JPM's Winding Road to 'Organic' Growth Focuses on Tech, Job Cuts

Even for the biggest and strongest of banks, thriving these days involves two steps forward and one step back.

JPMorgan Chase (JPM), the country's largest bank, on Tuesday convened its top executives to discuss its growth strategies. A major component: cutting a net 17,000 jobs over the next two years.

But more notable than the job cuts, composed largely of planned attrition in JPMorgan's consumer bank and about 15,000 cuts in its mortgage operations, was the bank's resigned attitude about boosting business while waiting for interest rates, regulatory pressures and the overall economy to improve.

In 2013, JPMorgan will have to grow "organically and meet a wave of our regulatory demands," Chief Executive Jamie Dimon said at the end of the event. "Just doing those two things will tax even JPMorgan," widely considered to be one of the country's strongest banks.

Dimon added that any sort of significant acquisition is "off the table" for the year. "If we accomplish those two things, we'll be in great shape," he told a crowd of almost 250 investors and reporters gathered at the bank's Park Avenue headquarters in New York.

But during the day, which involved more than six hours of presentations by Dimon and his recently reorganized senior leadership team, executives were largely upbeat. They unveiled several plans for eventual, if slow, growth in the bank's diverse business lines.

"There will be positives from some of these changes. … My guess is four years from now we make a lot more money," Dimon said.

The bank is rethinking its branch strategy, balancing its desire to get even more business from wealthy customers with the shrinking foot traffic to physical locations. More and more customers are using ATMs and technology, including mobile and online banking, to do business that once would have brought them into a branch. About 500,000 people every month are using JPMorgan's digital banking options, executives said; the diminished foot traffic is allowing the bank to cut, largely by attrition, about one employee per branch.

But JPMorgan is actually expanding its overall branch network by about 2%, planning to add about 100 net branches annually for the next two years. It currently has over 5,600 physical locations, and is using them to offer more complicated services, like private banking and asset management, to wealthy customers.

"We realize that how customers are using banks is changing," Ryan McInerney, head of consumer banking, said.

The annual investor meeting was an attempt at a sort of fresh start for JPMorgan and its leader, after a year of fallout from its $6 billion trading loss. The London Whale affair led to a round of regulatory scrutiny, congressional hearings and senior leadership departures in the past several months, although Dimon on Tuesday said the executive reorganization had been largely in the works already.

The event was also a bit of a public debut for Marianne Lake, the company's new chief financial officer, who gave the day's first extended presentation. She was followed by Consumer and Community Banking CEO Gordon Smith and his deputies; Commercial Banking CEO Doug Petno; Asset Management CEO Mary Erdoes; and Daniel Pinto and Mike Cavanagh, the co-CEOs of the Corporate and Investment Bank.

Matt Zames and Frank Bisignano, who became co-chief operating officers last year, did not give presentations but were in the room. So was chief risk officer John Hogan, who interrupted his four-month leave of absence to attend the day's presentation. Dimon introduced Hogan, and expressed his jealousy of his subordinate's "sabbatical" by calling Hogan a rather salty name, to laughter.

JPMorgan Chase also used the day to announce a new partnership with Visa (NYSE:V), the world's largest payments network. Executives said the deal will allow JPMorgan to negotiate directly with merchants over how they process payments on Chase credit and debit cards.

"It will enable Chase to build direct relationships with merchants… and to negotiate pricing," says Eileen Serra, the CEO of JPMorgan's card services unit.

"We pay Visa an amount of money and we build our own direct relationship with the merchant," Smith said during his presentation.

The deal appears to be a bid by JPMorgan to gain more control over the processing of payments on its credit and debit cards; Dimon famously dislikes paying outside vendors to do functions that JPMorgan Chase could do in-house.

But JPMorgan executives also framed the partnership as an attempt to help improve its dealings with the retail industry, which has long protested the prices it must pay and the rules it must follow in order to accept credit and debit cards. Visa CEO Charlie Scharf, a longtime JPMorgan executive and Dimon protégé who took over the card network in November, has said that he is trying to expand the industry's "flexibility" and to improve its relationship with merchants.