J.P. Morgan Executives: Let the Good Times Roll
Executives at J.P. Morgan Chase & Co. struck an upbeat tone during the firm's annual investor day Tuesday, painting a picture of bank businesses mostly poised for growth.
That marked a change from presentations in previous years when the largest U.S. bank by assets has had to defend its size, strategy and prospects as the financial sector struggled with stiffer regulation, very low interest rates and hefty legal bills.
The optimistic outlook comes against the backdrop of buoyant stock markets, particularly for financial shares. After Donald Trump's surprise election as U.S. president, banks' shares have soared with J.P. Morgan's stock up nearly 30% since Nov. 8.
And the bank's finance chief, Marianne Lake, said prospects look good, even without possible regulatory and tax overhauls by President Trump.
The bank expects its balance sheet to grow to around $2.6 trillion this year from $2.49 trillion at the end of 2016. In recent years the bank has held its total assets steady or shrunk them in the face of regulatory changes.
Executives said core loans should grow around 10% over a year earlier, and the bank is expecting $30 billion in net income over the medium term. In 2016, J.P. Morgan posted record net income of $24.7 billion.
During Tuesday's presentations, J.P. Morgan also placed less emphasis on cost-cutting, which had been a big theme for it and other banks in recent years. Expenses this year are expected to rise to around $58 billion to "self-fund investments and growth" in 2017, versus $56 billion in 2016.
Improvements in oil prices and the energy sector's recovery may also lead the bank to release a portion of its $1.5 billion in energy-related loan-loss reserves. Any "significant" reserve releases would occur in the second half of this year or later, Ms. Lake said.
As for Washington, Ms. Lake spelled out the bank's wish list, or "principles for responsible regulation." It includes coordination and consistency among agencies; aligning rules across global jurisdictions, especially eliminating the "gold-plating" that has made U.S. rules more stringent than others internationally; and reviewing the regulatory landscape in the context of cost benefits and economic growth.
"The time does feel right to provide more...flexibility," she said, adding that "everything is not binary." Ms. Lake added that potential changes may not necessarily mean less regulation, but may revolve around how rules are implemented.
Among the bank's individual businesses, commercial banking chief Doug Petno detailed continued boosts in investment banking and middle-market revenues. The latter, he said, could turn into a $1 billion business.
Corporate and investment banking chief Daniel Pinto said the bank doesn't have to increase its risk to boost its profitability. "I have no doubt this business will grow," he said.
That said, Mr. Pinto also injected a note of caution around markets activity. "I'd rather be a bit more cautious in the way we plan, the way we deliver, manage our expenses," he said.
In asset and wealth management, chief Mary Callahan Erdoes emphasized the bank's growth across the spectrum, from retail wealth management clients to ultrahigh net worth customers. She focused on five- or 10-year returns in asset management rather than more challenging near-term conditions.
Executives also repeatedly referred to technology investments and digital advancements that help to cut costs or boost revenues. J.P. Morgan for the first year set up a detailed display with about a dozen stations featuring applications and programs built through its roughly $9 billion in technology investments.
Write to Emily Glazer at emily.glazer@wsj.com
