November 30, 2023

Investment Banking

Let Your Investment Banking Do The Walking

Is JPMorgan slipping? Analysts will be asking CEO Jamie Dimon at conference

JPMorgan Chase CEO Jamie Dimon speaks to the Economic Club of New York in the Manhattan borough of New York City on Jan. 16, 2019.CARLO ALLEGRI/Reuters

Concerned that JPMorgan Chase & Co. might be starting to lose its profit advantage over competitors, analysts and investors are lining up questions for long-time CEO Jamie Dimon and other executives appearing at the bank’s first investor conference in two years on Monday.

The meeting was scheduled after JPMorgan stunned investors in January by revealing that 2022 costs would increase by US$6-billion, or 8 per cent, without forecasting fully offsetting revenue gains or persuasive arguments that new business investments will eventually pay off.

In April the bank again surprised investors by how much excess capital had been lost in the first quarter to unrealized losses on its bond portfolio and market risk even as it anticipated higher capital requirements from regulators.

JPMorgan stock, which has outperformed other big banks for more than a decade, has lost 24 per cent this year through Wednesday, compared with a 20-per-cent drop of bank stocks in the S&P 500.

Some analysts worry JPMorgan, the country’s largest lender, has grown complacent. “To what degree has JPM rested on its laurels?” Wells Fargo analyst Mike Mayo asked in a note this week.

Still, JPMorgan remains “best-in-class,” Mr. Mayo said. It leads in capital markets, investment banking, credit cards and consumer banking and has produced superior growth, operating efficiency and returns since the financial crisis. Its shares still trade at premium valuations to other banks.

Monday’s meeting in New York is scheduled to start with the release at 6 a.m. ET of slides that will accompany executive presentations, which will run from 8 a.m. to 2:30 p.m. ET.

Analysts and investors will quickly search for any changes in the bank’s outlook for net interest and fee income, expenses and profitability, as shown by return on tangible common equity.

In the month after 11 of the past 15 investor meetings its shares have outperformed other bank stocks, according to analyst Jason Goldberg of Barclays.

Its shares could rally if the bank increases its outlook for net interest income, says it can meet its profitability target more quickly or demonstrates that the new spending will pay off, Mr. Goldberg added.

Executives’ presentations are expected to broadly track themes that Mr. Dimon, 66, has been emphasizing in recent public appearances and his April investor letter.

On costs, Mr. Dimon has said that JPMorgan will not try to please short-term investors by curtailing spending on necessary business investments. It must spend to compete against giant technology companies as well as fintechs and other financial firms, he has said.

On capital, Mr. Dimon may discuss what he said in his April letter is a dilemma when managing capital for a bank of JPMorgan’s size and complexity: whether it should restrict its growth to hold down its capital requirements to achieve a higher return on equity, or accept a lower return in order to grow.

Investors are also likely to push Mr. Dimon on recession risks and inflation, as well as market volatility, loan growth and borrower defaults.

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