JPMorgan may hold steady on cost target despite low interest rates

Mon Feb 22, 2016 5:34am EST
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By David Henry

NEW YORK (Reuters) - At JPMorgan Chase & Co's (JPM.N: Quote) annual investor day on Tuesday, one big question will be at the top of attendees' minds: How can the bank keep a tight lid on costs without hurting its ability to grow revenue?

JPMorgan's chief executive, Jamie Dimon, and at least five of his top executives are expected to give presentations on the bank's diverse range of businesses at the day-long event, with forecasts on revenue, expenses and shareholder returns. They're also expected to offer some fresh details on how the bank is using technology to improve operations and slash costs - an initiative Dimon and his deputies have long been touting.

But for the first time in years, JPMorgan is not expected to expand further its cost-cutting targets. The bank is only halfway through a previously announced $4.8 billion cost-cutting target, and cutting any deeper could hurt its businesses, analysts said. JPMorgan has already cut more than 25,000 jobs since 2011.

That would run counter to what other big banks have been doing. Executives from banks including Morgan Stanley (MS.N: Quote), Goldman Sachs Group Inc (GS.N: Quote), Bank of America Corp (BAC.N: Quote) and U.S. Bancorp (USB.N: Quote) have all recently talked about further cost-cutting efforts.

Because of that, and the troubles at European rivals, top brass at JPMorgan have an incentive to reinvest in key businesses to take market share from competitors who are pulling back.

"This is the sort of environment that Jamie Dimon and JPMorgan live for: sluggishness in the environment, competitors feeling pain," said Mike Mayo, a bank stock analyst with CLSA.

Even so, analysts said they and their investor clients will want more insight into how JPMorgan strikes the fine balance between cutting costs to protect profits, and spending money for growth at a time when interest rates remain stubbornly low and the economy shows signs of becoming sluggish.

Some analysts and investors worry that JPMorgan may have to lower its profit target again.   Continued...

A sign outside the headquarters of JP Morgan Chase & Co in New York, September 19, 2013. REUTERS/Mike Segar