JPMorgan Chase's

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retail consumer banking operation spans more than 5,400 branches across the U.S., including its most recent acquisition of

Washington Mutual

. It is one of the cornerstones of the New York-based financial institution's successful diversified bank strategy.

Charlie Scharf, head of JPMorgan's Retail Financial Services, recently spoke to

in an exclusive interview, in which he weighs in on how the New York financial institution is staying competitive in a tough banking environment. Lots of banks talk about deepening their relationships with customers. How is JPMorgan's retail strategy different than other banks and why is it going to be perhaps more successful than others?

Charlie Scharf: We don't sit in a room and try and come up with something which is special or different than what

Wells Fargo

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Bank of America

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does. There are 8,000 banks in this country today that we compete against. What we sit in a room and

say is 'What can we do that's really great for our customer and makes sense for us economically?'

This isn't an industry where you know you've got to come up with something totally new and different to succeed. What we've got to do is a great job for our customers every day and they'll do business with us.

It seems like some banks tout that they are good at very specific aspects of retail banking, such as customer service or sales and that it is very difficult for one bank to be great at all things. What do you say to that and what would you say to critics who allege your retail strategy is average at best?

We've had very consistent and steady growth over a long period of time now. That's what great performance is.

Customers want to know that you're doing something consistently well for them year after year after year.

This isn't rocket science here. This is when a customer walks in the door, we can't sit there and decide do we want to be focused on customer service or do we want to be focused on getting them in the right products and services. You have to focus on both. Otherwise you're not going to do a good job for them and they're not going to do business with you.

Everything we do is built around that.

There is no one thing which is going to make us very successful. It's a coordinated series of things that make for a great customer experience.

Can you talk about some mistakes JPMorgan made in the past and what the bank learned from them?

I don't think we made a lot of mistakes in the branch business. Overall I feel great about what we've done.

On the lending side I think our clear mistake was too much home equity business that wasn't done to the standards that we would have liked them done at. The standards deteriorated across the entire industry and we let ours deteriorate as well.

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The industry recently has been dealing with a refinancing boom due to low interest rates. Banks including JPMorgan Chase seem to be overwhelmed by applications coming in. Can you address what has been going on?

Well, it's one of the difficulties about managing a mortgage business. The volume side of the business is extraordinarily volatile based on what happens with mortgage rates and interest spreads. Rates dropped below 5% and volume for us on a daily basis doubled and even almost tripled on some days. It becomes a very big management challenge to serve all the customers that you want to serve.

But we are very active about reassigning people within the company to help handle that volume and, as aggressively as we can, add resources to handle as much for the volume as we possibly can. It's clearly something that everyone is dealing with across the industry and it's a reality of the business.

What about purchase loans? Can you discuss trends you are seeing in that area?

The majority of the volume being done is refinance volume, but something like, depending on the day, 25% to 30% of the volume is purchase volume.

People who used to be able to go out and purchase a home and put no money down can't do that anymore. Now depending on the market you're in, you have to make a real down payment. There is plenty of credit. We ourselves

have no limits on the amount of balance sheet that we're willing to use for loans. The limit is based upon what the demand is there.

And when you say volume is that applications or actual closings?


Acquisitions -- do they get any easier to integrate?

Absolutely it does.

Back in year 2000

when Scharf arrived at JPMorgan Chase's predecessor Bank One, we did not have a group of people that knew how to do deposit conversions or loan conversions or anything. We now in this company have people that have done 20 to 25 conversions. We've got a trained group of people that knows the day we decide we're buying something, how to go in, evaluate the systems, write the programs and actually run the project to convert the technology. So while they're not easy, the more you do the better you get at it.


The Washington Mutual conversion ... is the biggest and most complex that we've done.

In late May we did the first conversion

of Idaho, Washington state and Oregon. It's by far the fastest one we've ever done. We announced the transaction on Sept. 25 and we're sitting here with the first conversion behind us. Some of our other competitors who announced big transactions have just picked the deposit system they're going to use.

Basically within a year, the whole thing will be converted. And if this would have been the first one, we wouldn't have even been close to this timing.

How has customer attrition been?

The customer attrition is very normal at this point. Meaning customer attrition had spiked way up when

WaMu had all their problems. Then our acquisition happened. Attrition came down. People understand that JPMorgan Chase stands behind the company at this point. We go out of our way when we do transactions like this not to do things which hurt customers so we're grandfathering old products. We're starting to introduce some of the new products and services on top of that. So it becomes a bunch of net plusses for customers not minuses. There is real stability in the deposit base today.

You told an analyst who asked at an investor day in February if the company could handle another acquisition that JPMorgan Chase had its hands full. Three months later, would you say your thoughts have changed?

It totally depends on the deal at this point. Back in February, we were still in the middle of doing all the work for the conversions. Having completed one of them gives us a lot more confidence that everything here will go smoothly and two months from now I will feel even better about our ability to do something else.

Fees are a hot-button topic that is being discussed throughout the industry. Can you talk about JPMorgan Chase's position on raising fees or garnering more fees since this is an area where banks need to figure out how to make more money, especially in this difficult environment?

We don't sit there and say 'Well because we might be losing some money in home equity, let's go figure out how to make money elsewhere.' We think that our businesses should charge people fairly and appropriately for services that we provide and within those individual businesses. And they've got to be competitive. We don't sit there and say 'Gee, we desperately need to raise fees.'

Where are the biggest challenges for retail banks?

If I was one of the smaller midsize-type banks right now, I'd be very worried about how they're going to be able to compete with people like us. I think the value that a JPMorgan Chase brings to a customer base when you walk into our branch -- the things that we can do for you -- are so much greater than a midsize or smaller-size bank. If I were them, I would be very worried about competing as time goes on as we get better at delivering our service level.