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Embracing Digital: JPMorgan Chase Rethinks Delivery

A new approach to branches, a dynamic competitive environment and the implications of $2 billion in compliance-related investment were among the topics covered by CEO Jamie Dimon and his management team at the bank’s recent Investor Day.

Pride In The Franchises: Dimon

Still, chairman and CEO Jamie Dimon emphasized that JPMorgan Chase's business is strong and growing. "I'm so damn proud of this company," he declared during Investor Day. Referring to the bank's four business areas -- in addition to CCB, that's Corporate and Investment Bank (CIB), Commercial Banking and Asset Management -- he called them "four of the best franchises in the world." Dimon emphasized that the four businesses help each other and that he sees no reason to abandon the model, regardless of too-big-to-fail-related regulatory pressures or an undervalued stock price. "We have four wonderful franchises," he said. "You don't mess them up while you figure out what the new world will be." In fact, if market conditions change significantly JPMorgan Chase will be able to respond to them "from a position of strength," he said, pointing out "We earned $30 billion pretax -- we have these wonderful franchises."

When asked during the Investor Day question/answer session whether he was concerned about the expenses related to the bank's growth strategy, Dimon responded: "Drive good revenues and there are good expenses." He also suggested that if recent improvements (though modest) in the global economy and lending market continue, "There will be an inflection point … the economy starts to grow, loans go up, payments go up, interest rates are going up … [We could be] the exact same company, and we are making $5 billion more, and we didn't do a damn thing. I think that may happen."

He did acknowledge the bank has experienced "pain in the mortgage business … it's been the most painful business ever. We've lost a tremendous sum of money." But Dimon emphasized, "We are here for the long gain," pointing out that JPMorgan Chase's mortgage business "has been cleaned up, it's down to 12 products. We're going to stay in it [and] build the best mortgage business. It'll be smaller."

Another unavoidable expense area is regulation and risk management, and the bank previously had reported it expects to spend some $2 billion this year to improve controls, systems and processes in areas such as anti-money laundering, customer onboarding and know-your-customer. During the Q&A Dimon had some reflections on these investments. "All these things will derisk the company," he said. "We will automate a lot of it." He described the investment as comprising "10,000 people, it's global, building new systems. It's part of how we drive more efficient operation … I'm hoping we've maxed out on those expenses, but the rules may change again. We have to deal with whatever the rules are."

Indicating the scope of the project, Dimon said, "We have 15,000 programmers, my guess is probably 5,000 are now working on all these things, [and] not just the Volcker Rule. We're talking about 1,000 systems. We've got a lot of work to do -- that's why we have to make sure we do it right. Those resources don't go away, they get reinvested in other things when the time comes."

Another area of risk that Dimon acknowledged is that of potential new competitors. "I'd be an idiot not to think that the Googles, Apples … all want to eat our lunch -- every one of them is going to try. We have huge resources around this." A new era of competition in consumer banking and payments with technology companies is "a given," he said.

Dimon also anticipates more competition from "some big shadow banks," as well as more traditional institutions such as Wells Fargo, which he expects will be stepping up its activities in the investment banking space. Chinese financial institutions also are on JPMorgan Chase's radar. "They are ambitious, they have reason to be ambitious, and have a strategic reason to win," Dimon said.

Regarding the competitive landscape, Dimon said, "My operating assumption will continue to be that we will have huge, tough competition … We know we are going to be attacked everywhere. That's capitalism, that's a good thing."

Speaking of capitalism, Dimon had perhaps surprisingly high praise for the performance of the U.S. economy. "I think America's stronger than people think, and may come back stronger," he declared during the Q&A, adding:

"Corporate America, the middle market and small-business America are in very good shape … Credit is back to where it was before the crisis … large corporate America, huge amounts of capability … the debt/service ratio hit an all-time high,[but] it's already back to where it was in 1985 … America still has the best hand ever -- we have the best military, the best universities, the best financial system … there is nowhere else in the world where you can raise money, get capital, invest, startup, fail, start again … [there's] unbelievable innovation … a great work ethic, a great rule of law. Our democracy is actually quite functioning -- that is, you don't question if it will still be a democracy in 20 years. That's why Warren Buffet does so well, [he has] abiding faith in the American system."

Dimon cited the immigration stalemate and income inequality as issues that could detour the comeback. "If we did the McCain/Schumer deal, the economy would grow," he said. "We're sending brains overseas." Dimon added, "I do think income inequality is an issue the country should face … but the fact is, we have this unbelievable hand, I'm unabashed, we can do it … I just hope it's sooner rather than later, to me we're missing the secret sauce of confidence."

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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Byurcan
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Byurcan,
User Rank: Author
3/10/2014 | 7:26:46 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
I agree. Long live the branch!
Kelly22
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Kelly22,
User Rank: Author
3/10/2014 | 7:25:27 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
I love the people who work at my local branch! Last time I went, they all waved goodbye and wished me a good weekend. ATMs aren't nearly as friendly.
KBurger
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KBurger,
User Rank: Strategist
3/6/2014 | 6:13:23 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Well, you guys better enjoy your time in the branches now because based on what we are seeing across the industry a) there will be many fewer branches in which to mingle and b) those that remain will offer a significantly different experience compared to what is available now. It won't be too long before your human interaction in the branch will be via video screen or kiosk, or maybe even with a robot!
Byurcan
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Byurcan,
User Rank: Author
3/6/2014 | 5:30:15 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
No. Artificial Intelligence will be the ruin of us all. didn't you see "2001: A Space Odysessy" or "Terminator 2?"
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
3/6/2014 | 5:25:37 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
So if I ask Siri to do a mobile deposit for me, that doesn't count as human interaction?
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
3/6/2014 | 5:24:28 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Citi is introducing new ATM's with increased transaction capabilities to pursue that kind of strategy with their branches. Will be interesting to see how successful they are with that, and if other major banks in the U.S. follow suit.
Byurcan
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Byurcan,
User Rank: Author
3/6/2014 | 1:40:55 AM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Agree, sometimes you just need that human touch. Everyone wants to do everything today on their blamed mobile devices. Where's the human interaction! Where's the love!
Becca L
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Becca L,
User Rank: Author
3/5/2014 | 10:41:52 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
I do this too! I don't know why, it just seems like the better option, even if it isn't the fastest or most modern. Maybe I just like the "hey, howya doing?" convo with the teller. Sorry to disappoint, Kathy :-(
KBurger
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KBurger,
User Rank: Strategist
3/5/2014 | 9:14:16 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
OK, now that's just sad -- even if you don't do mobile deposit you can deposit checks at ATMs now. Of course, while you're standing in line you can always check your email, texts, Twitter, etc. on your smartphone (assuming you have one).
Byurcan
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Byurcan,
User Rank: Author
3/5/2014 | 6:35:26 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Yesterday I waited on line at a branch to deposit a check, and loved it!
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