J.P. Morgan's View Is Rosy -- WSJ
March 01 2017 - 3:05AM
Dow Jones News
By Emily Glazer
Executives at J.P. Morgan Chase & Co. struck an upbeat tone
during the firm's annual investor day, painting a picture of bank
businesses mostly poised for growth.
That marked a change from presentations in previous years when
the largest U.S. bank by assets has had to defend its size,
strategy and prospects as the financial sector struggled with
stiffer regulation, low interest rates and hefty legal bills.
The optimistic outlook comes against the backdrop of buoyant
stock markets, particularly for financial shares. After Donald
Trump's surprise election as U.S. president, banks' shares have
soared, with J.P. Morgan's stock up nearly 30% since Nov. 8.
J.P. Morgan Chairman and CEO James Dimon said the new
presidential administration has political, legal and regulatory
areas going from "flashing red to flashing green."
And the bank's finance chief, Marianne Lake, said Tuesday that
prospects look good, even without the possible regulatory and tax
overhauls by Mr. Trump.
The bank expects its balance sheet to increase to about $2.6
trillion this year from $2.49 trillion at the end of 2016. In
recent years, the bank has held its total assets steady or shrunk
them in the face of regulatory changes.
Executives said core loans should increase about 10% over a year
earlier, and the bank expects $30 billion in net income over the
medium term. In 2016, J.P. Morgan posted record net income of $24.7
billion.
During Tuesday's presentations, J.P. Morgan also placed less
emphasis on cost-cutting, which had been a big theme for it and
other banks in recent years.
Expenses this year are expected to rise to roughly $58 billion
to self-fund investments and growth in 2017, versus $56 billion in
2016.
Improvements in oil prices and the energy sector's recovery may
also lead the bank to release a portion of its $1.5 billion in
energy-related loan-loss reserves. Any significant reserve releases
would occur in the second half of this year or later, Ms. Lake
said.
As for Washington, Ms. Lake spelled out the bank's wish list, or
"principles for responsible regulation." It includes coordination
and consistency among agencies; aligning rules across global
jurisdictions, especially eliminating the "gold-plating" that has
made U.S. rules more stringent than others internationally; and
reviewing the regulatory landscape in the context of cost benefits
and economic growth.
"The time does feel right to provide more...flexibility," she
said. Potential changes may not necessarily mean less regulation
but may revolve around how rules are implemented, Ms. Lake
said.
Mr. Dimon, who serves on President Trump's economic council,
echoed her sentiments. "We want a collaborative regime to talk
about these things," he said.
Among the bank's individual businesses, commercial banking chief
Doug Petno detailed continued boosts in investment banking and
middle-market revenue. The latter, he said, could turn into a $1
billion business.
Corporate and investment banking chief Daniel Pinto said the
bank doesn't have to increase its risk to boost its profitability.
"I have no doubt this business will grow," he said.
Mr. Pinto also injected a note of caution around markets
activity. "I'd rather be a bit more cautious in the way we plan,
the way we deliver, manage our expenses," he said.
In asset and wealth management, chief Mary Callahan Erdoes
emphasized the bank's growth across the spectrum, from retail
wealth-management clients to ultrahigh-net-worth customers. She
focused on five- or 10-year returns in asset management rather than
more challenging near-term conditions.
On the consumer banking side, chief Gordon Smith said the unit
has completed nearly all of its $2.4 billion of cost-cutting and is
keeping a close eye on other opportunities. He emphasized the need
to continue delving into digital and mobile banking.
Executives also repeatedly referred to technology investments
and digital advancements -- led by Matthew Zanes, chief operating
officer, and Dana Deasy, chief information officer -- that help to
cut costs or boost revenue. J.P. Morgan for the first year set up a
detailed display with about a dozen stations featuring applications
and programs built through its roughly $9 billion in technology
investments.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
March 01, 2017 02:50 ET (07:50 GMT)
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