This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

JPMorgan's Dimon Seeks to Wield Scalpel, Not Ax, in 2014

NEW YORK (TheStreet) -- Jamie Dimon expects to manage JPMorgan (JPM - Get Report) surgically in 2014 and not with blunt moves as the nation's largest bank by assets tries to move past the record fines, criminal investigations and regulatory change that are casting uncertainty over its business.

Dimon said he expects to make surgical changes to adjust JPMorgan to regulations surrounding leverage ratios, capital requirements and the recent unveiling of the Volcker Rule, which seeks to curb proprietary trading at U.S. banking conglomerates. "We are doing the surgical stuff right now... The strategies of the business will not change." Dimon said at the Goldman Sachs Financial Services Conference on Wednesday morning.

"We have to adjust to this new world and the new world is going to take a lot of effort," he added.

Dimon's tone indicated that while JPMorgan has been flooded with scrutiny into its business in 2013, the bank isn't planning any major changes in the new year. A surgical approach also indicates that Dimon believes JPMorgan is in a strong position to adjust to the new regulatory environment.

About the recently announced Volcker Rule, Dimon said, "we will be able to manage with Volcker at this point." He also said that many banks, including JPMorgan, have gotten rid of the proprietary trading businesses the Volcker Rule targets.

Must Read: Must-See Chart: MasterCard Wraps Holiday Present

He also indicated that nothing in the Volcker Rule will force JPMorgan to flee the U.S. in search of a less burdensome regulatory climate, a scenario that has been bandied about by many skeptics of regulatory reform. If Volcker undermines JPMorgan's competitiveness relative to foreign jurisdictions, it would be a problem, according to Dimon. However, he didn't appear to believe that would be the case.

JPMorgan was stung by roughly $6 billion in losses in 2012, as a result of a backfired credit derivatives trade that many hope would be barred under new regulations such as Volcker.

Control Issues

Dimon indicated the firm's compliance and controls will be the top priority in 2014. He called such operations "priority number one."

"We've got control issues we want to fix," Dimon said the conference. JPMorgan has been stung in recent years by trading losses and an onslaught of regulatory sanctions that have cut at the bank's profitability. Many civil and criminal probes also remain ongoing.

In November, JPMorgan agreed to pay $13 billion to a host of state and federal regulators to settle civil probes into the bank's sale of mortgage securities during the housing bubble. Dimon said on Wednesday that 80% of the activity referenced in the settlement occurred at buinesses such as Bear Stearns and Washington Mutual that JPMorgan acquired during the financial crisis.

He also said JPMorgan had decided to settle with regulators, even if it came at a premium, because a drawn out battle with regulators could have been more damaging to the firm. "You may have to pay a premium to settle, we thought it was a far better thing to do," Dimon said, while noting that shareholders had called him asking JPMorgan to fight the government.

At a November press conference, New York State Attorney General Eric Schneiderman characterized JPMorgan's $13 billion settlement as "a peace premium."

New ROE Targets

Because JPMorgan will be spending roughly $2 billion in 2014 to improve its controls, technology and compliance in coming years, Dimon said the bank will be adjusting its return on equity (ROE) forecasts at its investor day in 2014.

While JPMorgan currently carries a 16% ROE target, Dimon indicated that target could fall to 14% given a rise in expenses as the bank seeks to meet a new regulatory agenda. He also appeared confident that JPMorgan's expenses will fall in the long run, amid optimization efforts. A re-pricing of spreads in businesses such as revolving corporate credit lines and trade finance could also mitigate some of JPMorgan's near-term expenses and its falling ROE.

"All things being equal, our expenses will be higher and our returns will be lower," Dimon conceded.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
JPM $61.72 0.00%
AAPL $111.60 0.00%
FB $94.26 0.00%
GOOG $646.67 0.00%
TSLA $215.58 0.00%


Chart of I:DJI
DOW 17,131.86 +47.37 0.28%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,838.6430 +8.1730 0.17%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs