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JPMorgan to cut costs, charge for some deposits
[NEW YORK] JPMorgan Chase Tuesday unveiled plans to slash expenses and reduce certain deposits that have become more costly to hold amid a tougher regulatory environment.
The biggest US bank by assets, JPMorgan projected nearly US$5 billion in lower expenses through 2017 with cuts in its corporate and investment banking, and consumer and community banking, segments.
The bank said it could charge institutional clients for some deposits as part of a drive to reduce the amount of non-operating deposits by up to US$100 billion by the end of this year.
The change will target excess cash held by institutions, such as hedge funds and foreign banks. It will not affect individual account-holders.
Under new regulations aimed at riskier holdings at JPMorgan and other banks deemed "systemically important" by regulators, JPMorgan is required to hold "much more capital" against these deposits than other moneys, JPMorgan executives said in an internal memo to employees.
These regulatory requirements, imposed in the wake of the 2008 financial crisis, mean that keeping these deposits represents "a costly and inefficient use of our balance sheet," said the memo.
"We will work with clients to encourage off-balance sheet alternatives... and we will likely charge for some deposits, or in some cases, ask clients to hold their non-operating deposits at a different firm," the memo added.
The changes were announced at JPMorgan's annual investor day. The bank also said it would reduce its branch count by about 300 through the end of 2016.
JPMorgan said the rise of digital banking permits it to streamline its physical footprint, enabling fewer retail locations and smaller staffs at those that remain.
Chief executive Jamie Dimon told investors that JPMorgan's lower stock valuation compared with many peers was due to greater regulatory uncertainty given the bank's size and legal issues.
In two years or so JPMorgan's stock price would benefit as the regulatory cloud subsides and its financial performance strengthens, he predicted.
"I do think that one day those things will lift," Dimon said. "In two years, I think most of these regulations will be in place... and a lot of the legal stuff will be over." The bank has announced multibillion-dollar settlements, including over its packaging of mortgage-linked securities, and faces ongoing probes into its foreign-exchange trades and its hiring practices in China, among other areas.
JPMorgan executives offered a robust defense of the bank's business model, rebutting critics on Capitol Hill and from within the financial community who have called for a break-up of the bank.
The bank's ability to provide corporate, investment and individual banking functions is suited for private and government clients "who need a large bank," Dimon said. "It is not possible to do what they want with a small regional bank." Dow component JPMorgan Chase rose 2.5 per cent to US$60.82.