Peeling Back the Curtain on JPMorgan Chase
February 23, 2016 3:00 PM
Investor days are increasingly more revealing than overly scripted annual meetings. From retail banking growth to credit headaches, here are some data highlights and executive insights from JPMorgan Chase's 2016 presentations in New York Tuesday.
Too Big to Avoid
JPMorgan Chase says it has relationships with about 50% of U.S. households and does business with more than 80% of Fortune 500 companies.
Old School: Building Deposits and Loans ...
Average retail-banking deposits hit $531 billion last year, up 28% from 2012. However, average loans (including card, auto, mortgage, and small-business credits) grew at a faster clip, rising 34% to $302 billion.
... And New School: Payments Deal with Starbucks
JPM has agreed to incorporate the Chase Pay mobile wallet into Starbucks' mobile payments app at more than 7,500 of the coffee chain's locations, Gordon Smith, JPMorgan's CEO of consumer and community banking, said during his presentation. The agreement will take effect in the fall.
Speaking of Disruptors ...
"This has been going on my whole life.
It's just a bit faster," Chairman and CEO Jamie Dimon said when asked about the fast-moving developments in fintech and need to invest in technology.
Credit-Risk Alert
Net chargeoffs are expected to rise as much as 16% to $4.75 billion in 2016. Losses from the oil and gas industry are expected to be a major reason; JPMorgan plans to add about $500 million to reserves for oil-and-gas credits in the first quarter, for a total of $1.3 billion, but says it would need to add $1.5 billion to reserves in the longer term if oil prices sunk to as low as $25 for 18 months. (West Texas intermediate crude was down 4.82% to $31.78 per barrel in Tuesday morning trading.)
CRE Snapshot
JPMorgan made $63 billion of term loans for multifamily and other projects, a 16% increase from a year earlier. The average loan size was $2 million. It also made $16 billion of loans to investors with institutional-quality assets, a 22% increase year-over-year; the average size of those loans was $15 million.
Generational Shift
In 2015, online customers rose 8% to 39 million, and mobile customers rose 20% to 23 million, JPMorgan said. Meanwhile, 79% of customers aged 18 to 35 use mobile and 56% visit branches, while just 38% of customers age 36 and up bank on their gizmos and 68% of the older crowd use branches.
Adjusting the Shock Absorbers
JPMorgan reported capital and liquidity of about $350 billion in the fourth quarter for its so-called total loss absorbing capacity; that includes $125 billion of external long-term debt and $26 billion of preferred equity. However, some of its debt would not qualify under the TLAC proposal by federal regulators , so it would have to cover about a $20 billion gap through other alternatives.
Have We Hit Bone Yet?
The bank's branch count fell 3.6% from the beginning of 2013 to the end of 2015, to 5,413 branches. It expects to cut another 150 in 2016. Overall, its retail banking operation cut expenses nearly 14% from 2012 to 2015, to $24.9 billion.
A Note of Caution
"If the current market conditions persist, and we don't shake these off pretty quickly, 2016 is looking a lot like 2015," said Mary Callahan Erdoes, the CEO of asset management, after discussing her unit's challenging year in 2015.
