If Banking Is a Competition, JPMorgan’s CFO Is In It to Win
It’s no secret that Wall Street has pretty much been a regulatory punching bag ever since the financial crisis. It’s also no secret that JPMorgan Chase & Co. (NYSE:JPM) has been one of the poster children for post-crisis regulatory reform. The bank, America’s largest by assets, turned the page on 2013 with nearly $20 billion in settlements related to everything from the London Whale fiasco to mortgage fraud, and is facing a nondeductible $1.7 billion charge thanks to Madoff legacy issues. The losses contributed to the bank’s first quarterly loss in nearly a decade in 2013.
Moreover, like many other major financial institutions, JPMorgan reported ongoing problems with its mortgage production unit, as a rising interest rate environment has weighed on demand for mortgage services. The unit posted a pretax loss of $274 million, down by $1.1 billion from the year-ago period, “reflecting lower volumes, lower margins, and higher legal expense, partially offset by lower repurchase losses,” according to a company letter to shareholders. Mortgage production revenue was also down $1.1 billion, a 69 percent decline.
But the bank’s executives — and to a large degree, the bank’s investors — appear to be unfazed by the headwinds. Speaking with Bloomberg Television on Friday, JPMorgan CFO Marianne Lake was asked whether or not the bank’s recent performance and the new regulatory environment made the bank a less attractive place to work compared to companies like BlackRock, Inc. (NYSE:BLK) and The Carlyle Group LP (NASDAQ:CG). Park was blunt in her response.
“We have a fortress balance sheet,” Lake told Bloomberg. “We continue to invest in our businesses. We have everything. We have the best hand. And we will win.” To that point, JPMorgan reported Basel 1 Tier 1 common capital of $149 billion, a ratio of 10.7 percent, and estimated Basel III Tier 1 common capital of $151 billion, a ratio of 9.5 percent.
When asked what she meant by “we will win,” Lake explained. “So we have proven that we’re adaptable,” she said. “We’ve proven that we’re able to do that and still deliver very, very strong returns, industry-leading returns.” For the fourth-quarter, JPMorgan reported that return on tangible common equity, a measure of the bank’s earnings relative to stockholder’s common equity, fell 1 percentage point to 14 percent.
Looking ahead, though, analysts still appear to have some reservation’s about the bank’s growth prospects. For the coming quarter, analysts are expecting revenue to contract 4.5 percent to $24.67 billion and earnings to contract 10 percent to $1.43 per share.