JPMorgan’s chief faces rare investor criticism over spending plans- Forexsail

• Joshua
• 23 Mar, 2022

JPMorgan Chase’s chief executive Jamie Dimon is facing rare investor criticism over a multibillion-dollar plan to modernize the group’s technology and the decision to enter the UK’s highly competitive retail-banking market.

Shareholders told Dimon and his leadership team in February that the bank was providing insufficient detail about its ambitious technology spending plans, according to three people who attended the meeting in Florida.
 

Dimon, 66, was also told that JPMorgan needed to explain better its move into the crowded UK retail market with a digital-only bank last year, the people said. One person added there was particular concern over the expansion at a time when rival Citigroup is scaling back its international branch network.

“The uncertainty is pretty high [about the UK retail banking push]. I don’t think they’ve provided a lot of metrics to judge success at this point,” one of JPMorgan’s largest shareholders told the Financial Times.
 

The criticism is unusual for Dimon, who has built his reputation on pursuing growth while keeping a lid on costs since taking over in 2005.

JPMorgan declined to comment but people close to the bank say they intend to provide more detail on its plans at an investor day scheduled for later this year.
 

The biggest concerns from shareholders, analysts, and people close to the matter say, are around plans to increase spending on new projects this year by 30 per cent to almost $15bn — the largest proportion of which is dedicated to tech.

The investors say JPMorgan has only provided limited information about where that cash will go — so far earmarked for areas such as cloud capabilities, new hires, and marketing — while the bank has cautioned that the spending could lead to it missing a target for return on tangible common equity, a key measure of profitability, this year and next.
 

The boost to tech spending at the bank comes after Dimon expressed frustration that JPMorgan has lost ground to more tech-savvy rivals.

“Jamie points to fintech where they shouldn’t have lost share. So there’s a focus on not losing out again,” the JPMorgan investor said.
 

When JPMorgan announced the spending plans in January, the bank’s shares fell 6 per cent, despite it also unveiling record profits last year. Overall, the bank’s stock has fallen about 15 per cent since the announcement while the broader KBW banking index is down roughly 10 per cent over the same period.

“I’ve not talked to one investor globally that has disagreed with our conclusion that JPMorgan needs to provide better transparency on where, why, and when they will spend this record amount,” said Mike Mayo, a banking analyst at Wells Fargo.
 

Dimon’s reputation for “financial discipline now has a question mark after it”, said Mayo, who had recommended JPMorgan as a buy to clients for seven years but withdrew his endorsement following the January earnings report.

On the fourth-quarter earnings call in January, Dimon said he felt investors’ “pain and frustration” over the spending and offered a few examples of how the bank has invested in new technology over the years, including $2bn on new data centers.
 

Mayo said the earnings call was the second-worst Dimon has given as CEO, eclipsed only in 2012 when he described the London Whale incident as “complete tempest in a teapot”. In that case, JPMorgan had suffered a multibillion-dollar loss on credit derivatives by a single trader.

Dimon “recognizes that he was too flippant” and that detailed explanations of the spending plans were in short supply during the earnings call, according to one person familiar with the chief executive’s thinking.
 

“It seems pretty clear that the market wants to hear more from us,” Jeremy Barnum, JPMorgan’s chief financial officer, said at an industry conference last month as the bank announced the investor day, which has been scheduled for May 23. Mayo said the scheduled investor day underscored how JPMorgan had been “remarkably receptive to investor concerns”.
 

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But as with investors, some JPMorgan employees are also skeptical about the spending and unclear where the money is going to go. “They touted this crazy big number,” said one JPMorgan banker. “There’s a lot of head-scratching and talk internally of people like ‘we don’t see this’.”