- Dimon says JPMorgan's board has "really top choices" whenever he does retire
- Company's recent First Republic Bank acquisition will boost net interest income by $3 billion this year
- With 300 concepts currently in development, AI should add $1 billion in business value to the firm in 2023
In the wake of a high-profile Wall Street retirement last week, might be forgiven for anticipating news regarding succession plans for longtime JPMorgan Chase CEO Jamie Dimon.
They didn't. At the annual investor day for the largest U.S. bank, the bank's leader said he has no plans to retire. Moreover, the company's plans for what comes next remain unchanged.
"I'm kind of like I was when I was eight (years old)," he said. "I'm not going to change. I'm not going to go play golf."
That means Dimon isn't planning to follow the lead of James Gorman, who announced last week he'll step down as CEO of rival Morgan Stanley sometime in the next year.
Noting, "my intensity is still the same," Dimon said he still loves what he does. Once he senses his passion waning, he added, he'll know it's time to step aside.
"I don't think CEOs should retire in place and cut back," he said, adding later that the firm has groomed capable potential replacements. "I think the board is confident that they have really top choices here."
Assessing Credit in the U.S. Economy
With questions about his future out of the way, Dimon spent more time discussing events in U.S. financial markets.
After the turmoil that surfaced in the U.S. banking system in March, JPMorgan earlier this month completed the acquisition of First Republic Bank, one of a number of regional lenders saddled with substantial unrealized balance sheet losses.
More credit problems in the U.S. financial system likely will arise, he said. But he's optimistic they won't be a repeat of the 2008-09 global financial crisis.
"There will be a credit cycle," Dimon said. "My view is it will be very normal."
Underlying credit conditions, he said, remain better than they were during the financial crisis. But certain segments of the economy-such as office properties and construction loans-could face distress.
He also said banks generally appear in better shape to handle whatever credit problems do arise than alternative lenders that have emerged since the last crisis.
"I don't think (credit distress) will be systemic, but it may cause some issues away from banks," he said.
He also cautioned regulators from going too far in trying to alleviate risks that may have caused the recent turmoil, including raising capital requirements for banks. He noted that existing stress tests may have lulled banks and investors into a false sense of security as interest rates rose.
"Higher capital charges would hurt smaller banks but not bigger banks," he said. "Regulators should be very, very careful about how they want to allocate capital in the system"
Expectations For 2023
The company's baseline scenario remains that the U.S. will encounter a mild recession. That has decreased its targeted return on average tangible shareholder equity, a key performance metric, to 17% from 20% at the end of last year.
The company anticipates charging off losses on 2.6% of its credit card balances, up from 1.5% last year, and 0.5% of its auto loans, up from 0.2% a year ago.
As for the First Republic acquisition, Jeremy Barnum, JPMorgan's chief financial officer, said it would add $3 billion to the company's 2023 net interest income. It also will increase expenses by $3.5 billion to $84.5 billion.
Since the May 1 deal, deposits have increased slightly at First Republic. Though conceding it's too soon to predict, Jennifer Piepzszak, co-CEO of consumer & community banking, said the deal should help JPMorgan maintain flat or slightly higher deposits between this year and 2024. Previously, the company had expected deposit balances to fall slightly.
Aside from deposits, First Republic's private wealth management business will boost the company's client assets under management by a third to $800 billion. Each of First Republic's investment advisors, on average, manages about $1 billion in client assets.
Meanwhile, the company's technology team foresees artificial intelligence contributing $1 billion in value by the end of this year. It projects a 34% increase in AI "use cases," with 300 AI business concepts currently in development.
Fifty of those AI pilots exist within the firm's asset and wealth management division. That division already has downloaded 30 years of proprietary research into its own AI system, Spectrum GPT, to aid portfolio management.