Energy, inflation and war: Jamie Dimon on the big risks ahead

Dimon responded to investors’ recent calls for more transparency about JPMorgan’s spending plans, the size of which has drawn criticism. The nation’s largest bank by assets has said that its expenses are projected to rise this year by $6 billion, or about 8%, to $77 billion.

The $6 billion total includes $3.5 billion in investments, and Dimon provided more detail Monday about that spending.

The company will spend a combined $1 billion this year on branches and bankers across its footprint and on certain marketing expenses, and rack up another $700 million in “incremental expenses” tied to recent acquisitions, he wrote. In the past 18 months, JPMorgan has spent nearly $5 billion on acquisitions, Dimon noted.

But the largest chunk of money — just shy of $2 billion — will be spent on technology and operations. The actual expense lines, he said, could be for people, hardware or software, or purchased services.

Dimon also reiterated that $2.5 billion of the $6 billion will go toward what the company spends on people-related costs, including talent attraction and retention.

Dimon declined to provide more detail about one line item: the cost of building out a global footprint. Last year, JPMorgan launched a digital consumer bank in the United Kingdom and acquired a 40% ownership stake in C6, a digital bank in Brazil.

In his letter, Dimon said the company has several advantages as it expands overseas, including a well-known brand, a global payments business and global asset-management products.

“We have the talent and know-how to deliver these through cutting-edge technology, allowing us to harness the full range of these capabilities from all our businesses,” he wrote. “We can apply what we have learned in our leading U.S. franchise and vice versa.”

“We may be wrong on this one, but I like our hand,” he added.

Russia’s war in Ukraine is not only causing a humanitarian crisis, it is already damaging the global economy, Dimon wrote. And he said that it “could easily get worse.”

JPMorgan expects Russia’s gross domestic product to sink by 12.5% by mid-year. The bank still expects Euro-area economies to grow, but to do so at a more modest pace, and it sees a slight negative impact on U.S. GDP growth this year.

“Along with the unpredictability of war itself and the uncertainty surrounding global commodity supply chains, this makes for a potentially explosive situation,” Dimon wrote.

Still, Dimon recommended that U.S. officials “turn up sanctions” pressure on Russia, noting that “many more” measures could be imposed. He recommended the U.S. commit to a long-term military strategy in the region, featuring increased military expenditures and troop deployments on NATO’s borders, and that the U.S. take the lead in providing humanitarian help.

For its own part, JPMorgan has been “working hand in hand with governments” to implement financial sanctions on certain Russian individuals and companies, as well as stopping billions of dollars in payments, he wrote.

“Managing this has been an enormous undertaking,” Dimon wrote. “It is completely different from navigating a financial crisis or a severe recession.”

Dimon wrote that JPMorgan is “not worried about our direct exposure to Russia,” though it may lose about $1 billion over time. He said that the bank is actively monitoring any knock-on effects on the global economy and any longer-term geopolitical impacts.

Dimon made a historical analogy he’s invoked before, calling for a “Marshall Plan,” this time to provide energy security to the U.S. and its European allies. His comments came against the backdrop of soaring energy prices and a potential energy disaster in Europe, which is highly dependent on Russia for oil and gas.

Dimon offered four potential near-term fixes to “bring diverse stakeholders together”: promoting energy security; investing more in clean technologies; enacting a series of policies that encourage investment in low-carbon solutions and create jobs; and setting “meaningful” goals while identifying “a few tangible, cost-effective solutions” to cut down on emissions today.

While many companies, including JPMorgan Chase, have pledged to cut their emissions to zero by 2050, there remains a long way to go, Dimon said.

Last year, the New York bank set targets for reducing carbon intensity in its oil and gas, electric power and automobile manufacturing portfolios by 2030.

There is “no silver bullet” for achieving the world’s energy and climate goals, Dimon wrote.

“But we can start by prioritizing emissions reductions, developing meaningful short- and long-term goals and crafting innovative policy solutions,” he added. “The curve toward net zero can still be bent before it’s too late.”

Dimon’s ideas do not go far enough for more than three dozen climate advocacy groups, which criticized his “Marshall Plan” proposal Monday.

The groups, which include the Sierra Club and the Rainforest Action Network, said they were writing in response to a recent meeting that Dimon had with the Biden administration regarding the idea.

“Your proposal is not only a bad idea for the climate, it is financially unsound and risks further expanding the market’s ‘carbon bubble,’” the advocacy groups wrote.