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Jamie Dimon, who built JPMorgan Chase & Co. into the world’s biggest investment bank, said threats to its dominance may come from Beijing, Silicon Valley and a San Francisco-based rival with a stage-coach logo.
“We know there are going to be attacks everywhere,” Dimon told investors at an annual meeting yesterday at the firm’s New York headquarters. Asked about challengers, the chief executive officer cited companies from Industrial & Commercial Bank of China Ltd. to Google Inc. Wells Fargo & Co., founded in 1852 to serve California’s Gold Rush pioneers, will be “a major investment bank” within five years, he said.
Dimon, 57, guided JPMorgan through the financial crisis without posting a quarterly loss and expanded the firm by acquiring rivals that faltered. As the company grappled with costs from government probes last year, its profit was surpassed by Wells Fargo, the fourth-biggest U.S. lender, which relies most on retail banking and mortgages.
“My operating assumption has always been and always will be that we are going to have huge, tough competition from Goldman Sachs and Wells Fargo to some new entrants,” Dimon said. “Wells Fargo will be in our business. I have enormous respect for them.”
Wells Fargo, led by CEO John Stumpf, 60, has been expanding its securities unit. The lender opened trading floors in 2012 in Charlotte, North Carolina, bolstering a securities business acquired with the purchase of Wachovia Corp. four years earlier.
‘They’re Huge’
ICBC, based in Beijing, is seeking to triple earnings from outside its home country by 2016. China’s biggest financial firms are “ambitious” and have “strategic reason to win,” Dimon said.
“They’re huge, their clients are huge,” he said. “I expect very large, tough Chinese competitors all around the world.”
JPMorgan generated $26.6 billion of revenue from corporate advisory, underwriting and trading in 2013, the most of any global investment bank, according to data compiled by Bloomberg. Goldman Sachs Group Inc., the major U.S. bank most reliant on trading, had $34.2 billion in total revenue, including other businesses such as asset management.
California technology companies are delving into electronic payments. Google, based in Mountain View, created Wallet, a program that lets users make transactions in stores and online with their smartphones. Cupertino-based Apple Inc., which has more than 400 million credit cards on file with its iTunes Store, is exploring an expansion of its mobile-payments system, a person with knowledge of the matter said last month.
EBay’s PayPal
EBay Inc.’s PayPal unit is a leading online payments system, which accounts for 40 percent of the San Jose-based company’s revenue and has 143 million active users.
Technology companies “all want to eat our lunch,” Dimon said. “I mean every single one of them, and they’re going to try.”
Dimon may be overstating his firm’s vulnerability to blunt criticism of its size, said Erik Gordon, a business professor at the University of Michigan in Ann Arbor. JPMorgan is the biggest U.S. bank by assets and the country’s largest credit-card lender. It counts 80 percent of the Fortune 500 as clients, according to presentations at yesterday’s meeting.
“He’s downplaying the fact that at the end of the day, JPMorgan is probably as powerful as any financial institution, including going back to the original JPMorgan,” Gordon said in a telephone interview. “It’s his way of saying, ‘Don’t be afraid of us and how big we are.’ My guess is that he doesn’t really go home at night and worry about Wells Fargo.”
Cutting Jobs
Dimon’s comments on long-term threats came near the end of his company’s annual investor meeting. The bank can increase profit by 50 percent to $27 billion in four to five years as higher rates boost interest margins and legal costs subside, according to presentations posted yesterday.
The bank also said it would eliminate about 8,000 jobs in consumer and mortgage banking this year, while hiring in areas such as compliance and risk management. Dimon said he will stick with home lending, after calling mortgages “the most painful business ever.” The loans fill a key need for consumers, he said.
JPMorgan slipped 0.6 percent to $56.67 at 9:44 a.m. in New York after dropping 1.7 percent yesterday. It has gained 19 percent in the past 12 months, trailing the 24 percent advance of the Standard & Poor’s 500 Financials Index.
Trading revenue dropped about 15 percent so far this year compared with the same period in 2013, Dimon said yesterday. Lower levels of client activity, especially in fixed income, pressured results, the bank said.
‘Dog Days’
JPMorgan’s earnings last year were marred by clashes with regulators and $23 billion in legal settlements that contributed to the bank’s first quarterly loss under Dimon. The CEO is selling or closing businesses he considers risky and dropping non-U.S. clients who may invite regulatory scrutiny. He’s fending off allegations the firm rigged markets and ignored suspicious activity by clients.
Yesterday’s meeting concluded on an upbeat note, with a song from English rock band Florence + the Machine.
“The dog days are over,” the lyrics blared from speakers. “The dog days are done.”
Who/what does JP Morgan fear?
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