Jamie Dimon turns criticism of JPMorgan’s big spending plans on its head

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This time last year, Jamie Dimon was preparing for JPMorgan’s investor day in a rare moment of weakness, with shareholders raising concerns about the bank’s $15 billion investment plans and rioting against his pay.

Fast forward 12 months and Wall Street’s longest serving major bank CEO is heading to the same event having seemingly regained his mojo, buoyed by the acquisition of the remnants of the First Republic and a much less restless shareholder base. Last week, his pay secured the support of nearly 90% of investors.

Demon he has been in his element acting as Wall Street’s unofficial ambassador to Washington for recent regional banking operations crisis and during the debt ceiling discussion. People close to the 67-year-old, who are often talked about thrive during crises, describe him as having an extra step in the last few months.

Indeed the past 12 months might have been seen as one of the best times in his nearly 20-year tenure were it not for the trickle of damning revelations from two lawsuits relating to the bank’s relationship with the late financier Jeffrey Epstein.

Now, as Dimon prepares to address shareholders at this year’s Investor Day, he must convince them that the bank, the largest in the United States, still has plenty of room to expand.

“There’s no reason for us to think the company can’t continue to grow and leverage economies of scale, simply by continuing to serve its existing customers with more products and win new customers,” said Jason Goldberg, banking analyst. by Barclays.

The bank’s shares have outperformed the S&P 500 benchmark and the KBW banking index over the past year, and it has emerged as one of the winners in the recent regional banking crisis. In a research note this week, analysts at Wells Fargo estimated that JPMorgan’s market cap could more than double within seven years to $1 trillion, reaching a level that has been the preserve of technology and oil companies.

“They appear to have benefited from deposit inflows in the wake of the banking turmoil that unfolded in March with the failures of Silicon Valley Bank and Signature Bank,” said John McDonald, senior analyst covering large-cap banks at Autonomous Research.

Despite the optimism, Epstein’s lawsuits loom. Dimon is expected to be deposed in the case later this month. The litigation judge will decide shortly whether one of the plaintiffs, an alleged victim of Epstein’s, can expand her case into a class action lawsuit.

JPMorgan also deals with the fall the $175 million acquisition of student financial planning start-up Frank; the bank later said it vastly overestimated its user numbers. Dimon described the deal as a “huge mistake”. Frank’s founder Charlie Javice was formally indicted this week on charges of defrauding the bank, but the incident has raised questions about JPMorgan’s due diligence.

Part of JPMorgan’s growth was supported by investments that had been targeted by shareholders. This time last year they were requesting the bank for failing to outline the rationale for the $15 billion spend in more detail, a mistake Dimon sought to rectify last year.

“They’ve had the luxury of being such a strong bank for a while that they’ve consistently invested in the franchise, probably more than any other bank,” said David Konrad, an analyst at Keefe, Bruyette & Woods.

Analysts now say spending on initiatives including cloud computing, hiring and marketing is starting to translate into market share gains. “What JPMorgan has shown over the past year is that it is generating good returns on these investments,” said Erika Najarian, a banking analyst at UBS.

At Investor Day, Dimon will be joined by leaders from the bank’s four business divisions, who are expected to deliver presentations on corporate and investment banking, consumer and community banking, commercial banking, and asset and wealth management.

Analysts expect the presentation by consumer and community banking co-heads Marianne Lake and Jennifer Piepszak to shed further light on JPMorgan’s First Republic deal in April. The acquisition boosts that of JPMorgan presence in wealth management, one of the few industries where it is not a dominant player.

Analysts are also hoping for an update on JPMorgan’s digital-only international consumer bank which started operating in the UK in 2021. The bank disclosed last year that it expects to lose more than $1 billion over the next few years on the effort before breaking even by 2028.

If Dimon is still CEO by then, he would have kept the job for more than 20 years. He has given no indication that he intends to step down soon and he does earn a projection of $50 million if he’s still in office by 2026.

However, investors will view the investor day as an opportunity to evaluate potential internal candidates who could take the reins of Dimon.

“Investor Day remains one of the best windows to evaluate the broadest range of JPM executives,” Autonomous Research analysts wrote in a note this week, “and think about who will ultimately succeed Mr. Dimon.”