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The Deal: JPMorgan Cautious on M&A, Defensive on Dimon

JPMorgan has denied that Blythe Masters, who oversees the commodities arm of the bank, lied during a FERC investigation. "We'll be standing behind some of the people you have read about," Cavanagh said.

On the debate on Dimon's responsibilities, he added, "It should be for the board to decide. It makes complete sense [to maintain the status quo] when you look at three years running of record results and businesses across the board in great shape."

JPMorgan posted a 25% rise in first-quarter profit to $6.5 billion, though much of this came from releasing funds put aside for potential losses from credit cards and mortgages.

Consumer banking profit fell 12% to $2.6 billion, while corporate and investment banking profit shed 2% to $2.5 billion.

Cavanagh reiterated a target return on equity of 16% for JPMorgan, a level well above most of its peers and one that has prompted several observers to take an "if it ain't broke, don't fix it" approach to the firm's corporate governance scandals.

As an indicative measure, JPMorgan had a return on equity of 11.32% for the first quarter, as opposed to 10.69% for Goldman, Sachs & Co., 13.45% for Wells Fargo & Co. and 4.52% for Citigroup Inc. However, bank analysts caution against using these ratios for direct comparison, given the differing business mixes across banks. Before the credit crisis, ROE was often above 15% for the sector.

More broadly, Cavanagh acknowledged competitive pressure across the securities services business for banks. This is the segment that provides custody, fund accounting and administration to institutional investors, alternative asset managers, and debt and equity issuers. "All clients in financial services want the same for cheaper or more for the same price," Cavanagh said. "So it's no surprise there is a steady pressure [on returns]. You need scale and ability to drive costs lower."

The banker defended JPMorgan's capital levels. While the company used to lead its rivals, it has now fallen into the middle of the range. The firm had Basel III Tier 1 common ratios of 8.9% at the end of the first quarter, which is well above regulatory requirements.
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