes have continued to gather new -- net new flows over the past 3 years. And even liquidity, which hasn't done that over the past 3 years, had net positive flows last year while the industry was down. And so you can imagine that this is an environment that all of you know hasn't been one where it feels like people are really excited to put money back to work and hoping that we are setting ourselves up for when they do to be able to do that.
So I'm going to take you through each of these 4 areas for just a minute here, and we're going to start with the question on everyone's mind, which is the money market fund part of our business, which is the first column. For those of you, just as a backdrop, we are one of the largest managers of the institutional money market business. We gathered great market share after 2008, and we have held that. Question is, what is the industry going to do? I don't have the answer. It's a complicated set of questions, but I will tell you that it is being lost on a lot of people that the SEC changes that were made to the 2a-7 fund in 2010 have had a great effect on the money market fund business. It is provided for greater liquidity in the way that the funds are managed, better credit quality, better transparency, and really important to know is it's just lost inside of everything. The 2010 changes that the SEC enacted enable the board of a money market fund to step in and have an orderly transition, should you have something like a reserve fund take effect, which wasn't in place in 2008. That's really important and makes the industry a much more stable place.
The problem is, is that there's still great debate about this. There's still great debate about whether we should sell for systemic risk in the money market fund business or default risk. And that is something that people are going to grapple with for a very long period of time, and it's going to affect 2 sets of people: the borrowers and the investors who are looking for stable dollar in, dollar out places to put their money in addition to the great world of deposits. The answer is, we don't know, but JPMorgan is setting himself up so that we're there in any case. We already manage floating NAV funds. We have about 40% of our short-term complex already in floating funds. We have a lot of demand globally for the things that we do, it's not just a U.S. phenomenon. We have the largest Japanese yen money market fund. We now have one of the largest RMB money market fund. And in any case, JPMorgan will be fine. The question is, how do we get the industry to make it fine for the people that need to invest in these parts of the market?
Second area that I want to talk about on the fixed income is our New York, London fixed income platform. I mentioned this last year in Investor Day, and I just take this because this was a big flashing red box on my iPad 3 years ago. It wasn't really on my iPad 3 years ago because I didn't have an iPad 3 years ago, but that was the equivalent of what it was, which was an engine that had gone off the rails. It had terrible 1-, 3- and 5-year performance. We needed to replace the entire team, and we said it was going to take us 3 years to do that. We were losing about $2 billion a month in the complex. We've replaced the team. We turned it around. Last year, I showed you 500 basis points of excess return. You can see those little numbers on the bottom. It's 500 basis points of excess return on a 1-year, but we still had a 3- and 5-year problem. And you know in the mutual funds business, you can't do anything until you fix those numbers. Fast forward to this year, we have almost 500 basis points of outperformance on the 3-year numbers, and we're bringing in about $1 billion a month in that platform. And so this is an important part of the culture of how we deal with things that are either performing or not.
Our Columbus fixed income platform, we have the luxury of being able to have multiple fixed income platform, so that we can have different ways of managing client money. And the Columbus platform was part of the Bank One merger. We had doubled the assets of that platform since doing so, and that long-duration strategy is just an example of something that has had great flows over the past year.
The equity platform is more complicated. This is a sampling of our Global Equity platform, and I show you a set of 4 on the top that are very different than 4 on the bottom. The 4 on the top are funds that have had great inflows over the past year. Our U.S. large-cap growth fund is one of the strongest of its peers set. It was one of the only large-cap growth fund to outperform its benchmark last year. It went from $2 billion to $5 billion about last year, and it has a long way to go in terms of being able to absorb more assets.
Income builder is a multi-asset class solution. You see more and more of those types of products being acquired by the marketplace. Our global emerging market platform, $4 billion of net new money last year, people want it. It is our franchise. We are proud of it, unless you think you can't provide alpha in this world. For those of you who fear Asset Management, we are celebrating the 25th anniversary of our DBM process with 80 basis points of outperformance over all 25 years on a compounded annual growth rate basis.
The bottom fund, it had terrible absolute 1-year performance. They are not in favor, but their relative outperformance, 200 to 300 basis points, sets them up for when risk management comes back and people want to invest in those markets. We should be the recipients of a lot of those flows.
Page 13, just taking us to the innovation and then I'm going to get to some expense management things. I don't need to tell you that we do a lot of things across JPMorgan Asset Management, one of the first in the real estate market, one of the early people in the Private Equity fund-to-fund, hedge fund-to-fund. We bought Highbridge, we bought Gávea
And we do all sort of great things. But we do them fast. Just an example, last year, digital growth, cost base in the market, 4 weeks from beginning to end raised $1 billion to put it to work. Maritime fund, something to take advantage of the fact that there's a lot of dislocation in that space, raised money very quickly. And this does not account for the things that we do on the outside in the Private Banking space where we place money with other fund managers to complete this list of places to invest. And that has been running at a tight many years ago at about $1 billion of net new flows a month. It obviously took an air pocket in 2008 when people didn't want to put money in Alternative, and we are back to about $1 billion a month right now that's being put into the Alternative space.
When we do all of this, are we making sure that we are controlling our expenses? And how are we managing the overall business? Page 14 is an example of the productivity per client advisor both -- on both sides of the business. This simply shows you that even as we have continued to add, we have held our efficiency and even gained it in some cases. The dotted line shows you that actually each and every year, we've been able to absorb this within about the first year. Last year was the first year, given the difficulty in the market and the incredible amount of people that we hired in 2010, that you actually may require a 2-year payback. And that's what the dotted line is, and we feel very good about this.
The other thing that's probably not clear, but in the Wealth Management space, this is not the brokerage space. This isn't upfront deals, 7-year loans and buying people's books. These are hiring each and every banker and putting them on a team, and you can tell their productivity within a quick 18-month time period. Whether they're going to be successful or not, they are all measured on metrics of revenues, flows and clients.
How do we look at that on a market basis? This is the way we manage each and every investment that we make. These are our returns on investments. These are samples of U.S. markets, international markets. The Global Wealth Management side is very dependent on the people you hire. The Global Investment Management is very dependent on the performance of your products. And you can see that each and every one of those, we track by person, by team, by market. And we prioritize those -- just as Todd has said in the prioritization of what we do in the retail, we prioritize these annually, and we review them quarterly for whether they are on track or offtrack and whether they need an acceleration or a deceleration.
And the final risk management page that I just wanted to share with you is around a lot of the other things that we do, and I don't want them to get them lost in here. One of the important parts of the Private Banking business is the loan growth, and we have a very solid loan growth business that has continued to grow, not because we are reducing our credit quality standards, as a matter of fact, this is a business where we always have 2 ways out. I would just say that in the Private Banking space, it's really important to note that a big shift has been occurring where people no longer think about it as a commodity business, give me a loan, price it here, I can take it from any bank. The very smart and sophisticated clients are saying, "Hang on a second. I want someone who can lend me money in good times and in bad. And I need to really take this as a relationship business, and I need to spend time figuring out who's the bank that's going to be there." We continue to obtain great market share, particularly in the international market.
Below it is the growth of our jumbo mortgage business, which we weren't in until after 2008. We were sort of in it accidentally. The private bank, combined with the retail bank, is 10% of the flows of this market, #2 behind wealth, and something that has been a very nice addition to helping our clients. Our charge-off rates on both of these businesses are a fraction of the industry. Top talent is also important. You can't just hire people and then lose them on the back-end, particularly on the portfolio management side. We guide ourselves to 95%, and we guide ourselves in the portfolio managers to keeping more than 90%. That number is also running at 95%.
And then regulations. Just 2 seconds here. A lot of questions on Asset Management. How much does this affect Asset Management? How do you deal with client money? Our JPMorgan Asset Management business was never set up to take bank capital and co-mingle it with client capital and now have to spend months unwinding that. This has always been a separate fiduciary business. It's the way we manage ourselves, and we have set ourselves up to continue to take advantage of moving forward. And we are on top of it. And we have a lot of things that are going to sort of disrupt a lot of the sort of very silly things, like naming your funds, where JPMorgan would have to sort of name it a different name, which seems like a silly byproduct of these rules. But that is what we're focused on, and we will be fine.
Closing thoughts. This is not a business you are unfamiliar with. You know it's all about investment performance. We continue to innovate, particularly on the solutions and the alternatives front. We continue to invest in this business. I talked about both manufacturing and distribution and systems and infrastructure and risk management, all that is very important to us. All of that is disciplined and thought through on a daily basis. And you should expect continued revenue growth from this business with very little capital, which leads me to my lunch conversation, which is, "Well then why the hell don't you just keep plowing more money into this business?" And there's this very sort of simple quote that a lot of us live by, which was Pierpont Morgan testifying in front of the Senate back in 1933. This is not a business where you just go out and hire 100 people and hope that they have all of the same integrity and standards as they're out there on the front line either helping individual clients or managing money. It's person by person, name by name. The training, the intensity and making them a culture of doing first-class business in a first-class way is something that we don't take lightly. So we are growing as fast as we can, but as prudently as we can. And we are enjoying the benefits of that.
And we'll open it up for questions.
Mary Callahan Erdoes
Betsy Graseck - Morgan Stanley, Research Division
So 2 questions. One in international and one on M&S. On the international side, you indicated going from 35% to 50% is probably an overtime goal. How much of that is driven by better distribution? And how much of that better distribution you think you can get from your internal JPM network versus needing to go external?
Mary Callahan Erdoes
It is mostly better distribution. And so last piece of being global is the funds business. We are global in the Equities business, we are global on the Fixed Income business, we are global on the Alternatives business, we're global on the Private Banking business, we're global on the sovereign wealth fund business. And the funds business is a business that we've just run locally. So it wouldn't surprise you that the U.S. funds business sells a lot of U.S. equities and a lot of U.S. fixed income. And at the Asian funds business, sells a lot of Asian equities and a lot of Asian opportunity long, short things. But our clients need more of everything, and the more you can connect that, the more powerful that will be. That is more feet on the street, but it's as simple as the routine that we've had as we've grown the U.S. funds business. And I think it's a really exciting part of our growth profile over the next coming years.
Betsy Graseck - Morgan Stanley, Research Division
So we'll do that with your internal JPM network, should be able to do that at a better pre-tax margin than going to maybe external consultants?
Mary Callahan Erdoes
So we don't go to external consultants. These are internal people that we will -- yes, we will continue to hire. We don't have a branch network, obviously, outside of the U.S. So you're not going to see $40 billion coming in from the equivalent of a Chase retail. But our relationships with Morgan Stanley, Merrill Lynch, Nomura, all of wonderful clients around the world where we make the mutual funds for their clients base is very important to how we continue to cover it. And more people doing it with a global product palette, we should see more flows.
Betsy Graseck - Morgan Stanley, Research Division
And just on money market funds, you indicated about 40% of them are floating NAV. Could you give us a sense of the customer, the geography? Is that embedded in this?
Mary Callahan Erdoes
Yes, it's across the board, right? So any client that doesn't actually have accounting requirements need a stable NAV with a dollar in, dollar out, and they don't have to account for short-term gains and losses, can deal with the floating NAV or can just have something that's slightly longer than a money market fund and trying to enjoy that yield. And so if clients are flexible, that's obviously where they wouldn't be constrained with 365 days and [indiscernible] liquidity, et cetera. And I'm getting the high sign for this question. But -- so that's just a continuum. Globally, there is not as much requirement. Well, internationally, outside the U.S., there's not as much requirement for stable NAV is the way that we're set up.
Betsy Graseck - Morgan Stanley, Research Division
So do you hold capital against floating NAV [indiscernible]?
Mary Callahan Erdoes
We don't disclose what we do with our capital in terms of whether it's...
Mary Callahan Erdoes
Okay. I am going to turn it over to Mr. Jes Staley, who's going to go through the Investment Banking part.
James E. Staley
Long day. Now 2011 for me was -- I think it's a remarkable year for JPMorgan Investment Bank, sensibly, because we delivered a return on equity of 17%, in line with what we did in 2010. But what made it more remarkable was to deliver the 17% return on equity against 2 factors. One, during the course of the year, we significantly decreased our risk-weighted assets by some $80 billion, allowing us to improve our Tier 1 Basel III capital ratio from basically 7.2% to 8.4%, with the same basic profitability at 2010, with a significantly reduced level of risk. Second thing or the second factor that's perhaps more remarkable is while JPMorgan Investment Bank maintained its return on equity levels over the last 2 years, as we'll talk about later, most of the industry on average experienced a 600-basis-point reduction in profitability. Clearly, the industry faced some very tough winds in 2011. And in conversations with many of you over the last couple of months, the question is, what happened differently at JPMorgan Investment Bank? And is what happened in 2011 sustainable? What we're doing this year in Investor Day presentation is we're going to give you a level of granularity on to how the Investment Bank drives its revenue model to a degree that we have never done before. And hopefully, you come out of this review of what's driving that revenue model with an appreciation for the franchise that's been built at JPMorgan.
So the outline of the conversation there, we're going to start with a very brief review of 2011 performance and some specific accomplishments. So we're going to put up a slide that you've seen now 3 years running in terms of our strategic initiatives and give you some color there, and then we're going to break some glass and dig deeper into our core business, looking at the revenue model and particularly in fixed income. And towards the end, we're going to focus on a couple of issues you've asked or you've raised for us to give comments upon. Based upon my lunch conversation, we could spend an hour on the Volcker rule. We will touch on regulation. I'm going to talk about expense management in the Investment Bank, what we're doing with Mike in the Global Corporate Bank, some commentary on risk management and what is behind moving that RWA down to where we got it during 2011 and where we see it going in 2012. And finally, comments on capital, all leading to a discussion at the end of our forward-looking ROE target.
So quickly on 2011, $26 billion in top line revenue number, $6.8 billion in earnings. That's the second best earnings number in the history of the Investment Bank. And as I said, very importantly, we did that while we were increasing the strength of our balance sheet, moving to a Basel III Tier 1 capital ratio of 8.4% against Basel II 13.7%. For the third consecutive year now, the Investment Bank led the industry in terms of investment banking fee. We did over 1,200 loan syndication transactions in 2011. We did 1,700-plus bond deals in 2011. We were raising debt capital on either loan market or the debt market at 12x every -- for clients every business day of the year. We will participate in some 270 equity underwritings during the course of the year, the 7% market share. We had an 18% market share in M&A, completing 330 transactions during the year. But perhaps most remarkably, the #1 performance in terms of revenue and fixed income was the revenue market share calculated and generally embraced by the industry, which placed our market share at around 17%, which we think is a historic number accomplished by any firm on the Street. In equities, strong revenue number of $4.8 billion, we'll talk more about that. And then I think the extraordinary movement that we've made in the commodities business and pretty much demonstrated in 2011, that this business had arrived.
This is the strategic chart that you've seen from me for the last 3 years. It starts at the top with our clients. What we try to embed in every conversation we have inside the Investment Bank is the franchise that we benefit from starts and ends with the clients of this firm. We have, we think, one of the strongest franchises in the industry, and without that franchise, we cannot deliver the result that you've seen. They are the bedrock of what we do here, day in and day out. In addition to the $1.3 trillion that we raised during the course of the year for our clients around the world, $55 billion was for states, municipalities, hospitals, schools. We stay engaged in nonprofit, helping them raise the capital that they needed.
The 3 significant strategic initiatives that we laid out for ourselves, international commodities and technology, I'll talk briefly about what we accomplished in 2011. In the international space, Jamie created or asked that we create an international steering committee that I chair along with Mike and Mary. And it was to take a global wholesale focus to look at our international presence and make sure that T&SS, the IB, Asset Management and the Private Bank are coordinating our efforts with regional CEOs around the world and making sure that our FCOs were empowered to drive a wholesale business model in locations around the world to the greatest effect. We expanded our footprint in this initiative in 20 countries around the world. And then specifically, in the IB, we launched the prime brokerage business in EMEA and are already showing some significant results there. For 2012, we'll continue to grow our penetration in corporate between TS [ph] and IB international. We'll continue to add local market capabilities. And on the prime brokerage side, which we've noted as such an enormous impact on our equities business, in particular, we will build out in 2010 an Asian prime brokerage business.
In commodities, we've gone from basically nowhere in 4 years. Now, we are clearly a top 3 player, depend upon how you manage it within the top 3. We have 600 professionals around the world in 10 offices, and we are fully functional. During 2012, the ambition here is to continue to consolidate the client franchise that we've got in commodities and to achieve the profitability targets that we set for ourselves on the back of the Bear acquisition and the Sempra acquisition.
In technology, as most of you know, this is, I think, perhaps the most important strategic initiative within the Investment Bank. We are 50% through what we call the strategic reengineering product -- project. This is an end-to-end reengineering of our entire trading platform from core processing to front office across all of our asset class. It's an enormous undertaking. Already, by 2012, our annualized run rate of expenses by closing down 28 systems and inserting our new systems is $175 million, just on expense side per annum. By -- at the end of 2012, we're going to close another 28 systems, and that annualized savings every, year in and year out, in terms of the cost of running our technology platform, will be $300 million.
And we talked about headcount management. One of the things you can pencil in for 2012, as we build the SERP [ph] technology platform, we have had to increase our headcount to build the systems while we maintain our historical systems. We are over that hump now and heading to the other side of the curve. What you'll see between full-time consultants and technology and operations people, a reduction in our headcount in 2012 of a net 700 employees. So we're well on our way there. And I'll talk a little bit more about what we're doing, particularly on the equity space around technology.
And finally, as I've mentioned, in our capital and risk management, we think the team did an exceptional job of keeping their eye on maximizing the profitability of our asset base in our balance sheet, whilst at the same time, reducing the risk-weighted assets as calculated by Basel III.
So now we're going to spend most of our time on this next section. To give you a backdrop, what I wanted to do is talk a little bit about where the markets have evolved to and where we think they are going. In the first chart, what this shows is the percentage of financial asset relative to GDP in the United States. And what you see is, beginning in the early 1980s, the financial market evolved from basically driven by bank balance sheet to driven by the capital market. You all in this room represented an extraordinary increase in how the U.S. market finance itself. The capital markets grew, such that financial assets became -- went from roughly 100% of GDP to close to 400% of GDP. And most people believe that growth rate as a percentage of GDP is simply going to increase. Where we think it will come from is the capital markets as opposed to the balance sheet of banks.
When you look on a global perspective, and you see 2 phenomenons that I think are going to be incredible engines of growth for our business. One is, as the emerging countries become more and more developed, financial assets as a percentage of their GNP is going to grow. You have a Brazil and a China where financial assets are roughly 100% of their GDP. They're going to grow to 200% and 300%. So any growth rate you put in for what you think is going to happen in Brazil, in South Africa, in Russia and Indonesia, double it or put some premium over it for what's going to happen to their financial asset, and all figure, it will principally be in the capital markets, not on banks' balance sheet. So that's the market backdrop in terms of some of the macro numbers.
But something else, I think, we need to be very mindful of. The equity markets are very easy for us to understand. Stock times price, equals -- times the number of shares equals the value of the company. We trade on simple symbols. CNBC makes it very understandable, and Fox and Bloomberg and everybody else makes [indiscernible] for us to understand the equity market. And this is not to minimize the equity markets, but the fact is, the financial markets are driven in the credit space. So the amount of issuance that you see in the United States and in any given year is roughly $200 billion in equity. That compares to $6 trillion in the debt market. What's driving the modern Wall Street firm is debt issuance significantly more than equity issuance. But perhaps even more remarkable than that is when you think about our business as we dig deeper into it, you'll see that in terms of daily turnover, we're trading about $1 trillion a day in fixed income assets versus $100 billion a day in equity. It's a 10:1 ratio.
Now when you look at all of these and you look at the growth in the financial assets versus market, keep in mind, I think a very interesting study done by McKinsey very recently, what they expect financial assets as they catch up to GDPs in the emerging market to double in the next 10 years. And I think that is the paradigm for a strong growth industry.
As I said, we begin and end with our client franchise. So let me just walk through this a little. We have 21,000 clients around the world, 16,000 of those are investors. The important point I want to make on this slide is that roughly 80% of those investors are nonbank. And I would argue, if you take away the regional banks as opposed to the 19 large banks that most people focus on, that's probably about 90%. So most of our investor clients are pension funds, insurance companies, hedge funds, long-term mutual funds. It's the people represented in the room. It is not us trading with people sitting down in lower Manhattan.
The next chart is on our issuer clients. We have some 5,000 issuer clients. It's very diversified across business sectors. Again, the vast majority is clearly nonfinancial. But the point about this one I wanted to make is look at the pie chart on the right where the vast majority of our issuing clients are in the United States. So going back to the previous slide, if financial assets as a percentage of GNP are going to grow, and as we dominated by the capital market, and they're going to grow at much faster rate than the U.S., my bet is over the next 5 to 10 years, you'll see the percentage coming out of EMEA, Asia and Lat Am growing significantly. And a very important thing has already begun in 2012 in EMEA as there is a contraction of credit being available to the European banking system. You are seeing European corporates embrace capital markets as principal funding vehicles in a way that we haven't seen before.
So against this client base, which we think is one of the strongest in the industry, we pour our talent up against it. We have some 2,000 sales people dealing with institutional investors around the world. We have 2,000 traders around the world. We have 2,000 investment bankers dealing with this. And when all said and done, we also put up what we think is the finest research engine in the industry. We have 800 analysts. We're II ranked in fixed income in the United States and Europe, we're II fixed -- a #1 ranked in equities. We are trying to provide you with the highest quality research product we possibly can, and we're very proud of the investment we make in that group. To support of all that, we have 13,000 people in technology and operations. And if you look at where we are in terms of trade breaks and all the control functions of 4,000 people that focus on risk and compliance, we think, do an extraordinary job for this firm. We're in 40 countries, we have 110 trading desks based in 20 global market centers around the world.
We break our business into 16 segments. And what is remarkable about this to me is when we look at the sheer scale and presence we have across all these 16 business markets, it is the foundation, I think, of a scale business which distinguishes the firm. Now in the 16 segments, we are a #1, 2 or 3 player in 13 out of the 16 segments. If you go back just 4 years ago, we were a #1, 2 or 3 player in 7 of the 16 segments. We've had a significant evolution over the last 3 or 4 years in terms of becoming a dominant player in virtually every market that we're in. As I said in commodities, we weren't even in this business effectively 5 years ago.
On the equity side, which is the one place we are not a top 1, 2 or 3 player, and a lot of us have talked about this before, the primary reason is because up until 2 years ago, we made no investment in electronics trading of stock. But we were out of this enormous movement in the investor market to do straight-through processing of equity trade. We have made a major investment over the last 2 years to build the algorithms and the routers and the system to become a competitive player in electronic market-making of stocks. From where I sit, to the extent that we believe today in 2012 our platform will be as good as anybody's on the Streets and in many cases because it's newer, hopefully better, what we need to do is to convince people like you in this room to unplug one system or unplug one algorithm and plug ours in.
I like our odds of doing that to the extent that we are a #1 or 2 player as a provider of primary products in equities and the #1 player and provider of research in equities. Our ability to move from ninth to fifth to fourth, second or third, I think, is pretty evident once we deliver the platform, which we delivered on -- and all of the early signs we're seeing in 2012 versus '11 and '10, Carlos and his team are making great inroads. That's the last place we need to essentially have a leading capability across all the product offerings you see in Investment Banking space.
If you go back to the chart before, you saw roughly 25% of our revenues come from underwriting debt, equity and M&A advisory. The vast majority comes in our markets business. And our markets business is dominated by fixed income, which represents 70%. And what you see here both in equities and in fixed income, these businesses are flow businesses. The revenues we generate are not delivered by some proprietary debt making significant bets about where interest rates are growing. So we wanted to give you a granularity into that flow business, which you haven't seen before.
So here, we've taken a number of our products, and we are giving you both the average quantity of trades per quarter, then the average revenue of trade per quarter. And obviously, you put those 2 together and giving you the revenue contribution of each of these flow businesses per quarter. To give you more clarity on how these numbers are derived, 2011 was sort of a year of 2 years. You had a very strong first half of the year and a much weaker second half of the year. This is an average of all the 4 quarters. So this isn't an exceptionally strong year nor is it an exceptionally weak year. So it's the average of what we saw in 2011.
When you look at something like credit trading, we trade 250,000 credit instruments per quarter, and we make about $1,500 trades per quarter. It's not that much, but that generates because of our volume $375 million of revenue quarter in and quarter out, with de minimis risk. This is a major flow -- or driver of our flow business. Then you build out a commodity business, and it's just not taking a view on metals or energy or whatnot, it's trading 50,000x with a client, with a margin of our revenue of about $5,000 per trade. It's why this business delivers, transacting with our clients, in enormous volume $250 million per quarter.
And stepping away from the word derivative, I'm focused on interest rate swaps and currency swaps. In the interest rate swaps market alone, we write 30,000 interest rate swaps every quarter. So we make roughly $12,000 per swap contract that's traded. That's $350 million every quarter in and out. And finally, on the equity side, 6,000 equity swaps and options traded each quarter, roughly $30,000 per trade. That's driving $200 million of quarterly revenue for Carlos' business. This is an amazingly strong flow business, which is driven by its agency nature, and it is the engine, I think, given the scale and scope and breadth which is distinguishing our results. This adds up about 70% -- if you just take what's listed on this page, this is about 70% of our total markets revenue in any given quarter.
We wanted to put this chart up because there's a big question of who are our clients? Who are we trading all these swaps and credit products with? They said to a very little level with the rest of the Street. By the way, all of those numbers you saw were with end user clients. There's not -- we didn't include any of the transaction between ourselves and the Goldman Sachs in any of those numbers. Those are all taken out. What you see on this chart, if you look at the S&P 500, over 90% of the corporations in the S&P 500 transact an interest rate swap and currency swap and a credit swap with JPMorgan Investment Bank. It's enormous product used. In many ways, the swaps market today is more liquid than any other asset class, and it is used by almost all of our clients in the United States and increasingly around the world. The comment that Meredith made a couple of years ago, the one client base is not in here. It's in [indiscernible]. There's a political consideration now as such that, that market is basically closed. And you do have to ask yourself, is it healthy that municipalities don't participate in a market where 94% of all U.S. corporations think it's important to manage their capital? Throw that out.
So as we talked about, it is relatively a low trade per ticket franchise. 98% of our trades generate revenues of less than $50,000, but we do the major trade. And 25% of our revenues are generated by less than 1% of our trades where we make over $0.5 million on any given trade. And I'll give you a couple of examples. Recently, we completed a $2 billion bond offering for a company in the real estate space. They wanted to swap the entire offering from floating to fixed. We did that for the life of the bond, and we made on a trade like that $10 million in revenue. And this is a very sophisticated CFO, Treasurer [indiscernible] they know what our profit margin is, they know what this means for them. It's very good business for them in terms of their all-in borrowing costs and obviously, attractive business for us.
We also very recently, for one of the largest airline companies in the world, entered in to a 3-year program to hedge their jet fuel. On a trade like that, we made some $5 million in terms of the P&L for trade x. So there are big tickets that are important for our clients that we execute in the flow business and ultimately drive the market revenues that you've seen.
So we get to this question of how much risk are we taking to drive the flow business? And what we wanted to do was to really open the kimono and give you a snapshot of what our interest rate swap business looks like in terms of the volume of trading in any given day versus the amount of unit risk we start that day at. But this is a 2-week period, smack during the middle of 2011. And what it shows you, when we open the trading desk in the morning for $1 of risk in that interest rate swap book, we are trading 50x that level of risk during the course of the day with our clients in and out. Now with that degree of turnover, there's no way that someone could look at a business like this and not recognize its agency nature as opposed to any sort of notion of proprietary trading.
So that was a run-through of the markets business to try to give you a level of granularity that you haven't received before, and I hope you come away with an appreciation. We are not immune to risk offs and risk ons. We are not immune to people's view of actual volatility and people's view or investors' view of expected volatility. But if you gave us those 3 components, the predictability of the revenues coming out of the investment bank, I think, are quite high.
So now let's go through some of the issues that you wanted us to raise one-on-one. First is regulation, and I should preface this by saying I think JPMorgan Chase has been a strong proponent of regulatory changes needed since 2008, whether it's resolution authority, whether it's greater transparency, whether it's use of clearinghouses where appropriate. We acknowledge and hopefully we're a participant in trying to evolve the global regulatory environment to make the financial markets that we all deal in safer. But I wanted to highlight for the 3 -- for the investment banks 3 areas, which I get mostly from you in terms of questions and what it may mean for the Investment Bank. And the first, our clearinghouse and swap execution facility. One fact is, over the last couple of years, we have already moved close to 50% of our fixed income trading, swaps and otherwise, into clearinghouses. And the reaction to that has not been a decrease in our margins. In many ways, it's just been an increase in our volumes that you have seen. So we don't believe moving a significant amount of our agency business in the interest rate and currency market in the clearinghouses is going to have an economic impact on Investment Bank. In fact, some of us would argue that it actually made an increase to the power of our scale and accrue more revenues than otherwise might happen to JPMorgan Investment Bank. The one caveat here, which we are worried about, is extraterritoriality. And to put it very simply for you, what we are worried is if we want to write an interest rate swap with Siemens in Germany, if they have to post an initial margin with us, they may go to Deutsche Bank, who will not be required to ask them to post the initial margin. The thing we've done about that, from the Democratic side of the hill, the Republican side of the hill, to all the conversations we've had with the Treasury and the Fed, we get tremendous reassurance back that they recognize if the initial margin requirements that are currently being contemplated are not extended internationally on a level playings field, it will put us at a disadvantage and they will not do that. In fact, in the subcommittees in the House, they've already passed bipartisan legislation to protect us on the extraterritoriality issue. So at the end of the day, we think this will not be a challenge. So that brings us to everyone's favorite topic recently, which is the Volcker rule.
What I want to -- and I've said this to a number of you in a variety of forums. The challenge with the Volcker rule right now that's currently written is ambiguity. We used the word reasonable 62x in an 86% draft -- or 86-page draft resolution. Imagine this, traffic laws were written like that where how fast you drive down the New Jersey Turnpike was you can speed as long it's reasonable. Or you can have so many martinis on a Friday night as long as it's reasonable before you get into a car to drive. It simply would not work. And what the industry is facing right now is this ambiguity about what does Volcker mean. But I think what is really creating the issue today is, you have the regulators, which have said, we want to preserve banks' ability to provide liquidity, to maintain a full functioning market as we've just talked about. And all we want to do is just restrict their proprietary trading. But then what has the same regulators done? They have exempted 40% of the U.S. securities market. So if I say you don't have to worry about what we're going to do because we're not going to impact market making at all, but then at the same time, you exempt 40% of the U.S. securities market, you go, "Where's the inconsistency?" And then you go and you ask yourself, "What is the 40% that's being exempted?" U.S. Treasury, municipals and agencies.
And what has happened over the last month as that sort of came to the forefront who responded were not the banks. Those are central banks in Germany, France, U.K., Japan and the countries to the north of us. And they're saying we have a law that's ambiguous, it's not clear to us. If you're exempting the key government financial markets in the U.S., you need to exempt us. I think that over time, what's going to happen is, we're going to settle out these inconsistencies in the Volcker rule and we'll be fine. And I think the financial markets will be fine.
Expenses. I'll tell you about a couple of things here. One, we think we have the best-in-class overhead ratio in the industry. We reduced our non-compensation expenses here by 4%. We did that at the same time that we were investing in technology, investing in our international platform, investing in our commodities business, but we held expenses down. And so if you took out those investments, we think that we are managing this business with a level of expense discipline, which we feel quite good about.
On compensation, we have what we think is the lowest comp-to-revenue ratio in the industry, and this was one of the discussion points at lunch that I wanted to raise here. In 2011, we had arguably the highest revenue number of any Investment Bank. What we have done as a management team from the board on down was made the decision that we weren't going to be competitive with the Street in terms of comp to revenue for the business. What we were going to do rather was pay our individual people competitively with the rest of the Street. That did 2 things. One, that meant that we delivered the lowest comp-to-revenue ratio in the Street for the benefit of you, our shareholders. But the other thing very important that I don't think has been picked up, it avoided a comp arms race. If we had paid a compensation to revenue ratio on average to the rest of the industry, we would have paid our traders, our bankers, our salespeople significantly higher than the rest of the industry, and we will be right back into the race we saw over the last 15 years. So I think that we have done the right thing for our shareholders, I think we have done the right thing for our industry. And it's something that we feel very good about. I should add, whilst we have done that, our retention rate of our senior talent is still over 98% for the second year in a row.
Another side because this came up at lunch as well. If you look at our -- at the amount of compensation, we pay in cash versus deferred equity, our ability to manage variable compensation in the years from, we think, is another competitive advantage we have vis-à-vis a lot in the industry. The final issue I want to mention on cost is another project that Mike and I have started in comp that we call value per scale. If you think about the core processing engine that's required in securities and derivatives in the Investment Bank, there's an [indiscernible] processing capability in T&SS.
Rather, we pay our individual people competitively with the rest of the street. That's it. 2 things: one, that meant that we delivered the lowest comp-to-revenue ratio in the Street for the benefit of you, our shareholders. But the other thing very important that I don't think has been picked up, other thing it avoided, it avoided a comp ARMs raise. If we had paid a compensation to revenue ratio, on average to rest of the industry, we would have paid our traders, our bankers, our sales people significantly higher than the rest of the industry and we would be right back into the race we saw for the last 15 years. So I think that we have done the right thing for our shareholders. I think we have done the right thing for our industry, and it's something that we feel very good about. I should add, whilst we have done that, our retention rate of our senior talent is still over 98% for the second year in a row.
And another side to this came out at lunch as well. If you look at our -- at the amount of compensation we pay in cash versus the deferred equity, our ability to manage variable compensation in the years to come -- we think is another competitive advantage we had vis-à-vis a lot in the industry. The final issue I want to mention on cost is another project that Mike and I have started in comps that we call value per scale. If you think about the core processing engine that's required in securities and derivative in the Investment Bank, there is an -- and to our processing capability in PNSF, and we have never looked at rationalizing both of them. So we've had Lou Rauchenberger, who's Head of technology operations for Mike, and Paul Compton, who does it for the IB. They have joined the task force to see whether we can bring those 2 engines together and find synergies, and our current view is the scale and scope of the savings, just by merging where it makes sense, is well over $1.5 billion, so more to come on that the next couple of years.
In the Corporate bank, Mike did a good job of explaining the investments that we've made. We started out with 100 bankers. We're now at 250 bankers around the world. We'll end 2012, 2013 with 300 bankers. From my side, I manage the impact of the Corporate banking initiatives in 2 ways. Remember, we have the clients. The Investment Bank has clients from Indonesia to Brazil to South Africa. Mike has got the product knowledge and the product capability, and all this is really doing is making sure we're talking to the Treasurers and the CFOs outside the United States to get the Corporate banking business that we have the ability to execute on. From my side, what I am tracking is what is the growth of our markets business with non-corporation -- with non-U.S. corporations outside United States? So how much FX swap, FX, or interest rate swaps, FX executions swaps are we getting from Bali in Brazil or from Patna in India. If you think of all that happened last year in terms of the flatness in most of the financial markets and across the industry, this business for us roughly grew 30% last year. You combine that with some 20% growth in the trade loan volume and cash management exercise that you've seen in Mike's business, and the Corporate Bank is more than paying for itself, and I think it's going to drive significant revenue growth in the next couple of years.
We've all talked about the value of being part of a universal bank. Again, from my own personal experience, all I have to do is look at 2008 and 2009 and what these bank do, and if that doesn't justify the universal banking model, I think you're not going to be convinced. But clearly, we -- as Doug talked about, about 25% or so of our investment banking fees and debt equity in M&A underwriting come from the Commercial Bank. It's very self-evident, the value of having that franchise, and we talked about what we're doing with Mike.
With Mary, in terms of the Asset Management side. The real value of this is it's the same client base. We go to a client event in Hong Kong, and the reality is the largest companies in Hong Kong are all run by the largest families in Hong Kong. And we're the only Investment Bank that shows up to have an event in Hong Kong, where every single of those CEOs have -- and actually, I'll give you the percentage, it's pretty high. The vast majority of the CEOs and family members have an enormous amount of their personal assets with the Private Bank. And the synergy of that is almost immeasurable. But then beyond that and this is one of the fun things that's going from the Asset Management to the Investment Bank, we have built a delivery -- a platform in Asset Management, which is the envy of Wall Street in terms of raising money for hedge funds and Private Equity. We raised for Apollo and Blackrock and keep on going, and then what we raised for OGEAX and the rest of them and all those platforms. Then you sit on the Investment Banking side and you go in front of them on an IPO pitch, and you realize what drives them is who delivers their LP. We are the most sought-after firm in terms of driving LP funding for them. Think of the synergy, it means the relationship between the hedge fund and that private equity fund back to JPMorgan.
Then in closing and finally on risks. On the left, you've seen these numbers before. This is our markets revenue over the last 6 years. We had a significant step-up in 2009, '10 and '11. And we've done it whilst we've kept our VaR number reasonably flat. And we can debate how accurate VaR is as a risk, but I'll just point to those numbers out that we are generating a significantly higher amount of revenue then we historically did versus the VaR. But much more relevant, I think, are the 2 charts on the right. This is the average quarterly revenue in our markets business over the last 3 years. We've generated a little over $5 billion of market-driven, quarter in, quarter out in the Investment Bank. Our peer group is about $3.9 billion or $4 billion per quarter, but this is what is astonishing. The volatility of that quarterly revenue is 40% lower on our platform. That can only happen if you're gaining a benefit from scale. You'll only deliver a market-leading quarterly revenue number with significantly lower volatility if the economies of scale are showing massive benefit to your platform. And if you look at the footnote, the reason why we excluded DVA from this calculation, if I had included DVA, which is basically a function, obviously, of the credit spreads of our competitors, this gets much more attractive as a comparative matter for us, but we didn't want do it. This is just on the market side, and I think this is perhaps the most telling slide in addition to the volumes that I showed you earlier on that explains the unique franchise that we have in the Investment Bank today.
And in capital, as I said, our goal in 2011 was to drop risk-weighted assets by $60 billion. We actually dropped by $80 billion, thanks to a lot of hard work by a lot of people here. The expectation is we can fairly comfortably reduce that by a further $50 billion in 2012. So we will end the year at a risk-weighted asset basis of $400 billion and change against the $40 billion of capital. And so we are pretty confident that we'll comfortably land at a 9.5 Basel III Tier 1 ratio by the end of 2012. Most of that $50 billion runoff is in the legacy asset adjustment to our internal risk controls and advances in our modeling. We also should say in the $80 billion reduction in RWA during 2011, that was in the face of the fact that we increased our loan outstanding to our clients around the world by over $10 billion in the same period.
So the second to final slide I want to walk you through is sort of how I started. So we generated a 17% ROE in 2011 versus 2010. The rest of the industry had 14% ROE in 2010 and it dropped to 8% in 2011. And the main reason for that again is the chart on the right. If you look at just the market revenue, every one of our competitors say for one because it actually is all DVA, had a negative market revenue number in 2010 and we were essentially flat, slightly up. Again, I would use that slide to ask the question, is there a scale advantage in this industry that is becoming more apparent? So the question we get over and over again is, are you going to keep your ROE target of 17%, given what the regulatory headwinds are, given what's going on in Europe in certain markets? And there are certain things that we're going to have to deal with. Simply the costs dealing with the regulatory influx is a significant number. But taking all of that, given the size of our client franchise, the diversity of our product offering, the penetration and virtually all of those markets in terms of market share, the growth of financial assets globally, the advantage we have internationally and how international financial assets will grow disproportionate to the underlying GNPs. In the experience that we had last year, I do not see a reason to drop the ROE target as we stand here today.
But before I open it up to questions though, I do want to make 2 final points, which are for me, more important than the numbers that we just went over. And the 2 final points that I want to go talk about is, I think, in the last 2 years, we have reemphasized 2 principles, which are core to what this institution stands for. And the first one, we have worked every day for the trust of our clients. We have an obligation in this institution to act with the level of morality, with integrity, with fairness, so that we earn the trust of 21,000 clients day in and day out. We recognize and we've talked about this all. We had a significant swing in our client franchise coming out of the financial crises because we were the Safe Harbor. But unless you act in a fashion which earns the trust of those clients that come to you in financial crisis, they will leave you when the financial crisis abate. And I hope most of you would believe that this institution has acted in a way in the last 2 years, which we have earned the trust of those clients that came to us out of fear and now, they are staying here because of trust and mutual respect.
The second principle equally important is I believe we managed this business in terms of our people with a level of partnership and collegiality, which is the hallmark of this firm. We've had the great fortune for the last couple of years because we -- we've hired unbelievable talents from outside. The one comment I hear from them over and over again when they come here is they remark about how collegial the rest of the professionals are in terms of embracing them into what we do, and you heard Mary talk about it. We don't sit here and swap revenue shares and what not. The cooperation between the wholesale and consumer within wholesale is ingrained in the partnership culture that I think we have at the bedrock of this bank in JPMorgan Investment Bank, and it's those 2 things that I feel most proud of in terms of what we've accomplished or maintained in the last few years. So with that, let's spend the next hour talking about the corporate world again. Yes?
Actually, maybe before we get to Volcker, let's talk about [indiscernible] for just a second. If we turn to Page 9, which is your granularity and I thank you for that because this is really interesting stuff. 2 questions, first of all, I think you said that this is -- that this would account for about 70% of the markets business in a typical quarter?
James E. Staley
So give us a sense for what the other 30% is.
James E. Staley
With the NII, money from balances and prime brokerage are heavily structured products. So there's a lot of things that make up the -- but a lot of it is structured products, NII, pre-balances, that sort of thing.
And then, I guess, a follow-up to that is given what you know today about Basel III, about risk-weighted assets, inflation, et cetera, how different do you think that this might look in a fully implemented Basel III environment?
James E. Staley
Great question. What you're seeing is that a Basel III is having the impact that they want. The capital or the risk required on very complicated structured instrument, particularly in the credit space is prohibitive. And so a significant portion of that $80 billion contraction in our RWA is running off that complicated structured credit derivative book. What we're seeing in our financial performance is we are more than compensating that in these product areas, which have very little capital required to execute. It is primarily an agency flow business, therefore, we are increasing our revenues significantly relative to RWA, so Basel III will continue its approach. In my own view is our competitive advantage is because of our scale and our position across these product areas as it moves the investment banks away from the complicated structured credit derivative into interest rate swaps and currency swaps, our scale becomes a growing competitive advantage.
So I guess, following up on that, are you already charging your trading desks based upon the Basel III capital charges?
James E. Staley
We have been managing our risk-weighted assets with an eye on Basel III that why it went from 7.2 capital ratio to 8.4, keeping it fully diluted out of capital. That's why we're very comfortable to get to 9.5, yes?
Going to your chart on 5, showing how GDP has gotten more capital-intensive over time, I mean, I guess, I think that's wonderful. You're saying it's right because financial assets grow faster than GDP. Other people look at that chart and they say, "This is terrible, this is a debt super cycle, we have to undo all this and bring debt levels down." So I mean, do you have a view on how sustainable that is? And if you do have deleveraging in particular in the more mature economies, what is the revenue impact of that on your business?
James E. Staley
No, I think there are a couple of truisms. One is to become a fully developed economy, you require a fully developed financial market. You don't get one without the other. So the notion that the Koreas and the Brazils are going to grow their financial markets at a rate faster, you go to a country like Brazil, the amount of individual credit to buy houses and mortgages is de minimis. And they wanted to grow because they realize that they can use a robust financial market to drive economic growth, and that's across emerging markets and I don’t think that's a phenomenon that's going to fold back. What you need is a financial market, which is functioning efficiently. It is the oxygen for commerce. We don't appreciate to a certain extent a fluidly functioning but everything's working because oxygen is sort of free. When it's shut off, what happens is, I think, we clearly understand that impact. Now do you think that 400% of GNPs or GDP is the right level of financial assets overall? To the extent that the financial assets are managed safely, and we don't know -- we don’t -- forget about loan-to-value and things like that, I think it's fine. Now whether there's an ultimate cap, we're going to find out. But I think by and large, we will continue to see financial assets grow relative to GDP on a global basis. Clearly and certain developed markets like a, Japan, how much can that more grow? Although, if you look at a place like Japan, you say they can live with the 200% sovereign debt to GDP ratio because they have an enormous savings rate. And the amount of assets that they've saved up against that GDP number, this is both savings and borrowings. And I think it's a question of how those 2 evolve in parallel over time. Yes?
Yes, over here. The LTRO has created a lot of stability in the European markets, and I'm just wondering if you expect that to hold and what do you think is most likely to disrupt it?
James E. Staley
Yes. I've said this over in Davos the other day. I don’t -- in my own view, the move by the European Central Bank wasn't a bazooka, it was a canon. And I think providing the amount of financial support, the European Banking industry that was given in last December and will be repeated again in February has essentially taken off the table for at least the next year, if not 2 years, any banking challenges across Europe. Not only that if you listen to a number of the conversations from Todd on Dow today, they're done the operation of opposite twist or Operation Twist, as we've done here since we've flattened interest rates as much as we could across medium term [ph]. Then in the LTRO, we're giving 3-year fixed money that's essentially an overnight rate and allowing people to repo into the ECM, securities of less than 3 years with funding advantages of 300, 400 basis points. If you wanted the hedge fund manager betting against that carry trade, you're going to wait a long time. So I think the LTRO program put together by the European Central Bank is enormously important in stabilizing in Europe. As you and I talked about, the challenge is like here and there, we are embarking on an enormous economic experiment. We have grown the balance sheet for the Federal Reserve and the European Central Bank by trillions and trillions of dollars. At some point, you're going to have to sell those assets back into the private market. If it's managed well, I think, it's going to be an enormous program. If it's not, it's going to pose economic challenges down the road. But I would not underestimate nor bet against the impact of the LTRO. Yes?
Lastly on regulatory arbitrage?
James E. Staley
I'm going to be honest. I've been in this business for 33 years. And an interesting conversation, there was something from the Bank of England and I've said, of course, my experience at Morgan is the first big real move when I was starting as a young pup in this bank was the dollar borrowing market moved from New York to London. How do people remember the explosion of the euro-dollar syndication market? You know why that was? Because it was holding tax on interest payments in the United States and the Bank of England said, "We don't need it." And they moved an entire loan syndication business out of New York into London. And then we've talked about the Volcker Rule and I lived with Glass Eagle for the first 10 years. What really accelerated Morgan's enormous build-out in the city of England was because the Bank of England knocked on Dennis Weatherstone's door one day and said, "So Dennis, we don't have Glass Eagle over in London." And so we moved an entire Investment Banking business from New York to London. And in many ways, the City of London was built on regulatory arbitrage. And so we sit here today and so certainly, one of the challenge is in the Volcker Rule. People here have said, "Don't worry, the international community will adopt it." And they haven't. And given the reactions that we have all seen and all read about in the last year, I don't think you're going to. And the question is, is that's going to happen with central clearing and whatnot and initial margin and that sort of thing. So the industry is going to respond if there is a regulatory arbitrage not because we're devious to get around something, but because it's going to be self-evident and the regulators themselves will identify it as they did most effectively in the U.K. a number of decades ago. That all being said, if you look at what comes out of the discussions out of the G20 in Mexico and I think you have to give the regulators a lot of credit. They are working incredibly hard to try to unify what's going on around the world, which is why personally, I don’t worry about the Volcker Rule. They are going to get the inconsistencies ironed out because they recognize the challenge to the global financial system if they allow that arbitrage to exist. And they will ultimately get to the right place because they won't allow those arbitrages to exist the level that I think they have occurred in the last couple of decades.
Sorry. Hey, Jes, so last year, $40 billion of capital, 17% return on equity target outlook of $40 billion in capital, 17% return on equity. What are the things that are holding back the targeted profit growth?
James E. Staley
Well, one, I don't think I was going to get a question that 17% is too low. I do hope and I think our plan is to have that profit growth and the initiatives we made in technology and commodities and international should drive it. I think what's holding it back is that 17% market share in the fixed income space. In my career, I actually said this at the first Investor Day that I spoke at, whenever there's been a market disruption that I've lived through, fairly quickly, there's been a return to the norm of a bulge bracket of 6 to 7 firms, which roughly divide the market's business. And that's been the historical evidence. If that happens, that 17% market share and the fixed income markets business and commodities will clearly be challenged because that is a historically high number. So I'd take that into considerations when I think about the target we put forward. What I think these numbers tell me, however, is they're -- going back, there may be something happening around our scale, our client diversity, our market position in each of these product areas and our ability to invest at times and others can't, which maybe we can break that paradigm. If I thought that we could break that paradigm, I'd be moving the target higher. And you know, when we get there, we'll get there. So we're being conservative on that level.
Well, on another level, when it comes -- a while back, you said that the transition of derivatives could cost the firm $1 billion. So I thought Jamie said that maybe 1 year or 2 ago and you have haven't updated that. So as of the end of last year, how much of the change in derivatives, how much of the change in Volcker Rule or any other regulations impact your revenues?
James E. Staley
One of the things that I didn't put in there, I forgot to mention, when you look at the push out of a lot of our derivatives from the banking subsidiary, we have hundreds of people getting ourselves prepared to deal with that push out and whatnot. The way I sort of look at it, I think that regulation, overall, not a revenue issue for us, it's an expense issue. The amount of people and systems and time that we're going to have to dedicate to deliver compliance report, data report, trade transparency, building the pipes to all these center clearings probably -- I think we're going to be spending year in and year out over the next couple of years between $200 million to $400 million a year in expenses, responding to the new regulatory environment that we face today. As a revenue matter, Mike, because I believe that something is going on with respect to scale, it's very possible that the impact is going to be positive on our revenue.
From negative $1 billion dollars, last we heard, a positive impact on revenues that's partly offset by these expenses. You're guiding for a less negative outcome in the Volcker Rule? Is that correct?
James E. Staley
That's correct as a revenue matter. Yes?
Just curious on your RWA mitigation comment is $54 billion decline in 2012. You mentioned a couple of things including advances in our modeling. Which assets are you advancing mostly on the modeling? And is that more rightsizing across the world and to your comments about the G20 moving towards a common platform?
James E. Staley
It's all the way from using and probabilities to redefine exposures in your options books to looking at more in-depth with the correlation between asset classes and the set-off between those asset classes. It's questions around do you use rating agency, credit experience versus your own credit experience and a credit default assumptions that you use in your models. It's really across the board.
Thank you. So folks, I'm going to give you about just 10 minutes of comments, and we'll open the floor to questions for me or anybody else. Just want to reiterate a few of the things that people said here and can clarify a few things. First, I hope you feel like I do. This company has got fabulous franchises. Not all exactly best-in-class, but they're all exceptional in terms of talent, products, services. They've obviously been built over a long period of time and we benefit from that. We use the word cross-sell and we try to emphasize a little bit today. I actually never really liked the word cross-sell as much as this competitive advantage. But we were in the card business, so we're a Cap One, and you add our ability to sell on the retail branches. If you were RTSS, you have the ability to sell to a middle market bank. If you were our Asset Management, you have the ability to sell also in the company. These are all huge competitive advantages. And Mary said the it the best, that they used to like -- the fact we've seen that guy before is really great. You get to cross-sell, but you actually come out doing a very good job in your basic business, huge competitive advantages. We had record profits this year. We had record profits last year. I'll be damned if record profits at least in the next year or 2 or for a while now, and I think we have just great opportunities. Mostly, we saw were organic -- I'm going to fill that in [ph] a second. I will just keep on trying to grow the franchise over time. And I think we have businesses that have pretty strong moats, some stronger than others, but -- and I think all these regulatory stuff, one of the unintended consequences is it actually makes bigger moats to some companies. In some ways, they'll create more Safe Harbors and tougher competition for upstarts over time.
Management, you saw a lot of management today. I wish you had a chance to see all the management that run the businesses and the staffs here at the company. I think we just have exceptional people. We've moved a lot of those people around now. So Frank with mortgages and Geoff came from Asset Management and Todd, we moved from Commercial Banking to Consumer. Doug Braunstein from Investment Banking to CFO. We've done that at many levels. I guess it's very important more to the culture of the company to make sure the people at this company know the company is broad-based, and so you learn awful lot from dealing with other issues at the problem at the company to resolve them. I hope you see in the Mortgage business. I think this is instructive too, and I'm not sure anyone could have done the same thing. This is the case. But frankly, really, a lot of companies having a problem. I've seen this before in my life. Management team run as far and as fast as they can away. They don't want to be associated all and Frank and a bunch of other people here had said, "What can I do to help?" And then really dug into the business with a lot of resource to bear. That's how we like to operate over time. Mary mentioned they're bringing the whole company to bear certain things. They're a couple of big corporate deals we won or other deals that are on the deal team. We have someone like Jimmy Lee; Jay Mandelbaum with strategy; Mike Cavanagh; Guy Chiarello; technology. Because a lot of companies want to hear what we're doing and what we're using. So we really do bring that whole company to bear as best we can.
And in comp, I just want to add one real quick thing. We are going to pay competitively. I was watching Warren Buffett in TV yesterday and I think he does an exceptional job. I'll make you bet he pays his top 20 or 30 people more than we do. We need to have talent. You cannot run this businesses with second-grade talents. You wouldn't want it. We couldn't deal with it. We have to do it and also make a place where top guys wants to work. So those will always be important to us and -- I also mentioned, and I'm saying this strictly for the corner of over there and newspaper people, can you wake up for one second? You all who are obsessed with this compound ratio, we're 35%, the lowest there is. I have mentioned all the time that the -- because that is a stupid ratio, by the way, folks. When you're in a steel company that is all capital and your comp-to-revenue is kind of rather small. If you're like a all human capital company, like a [indiscernible] company, a law firm. Your comp-to-revenue is like 90%, it's not 100%. Why would anyone mix this is up, that is completely beyond me. I mean, we got to get beyond this. And obviously, our business, in the investment banking in particular, all of our businesses, be it high capital and high-human capital, they're both true. Newspapers because I went and got this one day just for fun. 42% payout ratio, which I just think is just damn outrageous, okay? And not worse than that, you don't even make any money. We pay 35%, we make a lot of money. Well, really important about how we build the businesses and I think it's -- the profits we earned last year had to do with the business we made over the last 5 or 10 years. The concept of somehow you guys are going to change that, and you can't. We can do a lot of things right now that can change the results. We can cut marketing expense, we can cut new technology, we can cut comp, we could cut -- we may not have a better company, have a lot more profits next year. We can take a lot more risk, we can get on the phone, make a few phone calls [indiscernible] just like that. Just like that. We can take out the curve, make more risk for [indiscernible], just go for it. Leverage up, okay. And -- but that's not how we build the business. We're trying to build a quality business to start with -- everyone's mentioned up here quality clients. You show me a bank where everything is exactly the same quality clients versus non-quality clients, I guarantee the quality clients bank would be better. And this one will probably go bankrupt. Quality clients and then constant investments in infrastructure, quality assets, quality reserves, everything you put in the balance sheet should be real, reflect your ability, should make you acknowledge [ph] very quickly and confidence in the infrastructure. As Mike mentioned, the thing about program in our name [ph] "usually it is complete bull****, okay?" And now that's not true for everybody, some probably do a great job. That is, it should be part of your mindset: you don't waste money. Because you need to invest in systems technology, data centers, people, services [indiscernible], marketing and all of those things. Those are not bad expenses. So we're a fanatic about waste, we're not a -- there are good expenses. So -- and you saw a whole bunch of examples here. Adding private bankers in Asia is a good thing, adding global corporate bankers is a good thing. Building the SRP program's a good thing. It's just like when you walk into an airplane, then you hope that they maintained it properly. I mean, so this concept is somehow expenses are bad. Expenses, there are good expenses and bad expenses and then secondly, it's how we think about it. And also, constant innovation. You saw it up here all the time, and you see our [indiscernible] cars to Mary's iPad to Quickpay and -- I hope you all went out and saw some of the stuff out here. We should constantly be doing that, but we're not wasting money. And the other thing I always believe is you should earn good margins while doing that. For the conversations we have are not, well, Mary you should be at 30% margin, and well, okay, I have to cut [indiscernible] and I could cut marketing as well. And so we have to earn a good margin [indiscernible] in the future. And it works well over time. We also manage these businesses, I hope you saw a much deeper level. So when we present Asset Management or investment banking, it goes much deeper than that. How we actually look at, are we competitive and what the opportunities are.
You heard a lot today about the focus in 2012. It is going to be -- it's not acquisitions. It's navigating what we thought we got to do while doing a great job to the clients. The state of your system, we felt oh, it's G-SIFI, it's Basel III. We're attaching LTR [ph] with Basel III, G-SIFI to virtually every asset, and anything around the balance sheet, that will complete all these things into a good job for our clients. I don’t personally [indiscernible] a financial system, I [indiscernible] down the road. You've mentioned on the second, but we have to do it and let's do it at a very detailed level to manage all these exposures, et cetera.
A couple of quick issues to bring up. Branches, I think there's a little confusion. Our average retail branch makes $1 million a year. It is really, really profitable, okay? The new branches are going to make $1 million a year. They're not that different from the old brand. We are not relying on new technology -- we're putting new technology in it -- I think the real issue in the branch is that the Durbin Amendment basically eliminated $1 billion of revenue, and overdraft another $600 million or something like that. But it didn't affect just the products of each branch to see [ph]. But really, that has changed the profitability of certain types of branches. The branches of predominantly lower income households all of a sudden could become unprofitable. But what we did is relook at branch plans and make sure the new branch would -- are profitable. It's going to be more higher-income areas, et cetera. While [indiscernible] all I know is look, that's what the legislation did, and we just simply reacted to that legislation. Now the branches bringing mortgages, credit cards, debit cards, checking accounts, statement accounts, investment accounts, small business. They're enormously profitable, we're just transforming them to adjust to new reality over time. Think about it as density, it's really important you grow branches. We could put a branch in Nashville, but -- which will have no market share at all, and that branch probably won't make money. But we put a branch in LA where we already are, where we're earning more market share, it could be very profitable. Because it's not just branch-by-branch, also density by area so we always look at that. And then marginal accounts, the average cost to maintain a banking account is $300. And that's -- not all -- I forgot the exact numbers, not all is fixed numbers, I'll say probably $250 or so, something like that? So even, Todd said, the margin account's fully loaded, fully loaded. So this is true for a lot of businesses, if you're earning $100 of revenues and the contribution to overhead is $50, you may not get rid of the account. It's just that you have to be much more conscious with the calculation thing, and that's what we're trying to do. So we're not going to drive out all fully loaded margin accounts, because most of businesses they keep a lot of account which are marginally profitable. That's on a fully allocated basis, and true for most businesses. And so we're just highly sensitive about that. The thing to look at about all these things is network effect, critical -- Mary hired a private banker, okay? We're not adding all the additional support to do it. When the guys have built the Global Corporate Banks added a branch in Kenya, stuff like that, they're adding regional cost -- I think the average branch is like $5 million, $6 million, not spending the billions of dollars of cost from the system. If everything adds to revenue, the margins could be very profitable. That's true for retail branches, that's true for GCB branches, that's true for private branches, true for new products and Asset Management, that's true for new sales people and the investment bank. Huge profits as a margin even though we are fully allocated basis, it's not exactly the same. You should always keep that mind as we expand these kind of networks over time. Europe is a good example. I won't go through the details. A decision that one makes that if you can look back here in 2 years and say, you should have stayed out of Europe, you should have cut your exposure more, we decided not to. I, by the way, don't think that it'd be wrong if it turns out to be a $3 billion loss. We thought about it, we thought hard about it, we looked at the potential risks. We've been in those countries 75 or 100 years -- I'm talking about Spain and Italy here, my guess is that we'll be there 75 or 100 years from today. And while we're taking a risk of losing $3 billion, my guess is we're making $1 billion in 3, 4, 5 years out there. And that's the calculation you make. It goes back to how are you going to run your business? It's not how you're guessing about what's going to happen over -- but I mean, you want to protect yourselves. The mortgage business, we made a determination to stay in it. Obviously, it's going through a tough time, we're bearing a lot of overheads, but I won't repeat it, but it's just -- we'll proceed. The #1 financial product, we're going to have the best front end, the best back end, the best servicing, the best -- it's critical to be very good at it, and so we've decided to fix it. And these companies can make an awful lot of mistakes -- we had a big problem, close it down. I think that's going to work and lead to the wrong thing. The IB business, I think, [indiscernible] and the question is probably, is the downturn you saw in the fourth quarter, cyclical or secular? They were telling you, it is cyclical. I'm not hedging that, okay? It is cyclical. If you look at those views from the point of view of the client, this is JPMorgan Chase, okay? The investors, you all, I mean, the McKinsey reports will be twice as much as [indiscernible] the last 10 or 15 years today. Multinationals, twice as big; credit risk, twice as big; stock markets, they'd be more than twice as big; Credit market, twice as big; ECM, DCM, balance sheet, they're all going to be there. It is, however, volatile. Not like the Bloomberg lady over there said it's not volatile I don't think you meant that. The revenues are volatile. The revenues themselves go up or down 50%. That's true for fixed income, it's true for equity, it's true for [indiscernible] Why are you so surprised? It's happened my whole life. Get over it. Run your business that you understand that it will come back. And now there are things that could make it tougher for us. So I heard Jeff talk about Volcker and derivatives -- I agree with him. But if those turn out terribly bad, the business itself will continue to grow. Some of the investment banks may not get their fair share. That's just where it ends up, okay? Because the needs of multiple clients will be the same and we'll grow over time. And then a lot of little ones, I mean, I'll just give you one example here about -- I was in Colombia recently and we opened a branch there, I think, like 4 or 5 years ago. I think they were $120 million of business. That business is Colombian clients in Colombia, it's Colombian clients that are outside of Colombia. There's Chinese, Brazilian and American clients going to Colombia. And we trade -- Republic of Columbia bonds across the street here, that's how we build a network effect: 49 branches in Colombia. Well, you may read our research on Colombian companies, the Republic of Colombia. And that's the -- those opportunities, those Colombian branches are going to be there for another 20 or 30 years. We're not going away. The question is do we properly manage to build it and do a great job for the clients? And this capital chart, as I said, asks a question about when you look at numbers how much of the financial market [indiscernible] versus the country -- assuming, let's just see what happens, okay? If you were a barter economy, there are no saving. You're living hand to mouth. Once the people start saving, what do they do with the money? The financial markets, stock and bonds or loans. So there's a natural growth, it's the good growth as companies become sophisticated with a huge amount of savings. Then maybe those numbers, there's too much leverage or speculation, but the actual raw savings is a good thing. Those things need to be reinvested. Jeff, I don't know if it's in your presentation, I may have missed it. But on the trading, I hope we helped demystify it a little bit. The other thing is I wish Paul Volcker will get to is the cost -- the benefit is huge through the client -- actually your client, okay? The cost of trading, if you took all of those charts and spreads and you have things per share, an equity of $0.25, that used to trade like 4 points [indiscernible] The point of trader's is that's investment grade bond. The cost to trade has come down, who's the beneficiary? The investor. They get to buy at a better price and sell at a better price. That is a good thing, no different than Walmart versus -- I'm not saying we're Walmart, got that over there on the press side? But that's what Walmart did for its clients. Now I don't know why Paul Volcker think it's good to do for someone walking in Walmart. It's not good to do with your clients, who by the way is often retired, or a veteran, or a teacher, or a union member. Those are good things and we shouldn't throw out the baby with the bathwater. And then people have these ridiculous, stupid numbers [indiscernible] effect, right? Like, I saw a chart, I remember I referred to several times a lot of people about FX trading. It is -- total FX trading over your -- the amount of trade or something like that. And they said, it was like 1700x the amount of trade, and therefore we'll all speculate -- have you ever see than chart, is that true? No. I mean, if people have hedged revenues, they hedged expenses, they hedged investments, they hedged capital, they hedged trade flows. Some of them hedge weekly, monthly, so it just turns over. But that said, let's just not make no speculation, and the actual numbers that people use to come to conclusion are often completely wrong, and eventually you got to get that right. Capital, I think Doug was clear. Obviously, dividends will be there and then invest on our businesses. But we obviously have to wait to hear about CCAR. The one good thing about CCAR, and you saw how rigorous it is, I actually believe in its rigorous [indiscernible]. But when it's over, I think it'll remove one of the clouds on banks, which is are American banks property capitalized, but we had 7% Basel I in the crisis. It almost never went down to the real life crisis. We went through test number [indiscernible] never went down that 10, and the Basel III will be 14, right? The 7 was perfectly adequate to my mind, but it never went down. We had the treasury tests, we're just fine. We had the first stress test, we're just fine. We had the second stress test, we're going to do fine. I think most of the banks will do fine. And now you'll hear more about them on TV yesterday talking about, they got a lot of reserve, they got more capital, they got more earnings power, they have more clients. And so I'm hoping that eventually people will understand the banking system that America's pretty sound and pretty well capitalized. And then one last comment, the regulatory thing is we're going to obviously meet all regulatory requirements, okay? It's the best we [indiscernible]. It doesn't mean we agree with them all. I just want to point out, and some of them, if you look at them, they're inconsistent. I mean, this is not intelligent design, what we do, okay? But we're going to meet them all. We can meet them all and we can meet them all and do a good job for our clients. It's the one thing we're really concerned about. And then maybe some things won't -- there's a bad economic, et cetera. There will be unintended consequences, some of them good for us, some of them bad for us. But won't all be bad for us. And we're going to meet them all. I've pointed out that -- and we tried to be more specific, again, for the press over there. This is not railing or ranting, I'm just making a statement. We agree with those need to reform. We agree with tons of reform. We disagreed with some of them. That's all. There's 4 major things we disagree with them. You want to know something funny? So did Barney Frank, okay? So Barney Frank was against Volcker, Durbin. Because this is finance and I'm not just to say the last one here. So okay, I'm going to stop there and open the floor to additional questions as we see fit. Thank you.
Jimmy, on Page 28 of Doug's presentation. There are 2 scenarios that are set out. The first is get to an 8.3% Basel III number in 2013. Second is it could be 9.5%. I got 2 questions, how do you weigh out benefits of one versus the other? And secondly, when do you think you'll have clarity on which one you're going to pursue?
Well, the CCAR had 2 separate tests. One was Basel I. That one was -- Basel I was stress, you got to go through it, say, above 5%. The second one is the one that's really in there, which is not stress. It's just Basel III, are you in a glide test in getting to where you think you need to be. Now the 9.5% that we think we need to be, we don't really know yet. We can't do the goddamned calculation. But let's just say it's 9.5%. Okay? They have made it very clear, in my opinion, that the glide test is a straight line. So you could do the math yourself. If we're an 8, we need a 9.5%, [indiscernible] that's what it is. But we don't know -- I can't honestly tell you I know what the right thing to do is. That's why I call it capital confusion. When they said they wanted to do over 5 years or 6 years, but honestly, if you're all my board, what would you tell me to do? Get there sooner. But wait, don't get caught offguard again. That kind of stuff. So it's a board level decision, we've already said we hope your buyback -- we may not buy back your stocks, but we have the authority to buy back as much stock as we bought last year, and then we'll try to be as clear as we can about capital requirements and where we're aiming to and how much capital we can deploy. That chart shows we've got a lot of capital to deploy. We can deploy quickly to get into the 9.5% or we can spend more and then get to 9.5 slower. And that will also relate to stock price. We don't buy back the stock regardless of price. We buy the stock when it is good for the remaining shareholders. So we like to buy it back when we think it's a very fair value though. I wish I can give you more. We don’t know other things either by the way. So let's say you know the 9.5%, my question is what happens when you go to 9.49%? I don't know. You go to 9.49% and they kill your first born then you obviously can run it closer to 10%. So we're still waiting to get some of the guidance 3.5 years after the crisis. Yes, Mike?
Just a question related to Slide 7 in the business model. So just because you're...
7 in what presentation, Mike?
At the start of the presentation, Doug's. It's leveraging the franchise, all the synergies and all the different businesses, even if one was to assume that you're best in breed, are you the right breed? Because even with all these great synergies, you still have best-in-class players by business line. We can all think of a credit card company or an asset manager, a strong retail bank or some sort of processing company. So that's the first part of the question. That's kind of the growth investors. And then the value argument, to the extent, how much financial conglomerate discount you need to have before you take some sort of action? I know you don't like having a stock price that's been flat for 8 years. Now you've demolished the competition in terms of the banks down 50%, but the SEC is up 20% over that time, you've underperformed the stock market...
The timeframe you're talking about?
Since this merger of Bank One and JPMorgan, 2004. So everyone could do this, but my question is why aren't you best-in-class by business line if you have all the synergies? And how much financial discount do you need to have before you take some sort of action?
So the first one is best-in-class. We tried to be best-in-class but obviously business isn't that easy, we've got tough competitors everywhere. One of the issues -- and I'm not going to disagree with you by the way, it's perfectly fair, you say, Okay, well I'm going to put together a group of 5 banks that look like you but they're basically better. They're American Express and credit cards, Goldman Sachs, this one and all those stuff like that. Remember, you can do that in hindsight. That thinking was used many times, the 5 companies I would pick. Pick the 5 companies 5 years ago, it might have been different companies you would have picked. I'm just making a different intellectual point? We absolutely outperformed those average companies [indiscernible].
Hundred largest banks financial companies and you have the -- there's only a couple of banks that have a lower 2013 [indiscernible].
That's your second point. So that's the second point, I'm just making the first point, I agree that you can look at index but you pick out the index of the best 5 players for the last 5 years, you buy it -- okay, it's hard to -- and the real question I would have is looking at where you are, if you have all these benefits, and if you really believe -- and I've seen a lot of companies split up because of the conglomerate discount, okay, and there are benefits afterwards, I've seen a lot of companies split up and they got worse. So you really got to make a determination, do you free up capital? How much cost you add? You lose economies of scale. Turning to our business, we lose huge economies of scale. Now with G50 [ph], we also may be carrying extra capital, that you wouldn't carry if you're in a bunch of different pieces at one point. So one point, the board has got to look at those things to determine it. But my guess is, probably be far more value of 10 years, you will do today for 10 years than split up in a whole bunch of different pieces thinking that will perform the way you perform. That's just my guess. If you go through that, like I said, it's a valid question, we should look at it. But I can't imagine that the units of this company will perform better if they're part of a much smaller company, that's the benefit of it. Even if we're at 30% discount today.
That then ties us in the second part of the question. If you have a 14 PE business and you're trading at a 7 PE, and maybe it's worth more to somebody else, you can buy back that much more stock?
Again, my experience in light of the people who try to play God for the high PE company and buy the low PE, make a huge mistake. It never works out. Build your businesses for long-term value, that's what work out for shareholders. If I really believe what you said, then maybe we should consider that. I just -- I've never really believed that. I've never seen it happening through. And what I see companies are doing internally, which is bad, which you would agree with me, is they start to put more and more earnings to the high PE side because they think that's good for the company, because I think that's misrepresentation. So to put your confidence, your business is going to be -- if financial engineering add a lot of value, we'll consider it. But it's got to be real, it's got to be permanent, not just temporary because you have something take in place. Perhaps I don't mind the stocks trading where it is right now, for a while. Warren Buffet also wrote the thing that he wants IBM to trade really cheap for that 5 years. It's better for his own ownership, because they're buying back a lot of stocks. [indiscernible] Let me get back to you after that. Any of folks over here who want the microphone. If you do want, Michael, you stand up and get one.
Obviously, a lot of discussion about cadence in the money market's fund industry, Mary talked about it a little bit, it's her business. But for the banking industry as a whole or more specifically for JPMorgan Chase, have you thought through the economics of what it would mean to you if we went to NAVs for capital that was required and therefore presumably a lot of these deposits essentially flow to the industry?
I think Mary mentioned it, internally we already allocate capital. And we did it before. And we didn't wait to do that, though we thought there was risk in a money market fund. And look, either way we're fine. If somehow a lot of that money is in deposits, that could be a good thing. But then again if you look LCR and Basel III, you better be able to do some of those deposits and depending who they're from, which I think if portions of the marketplace is from a financial company, you basically can't invest that deposit profitably. If it's from a nonfinancial company, you might be able to invest it profitably. One of issues about Basel III, and I know -- I guarantee this is going to happen, because it's very prescribed. So every asset has a calculation and everyone could do the calculation, they're all going to come -- they promise to make it fairly competitive and fairly close, as you go through AAA, AA, A, CMBS AAA, AA, A, agency, nonagency, each probably has got -- and everyone is going to have a Basel III RWA and ROE. And the whole world is going to have pretty much the same numbers. And people actually are going to believe those numbers. You believe those numbers? You believe VAR? I mean, I'm being serious. That what people are going to do -- 10 years from now, you actually believe it and you're going to create [indiscernible] a great cloud of trade. How come we have the institution mortgage problems? You all believed it? I mean, so we're building this system somehow, instead of using your judgment. This could be all the mathematical. That's all. So what I would worry about, you have $1 trillion of deposits come in here to deploy it and you deploy in the highest Basel III RWA thing and that could end up in a huge mistake.
I just want to [indiscernible] what it seem a little bit on capital. If you were able to redeploy your capital as you see fit and you didn't have these artificial limitations on dividend or on share buybacks and investments, what would you do?
Look, I answer that in 2 pieces. What would I do in the short run or I do in the long run? I think, and that will also relate to what happens to our future. So right now, I think we're kind of out of the acquisition game. We've got huge organic growth opportunities. We'll go on for many years. I don't think that I said right now, are we going to be out of the acquisition game in 7 years from the Chinese banks 4x our size and maybe American Republic beside. We don’t want to hamstring our banks and that we need to compete aggressively through around the world, because it isn't that simple to say -- but we have the least consolidated banking system on the planet. You all hear it at the press over there, the least consolidated on the planet, and they're huge kind of scale. So I would play the game organic but I might get this 5 years or 10 years now, we're going to have to be free to compete. And it won't be great for America every -- Boeing and Caterpillar and Siemens were all getting everything they want from global Chinese banks and we're prohibited give all these various types of things. But I think we've said 30% dividend, the Fed is basically hoping for 30% normalized -- I don't know how they're going to calculate normalized earnings for now, they may obviously very well change that. I think that down -- [indiscernible] said is true, down the road, they may go higher. If the organic growth is going to be so fast, you will get higher dividends. And stock buyback, I've always been very thorough, we're not going to buy back the stock at a high price because we have a lot of capital. We're just not going to do it. So we're going to look for ways to deploy capital, do something smart with the capital. We will buy back a lot of stocks at what I call a good price. And we're not going to tell you the price. And Warren Buffett came out and said 110% of book value. I'm not going to tell you the price because I don't think you need to know. It will be -- we bought a lot back in $36, anything below book value you could assume if it's pretty good. We're not going to stand in front of a market that's collapsing, that's not our job. So what you think of it as a range, we will buy more if it goes down and less as it goes up around what I could consider a good price. If you want to do a test about stock buyback, do your own analysis and say, what if we only earn $4 a year for the next 10 years? What price would have been a bad price? And you can get a feel about kind of how we look at it. It's got to be a good long term price even if we earn a lot less than you all think.
Why don't you want [indiscernible]?
Right now, I don't mind a low stock price. I've said that, I mean it. That's number one. I'd rather use the capital to get to the 9.5% quicker. Dividends don't do that.
Once you get to 9.5%? They usually get [indiscernible].
Once we get to 9.5%, we're going to rethink that, but that's -- we're trying to figure out what's the time table.
I would argue it would go up if you had a higher dividend.
Yes, exactly, that's why not now. You guys spelled the stuff out. Well, we don't know yet. We've applied for what we think is a reasonable real number.
Your customers, many of them say we're not hiring because of regulatory uncertainties, tax uncertainties, what regulatory uncertainty is preventing you to do something? Were you holding back from doing because you're uncertain about a global regulatory environment?
What acquisition? I think we created a funny thing here, too, by the way, which is the big companies can acquire. Some of the small ones are desperately in need have been acquired. Then there's no one to do it. I think we should not go through the system. So that's one. But in terms of products, services, branches, organic growth, almost none. In terms of buying assets, we've [indiscernible] into a bunch of assets that I think would have been a home run but -- and good for the system we could try to support. Like we could buy some of the second tranche down in CMBS or something. Fabulous cash-on-cash returns, fabulous, what we believe, real returns, very low risk of them being bad returns, with Basel III huge RWA. And so instead of supporting our market, we just grab it and get the RWA quicker versus that decision. So if you think your specific decisions you've walked away from, just because we'd rather not use up the RWA that way. That can change, by the way, once we're at 9.5%, but it's not going to change before 9.5%.
On your duties as a roundtable member, what are guiding the President in terms of job situation?
I've been to other business Roundtable, the business Roundtable -- here [indiscernible] he had the jobs council [indiscernible] we're actually public. It's really a reasonable thing that all the things should be done. And the business Roundtable has them too. Because of regulation, energy taxes, employment, corporate taxes, individual taxes, it's not that different in stuffs you all read about. I think it's public, you go to the Roundtable site. Is that it? You're all speechless? You're all done? Folks, thank you very much for spending the whole day with us. We will talk to you all soon. We appreciate it.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: email@example.com. Thank you!