You either retire a hero or live long enough to see yourself become the wastrel, noted one Batman villain. Jamie Dimon, now 66, made his reputation decades ago as a cold-blooded, by-the-numbers banking executive. But his tone has changed. The longtime chief executive of JPMorgan said at an investor event recently: “What we’re not going to do is hamstring ourselves to meet an overhead target.”
Higher spending lies behind the more blasé attitude. Earlier this year, JPMorgan — fretting at the threat posed by upstart fintechs to banking incumbents — announced that it would plough $15bn in 2022 back into the business, part of which would go on upgrading technology.
That figure is 50 per cent higher than in recent years and the company has been vague about specifics and payback. That shift has spooked analysts and now investors. JPMorgan’s share price this year is down a tenth and has trailed far behind the KBW US bank benchmark.
Dimon, after a long and distinguished run, has been given much rope by shareholders so the recent backlash must sting. In 2022, JPMorgan generated $48bn of net income, leading to a return on tangible equity of 23 per cent. All in all, it returned $5bn to shareholders through buybacks and dividends. While the bank possesses plenty of financial firepower, its shareholders focus on precise returns down to the decimal point.
Dimon recently defended these huge outlays. Spending heavily to migrate its legacy mainframe computing system to the cloud will enable JPMorgan to improve the way it deals with customers. While the exact value and timing of that payback is unknown, the bank believes it a necessary wager.
Ironically, growth-obsessed investors had cared little for such financial discipline in fintech rivals’ spending. That too may have changed. Executives of PayPal, Block and Affirm and others have watched their shares fall at least 40 per cent in the last six months, following heavy operating losses. This suggests a new era of impatience with open-ended investment plans.
Source: Financial Times
