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The Big Questions JPMorgan Investors Have for Jamie Dimon
Investors are flocking to JPMorgan (Reuters)JPM) Manhattan campus on Monday to hear from CEO Jamie Dimon and his executive team, and they’ll be listening for answers to some important questions.
Who May Succeed Dimon, Longest-serving Head of Major U.S. Bank? Can JPMorgan continue to produce record profits? How do you plan to invest all your excess capital? How exactly do you plan to incorporate AI into your operations?
By virtually any measure, JPMorgan is currently in a class of its own when compared to the rest of the industry.
It is the country’s largest bank by assets, surpassed all its rivals again in the first quarter and its shares reached a new all-time high last week.
The concerns some have as they attend JPMorgan’s annual investor day on Monday have nothing to do with the present.
They have much more to do with the future.
Who takes Dimon’s place?
The biggest unknown for JPMorgan at the moment has to do with the plans of its 68-year-old CEO, the longest-serving head of a major bank and one of the best-known figures in the financial world.
Dimon has repeatedly dismissed retirement expectations, but at last year’s investor day he acknowledged he knows he can’t do the job forever.
“Succession is an issue no matter what,” said Mike Mayo, a banking analyst at Wells Fargo.
Mayo pressured Dimon on last year’s investor day about how many years he expected to remain CEO.
“Three and a half,” Dimon said before laughing. He added that “we have the same plan as we had before” without clarifying whether there was any truth to the number he mentioned.
He has an incentive to stay until at least 2026 through a special retention bonus of 1.5 million options the board granted him three years ago, and he is required to stay in the role that long to exercise the options.
Jamie Dimon, chairman and CEO of JPMorgan Chase, attends the final beam laying ceremony for JPMorgan Chase’s new global headquarters in New York City last November. (REUTERS/Brendan McDermid) (REUTERS/Reuters)
The retention plan has an interesting provision that allows Dimon to leave early. He will be able to exercise the options if he leaves for public office, according to a regulatory document – whether elected or not.
Investors will hear from many of the executives considered favorites for Dimon’s job on Monday.
One of the leading candidates is Jennifer Piepszak, who this year became co-CEO of a new division encompassing JPMorgan’s commercial and investment banking, along with Troy Rohrbaugh, previously co-head of securities markets and services.
Another is Marianne Lake, who oversees JPMorgan’s sprawling consumer unit.
JPMorgan President and COO Daniel Pinto is widely considered the person who would step in if Dimon had to leave suddenly and a new leader had to be named immediately.
The story continues
Analysts agree that JPMorgan has a deep bench of executive talent, but the transition will be challenging regardless of who takes over.
“When the announcement comes, the stock is going to fall because there are a lot of people who own it because of it,” Gerard Cassidy, a banking analyst at RBC, told Yahoo Finance.
What will JPMorgan do with its excess capital?
JPMorgan prides itself on being prepared for any unexpected shocks.
One measure of this preparation is capital, a reserve that protects the creditor against future losses. The lender currently has more of that capital on a relative basis than it has ever had in its history.
“Our capital cup is overflowing,” Dimon told analysts during an April earnings call.
For its regulators, this is a good thing. But having too much can be a bad thing as far as investors are concerned.
This is because it could mean that the company runs the risk of not performing as efficiently as it should, undermining certain measures that investors care a lot about. One such measure is the return on tangible common equity, or ROTCE.
JPMorgan’s Q1 ROTCE far surpassed rivals as well as its own target. But the concern is what will happen to this metric in the future as regulators ask JPMorgan and other big banks to further increase their capital levels.
“How long does JPM want to hold on to excess capital?” asked Morgan Stanley analyst Betsy Graseck.
JPMorgan Chase’s new headquarters at 270 Park Avenue is in midtown Manhattan. The bank’s annual investor day will be held in front of this new building, inside another property controlled by the bank. (Gary Hershorn/Getty Images) (Gary Hershorn via Getty Images)
There are ways for JPMorgan to deploy its extra capital. You can make new investments, such as buying another bank. You can also increase your dividends or share repurchases, returning more money to your shareholders.
But it will be politically difficult for JPMorgan, the most dominant U.S. bank, to get away with more acquisitions, such as the 2023 takeover of regulators’ failed First Republic.
More dividends and share buybacks are also not certain. Dimon poured some cold water on the idea of increasing JPMorgan’s share buybacks in April, saying “personally” that he didn’t want to buy JPMorgan shares at the April 12 price ($195.43). Now it’s over $200.
“Excess capital is not wasted capital, it is accumulated profit,” Dimon said in April. “We will roll it out in a very good way for our shareholders in due course.”
The issue of excess capital is “a nice problem to have, but it’s a challenge,” said RBC’s Cassidy.
How will AI transform JPMorgan?
Dimon didn’t hold back in its annual letter to shareholders last month when talking about the potential of artificial intelligence.
He compared it to “the printing press, the steam engine, electricity, computing and the Internet”, predicting that the consequences will be “possibly as transformative as some of the major technological inventions of the last few hundred years”.
So how will this change JPMorgan?
Dimon offered some details on this topic, citing more than 2,000 AI and machine learning experts and data scientists currently working for the bank and a new role called chief data and analytics officer who sits on the operating committee.
But some of the work remains a mystery. JPMorgan, he said, now has more than “400 use cases in production in areas like marketing, fraud and risk” and he sees AI helping the bank “reimagine entire business workflows” and “augment virtually every works”.
Investors will be watching for more details, both in terms of JPMorgan’s investments and potential savings over time.
Last year, JPMorgan budgeted $15.3 billion for technology, the highest amount ever and the largest annual spend among North American banks. Analysts expect the budget to be higher in 2024.
“I think JPMorgan could end up being the Nvidia of banking,” Mayo said in March, referring to the chipmaker that has benefited enormously from the AI boom.
“They have the resources, the spend, the data, the process and the people in place… They start from a position of strength, more so than any other bank.”
David Hollerith is a senior reporter at Yahoo Finance, covering banking, crypto and other areas of finance.
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The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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