Despite a rosy outlook for expansion and a projected dividend increase, JPMorgan Chase (JPM) CEO Jamie Dimon faced thorny questions that show the obstacles banks continue to face in 2011.
In remarks to reporters at the bank’s annual investor day, Dimon said his bank will not be “goaded into doing something dumb” with its capital, even as it prepares an aggressive expansion in consumer and private banking over the next five years.
However, as reported by Reuters, despite beating analyst estimates for fourth-quarter earnings, investors still have concerns about, in no particular order:
• Long-time ties to imprisoned Ponzi schemer Bernard Madoff
• Foreclosure practices
• Pending financial regulation.
Retail financial services Chief Executive Charlie Scharf addressed part of the regulation issue, saying JPMorgan was looking to offset the $1.3 billion of revenue it expects to lose because of new regulations on debit card processing fees.
Dimon declined to personally address the pending $6.4 billion lawsuit against JPMorgan by the trustee seeking money for Madoff’s victims, who accused the bank of being “thoroughly complicit” in the Ponzi scheme.
But general counsel Stephen Cutler, a former U.S. Securities and Exchange Commission enforcement chief, said JPMorgan would challenge how the trustee “conflates timelines, takes quotes out of context, seeks to penalize our firm for raising the sorts of issues you’d expect to be raised in a due diligence process and generally applies 20/20 hindsight to make his claims.”
Though trading revenue trended downward over the course of 2010, falling to $2.9 billion in the fourth quarter from $5.5 billion in the first quarter, investment banking chief Jes Staley emphasized the stability within those results.
Staley, considered one of the leading candidates to succeed Dimon as chief executive, said his unit had only eight days of trading losses in 2010, and a perfect second half.
That’s the bad news.
In better news, Dimon said the bank is prepared to withstand any phasing out of mortgage financiers Fannie Mae and Freddie Mac, despite being the third-largest U.S. provider and servicer of mortgages.
This is in part because 2011 is expected to be a year of growth for the bank, primarily in its existing businesses, but also in market share in Latin America and Asia, Dimon said.
As the global economy stabilizes, JPMorgan plans to increase its dividend payout ratio to more than 30 percent of normalized earnings, executives said.
The nation’s second-largest bank by assets slashed its annual dividend 87 percent to 20 cents per share in February 2009. Dimon said last month that JPMorgan could raise the annual payout to between 75 cents and $1 once regulators give the go-ahead, likely at the end of March.
Scharf said Chase plans to add at least 1,000 branches in the next three years and could add up to 2,000 within five years will add branches largely in areas where it already operates – particularly in California and Florida.
It ended September with 5,172 U.S. branches, trailing Wells Fargo & Co’s (NYSE: WFC) roughly 6,500 and the nearly 6,000 that Bank of America Corp (NYSE: BAC) operates.
JPMorgan significantly boosted its branch network in 2008 when it bought the banking business of Washington Mutual Inc, the largest U.S. bank or thrift to fail.
JPMorgan also expects to add 50 private client locations in 2011, and have more than 150 by 2013.
