JPMorgan's Dimon: 'Intensity is the same' after decades on top

JPMorgan Chase (JPM) CEO Jamie Dimon said Monday he knows he can’t be CEO “forever” but stated his intensity “is the same” after nearly 18 years as boss of the nation’s largest bank.

The comments from the 67-year-old Dimon came during JPMorgan’s annual investor day in New York City, where the CEO discussed how much longer he might stay in his job and what type of person could succeed him without offering any hints that his tenure might end soon.

Those issues become more relevant with each passing year. Dimon became CEO of JPMorgan in late 2005, after it merged with Bank One, and he is the only big-bank CEO still standing who was in charge during the height of the 2008 financial crisis. He was also previously CEO of Bank One from 2000 to 2004.

One of his peers, Morgan Stanley CEO James Gorman, announced on Friday he would step down within the next 12 months. Gorman, 64, has been running that Wall Street bank since 2010.

One analyst asked Dimon Monday how many more years he planned to stay in charge. The CEO said “three and a half,” while laughing, but then said “we have the same plan we had before” without specifying if the number he vocalized was real or not.

When asked if he still had the same drive for the job he said he did. “I am not going to change,” he said. “I’m not going to play golf. I can’t do this forever, I know that. But my intensity is the same. I think when I don't have that kind of intensity, I should leave.”

He didn’t drop any hints as to which of his executives might have the best chance of taking his job someday, but he did say the bank's directors know all of his senior managers and the succession question, he said, is “up to them.”

"The board is very comfortable with the really top choices here."

The most important qualities in the next leader? Dimon mentioned hard work, grit and courage while also using a few expletives to drive his points home.

“If you don't have grit, you don't have it," he said. "If you don't have courage, you don't have it."

A $3 billion bump from First Republic

His key executives spent much of the day telling analysts how the country’s biggest and most profitable bank intends to get even bigger and take in more income despite chaos in its industry, higher interest rates and a possible recession.

A key update was that JPMorgan raised its forecast for net interest income, the difference between what it earns on its loans and pays for its deposits, by $3 billion. That jump is due to JPMorgan’s May 1 acquisition of the bulk of First Republic, which was seized by regulators after a massive outflow of deposits.

The bank now expects net interest income to be $84 billion in 2023. Many banks, especially regional lenders, are projecting lower net interest income this year as they pay more for deposits and keep pace with rising interest rates.

The bank said the First Republic acquisition would “modestly” improve its overall net income at an annual rate of $500 million before including a restructuring cost over the next two years.

"If we wind up doing better than we assumed, great," said JPMorgan CFO Jeremy Barnum.

Dimon warned that interest rates could still climb further after a year of aggressive hikes from the Federal Reserve, and that banks should be ready for rates as high as 7%.

"I think everyone should be prepared for rates going higher from here."

AI and bank branches

JPMorgan provided several examples Monday of areas where it expects additional investments and growth.

Global chief information officer Lori Beer said the company plans to invest an additional $1 billion into artificial intelligence investments by the end of the year, while its CEO of consumer banking said JPMorgan also expects to add more brick-and-mortar bank buildings across the US.

JPMorgan anticipates that it will be able to cover 70% of the US population within a 10 minute drive of its branches, up from 60% today, said Jennifer Roberts, CEO of consumer banking. The company currently has more than 4,800 retail locations.

“You will see us build more branches then we close resulting in a modestly larger branch network over time,” she said.

The First Republic deal is helping JPMorgan add to its heft. The acquisition added 200 advisers and $200 billion in client assets to JPMorgan’s wealth management operations. The number of financial advisers went up 5.3%, to 4,950.

The bank said it will close some First Republic branches where it already has brick-and-mortar banks nearby while others in "premium locations" including San Francisco and New York City will help accelerate its strategy with affluent clients.

A 'good price to pay'

JPMorgan's chief operating officer Daniel Pinto said the US economy “at the moment is doing fine” but “it's very unlikely that we are not going to have a recession.”

"We cannot ignore that there are plenty of challenges at this time and sources of uncertainty."

He cited his Argentine background to say that he has lived through inflation and hyper-inflation, and that a recession is “a good price to pay” to solve the problem of inflation.

JPMorgan did set aside $22.8 billion in reserves for credit losses during the first quarter, up from 22% from a year ago, because it anticipates deteriorating credit quality, loan growth and economic conditions.

“We're already seeing credit tightening up," Dimon said.

It also expects expenses to rise another $3 billion due to the First Republic acquisition, to $84.5 billion.

Pinto said JPMorgan expects investment banking fees and trading to be down roughly 15% through the second quarter from the year-ago period, with a pickup in the third and fourth quarters of the year.

“We have a period now of low volatility, but I don't think that that situation will stay for the rest of the year,” he said of the trading segment.

And JPMorgan won’t be able to completely escape the fallout from the Silicon Valley Bank and Signature Bank failures in March. It said it expects it will have to pay the Federal Deposit Insurance Fund a special assessment of $3 billion to help absorb the losses from those seizures.

Other large and mid-sized banks will also be asked to help cover those costs.

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