JPMorgan Chase & Co. laid out plans Tuesday to gradually boost profits a third by expanding overseas, building fewer retail branches and wooing more wealthy clients.
The goal is to generate $24 billion a year in net income, up from $18 billion in 2011, Doug Braunstein, JPMorgan's chief financial officer, said at the New York company's annual investor day.
Higher regulatory costs and the slow economy are forcing JPMorgan Chase to tweak its strategy, Chairman and Chief Executive Jamie Dimon said. Its record profits in 2011 and 2010 stemmed from growth plans set in motion five to ten years ago, he reminded attendees.
"I'll be damned if we don't have record profits" in coming years, Dimon said.
Getting there hinges on overcoming the $7.5 billion it spent in 2011 resolving mortgage problems and corporate litigation, as well as the $500 million of net income sapped by the Durbin amendment, Braunstein said.
Growth initiatives across its seven primary businesses should deliver at least $800 million in additional net income over time as it spends more in certain areas and less in others.
Its investment bank plans to open a prime brokerage business in Asia this year, after launching an emerging markets brokerage in 2011, said Jes Staley, JPMorgan Chase's chief executive of investment banking. It also will cut 700 investment bank technology jobs.
Meanwhile, its consumer and business bank is scaling back aggressive branch expansion plans announced a year ago. JPMorgan Chase now plans to open 900 additional branches, mostly in Florida and California, said Todd Maclin, chief executive of consumer and business banking. At last year's investor day, the company unveiled plans over five years to add another 1,500 to 2,000 new offices across its entire 5,500-branch, 23-state retail banking territory.
Maclin said his unit's pre-tax income would decline 14% year over year in 2012 because of low interest rates and curbs on deposit fees. But the payoff from cost savings and the addition of clients and offices could boost his division's annual income by $1 billion by 2015, and by more than $6 billion by 2020.
New fee restrictions would make unprofitable about 70% of customers with less than $100,000 of investments, he said.
To that end, JPMorgan Chase sees its best growth prospects in banking wealthy people. Those types of clients tend to visit branches more often than other customers, Maclin said.
They also have more complicated financial needs, which makes them ripe for buying multiple products and services.
JPMorgan Chase also has an outsize share of the well-to-do banking market to build on, he said, noting that about 23% of U.S. households with $500,000 or more in deposits and investments buy at least one banking service from JPMorgan Chase.
The bank also intends to invest heavily in private client banking this year, with plans to open 750 new private client offices in California, Texas and Florida. It currently has about 262 such offices, after opening 246 last year. It also aims to hire 900 private client bankers and 350 private client advisors, Maclin said. Its goal is to end 2012 with more than 75,000 private clients, up from 22,000 at yearend.
Frank Bisignano, CEO and chief administrative officer of mortgage banking, said JPMorgan intends to overhaul its origination and servicing processes this year. It also plans to recruit and retain more loan officers.
Growth targets include boosting its share of the mortgage-purchase market to at least 11.5% this year from 7.8% in 2011. It also intends to add 1,000 more loan officers this year, after hiring 700 in 2011. It ended 2011 with 3,800 loan officers.
JPMorgan Chase will experience only minor financial pain from the recent $26 billion mortgage settlement between the five big mortgage servicing banks and the Justice Department and attorneys general of 49 states, Bisignano said. The settlement will cost JPMorgan Chase $5.3 billion, a financial sting it has already absorbed building litigation reserves in prior periods. Lowering borrower rates to refinance loans would create an immaterial decrease to net interest margin that will be offset by reserves, Bisignano said.
Gordon Smith, CEO of card and automotive services, said his division's expenses should stay flat in 2012 as it self-funds initiatives in mobile banking and other areas. Its number of mobile banking customers rose 57% year over year in January, he said, adding that the $33 billion in mobile payments and transfers it handled in 2011 could double this year.