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JPMorgan Is Not Expected To Expand Further Its Cost Cutting Targets


There will be one big question at JPMorgan Chase & Company’s annual investor day on Tuesday from top attendees’ minds and it will be:  "How can the bank keep a tight lid on costs without hurting its ability to grow revenue?" Jamie Dimon, JPMorgans chief executive, and about five of his top executives are anticipated to give presentations on the banks diverse range of businesses at the day-long occasion, with estimates on income, expenses and shareholder revenues. They are also expected to propose some fresh information on how the bank is using technology to increase operations and reduce costs, an initiative Dimon and his delegates have long been pushing.

However, JPMorgan is not anticipated to increase further its cost-cutting goals, for the first time in many years. An analyst stated, the bank is only halfway done a previously broadcasted $4.8 billion cost-cutting goal, and cutting any deeper could hurt its businesses. JPMorgan has already reduced over 25,000 jobs since 2011. That would run against to what other large banks have been doing. Executives from banks, including Morgan Stanley, Goldman Sachs Group Inc, Bank of America Corp, and U.S. Bancorp have all lately talked regarding additional cost-cutting efforts.

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For the reason of that, and the troubles at European competitors, top brass at JPMorgan have an incentive to reinvest in key businesses to take market share from competitors who are pulling back. "This is the sort of environment that Jamie Dimon and JPMorgan live for: sluggishness in the environment, competitors feeling pain," stated by Mike Mayo, a bank stock analyst with CLSA. All the same, analysts stated “they and their investor clients will want more insight into how JPMorgan strikes the fine balance between cutting costs to protect profits, and spending money for growth at a time when interest rates remain stubbornly low and the economy shows signs of becoming sluggish.”

A number of analysts and investors fear that JPMorgan may have to lessen its profit goal once more. The banks publicly stated goal going into investor day is to attain a 15% return on tangible common shareholder capital over the long term. Which is down from a 16% goal in 2013, that JPMorgan lowered to a range of 15-to-16 percent in 2014. JPMorgan provided returns of 13% in both 2014 and 2015. "What is that going to be and how can they get there without higher interest rates?" said Chris Mutascio, an analyst with Keefe, Bruyette & Woods.

The previous year, executives presented a slide in which higher percentage would contribute approximately half of the extra profits needed to reach the 15% target. However, with the exception of the small increase in rates from the FED in December, that tailwind has not appeared. JPMorgans investor day is about more than just one bank. As the largest U.S. lender by assets, with widespread consumer and investment banking operations, its executives are well positioned to propose wider perspectives on the state of banking and the worldwide economy. As in previous years, Dimon is likely to speak out on topics ranging from interest rates and energy markets to financial regulations and foreign affairs. "Given the size and breadth of their consumer and commercial client base," stated by Mutascio, "JPMorgan has the pulse of the U.S. economy."

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