JPMorgan Chase & Co. could pay off the government's $25 billion bank-bailout investment as early as this year, James Dimon, its chairman and chief executive, said at his company's investor day Thursday.
Mr. Dimon said such a payoff was possible but would not happen without consultation with regulators. "As a company, we'll do what is in the best interests of this company, clients, and the country. We're not going to be disturbed by the rancor going on in Washington."
The New York company also feels "comfortable" with its ability to measure up to the stress testing process the government detailed Wednesday, he said. "Our capital ratios in a stressed environment will be the same. We're not going to feel good, but we feel comfortable in this environment."
At the investor day, Charles Scharf, who heads the $2.2 trillion-asset company's retail business, said that a bank acquisition this year is unlikely but not entirely out of the question.
JPMorgan Chase is "very busy" integrating Washington Mutual Inc., the failed Seattle thrift company that was acquired Sept. 25 in a government-brokered transaction, Mr. Scharf said during a morning presentation. "There's a lot of work to do, and we're right in the middle of it."
He also said he expects to complete the systems conversion for the 2,200 Wamu branches this year, putting them on the same operating platform as JPMorgan Chase branches and completing the sign changes. "As we get closer to these conversion dates and know we can get them done, then things may change."
Earlier in the week, Mr. Dimon had discussed the possibility of making acquisitions "in a year or two" by using more than $80 billion of tangible common equity for deals.
For now, Mr. Scharf said, he is focused on stabilizing Wamu and accelerating cost cuts. On Thursday he gave updates on both fronts, saying his company added a net total of $500 million of deposits at Wamu branches from the thrift's closure to Feb. 13. Wamu had bled nearly $15 billion of deposits in the two weeks before its failure, he said.
He also said JPMorgan Chase expects to wring more cost cuts from the deal. When the Wamu deal was announced, JPMorgan Chase projected $1.5 billion of savings by the end of 2010, but now it is projecting $2.75 billion by the end of this year, or $2 billion after marketing and facilities expenses.
Some of the savings will come from an increased number of job cuts in Wamu's staff. JPMorgan Chase now expects to cut 12,000 jobs, or 30% more than originally slated. A spokesman for the company said Thursday that the higher estimate includes 2,800 positions to be eliminated through attrition.
(JPMorgan Chase also said it expects to cut up to 2,000 jobs in its investment bank this year.)
Mr. Scharf offered few details on how his company would trim more fat from Wamu, saying only that additional cuts became apparent after another review of the expense base.
Expense reductions will be split almost evenly between payroll and areas such as technology and real estate, he said, and charges associated with increased marketing and renovating about 900 cafe-style Wamu branches will offset some of the lower costs.
JPMorgan Chase plans to open 120 branches this year, including 30 in former Wamu markets, he said.
The company also adjusted its forecast for losses on Wamu's loan book over the life of the loans to a range of $30 billion to $36 billion, versus a range of $32 billion to $36 billion offered Jan. 15. Both forecasts assume a 31% overall decline in home prices.
Mr. Scharf also warned that his company could record $1 billion to $1.4 billion of quarterly losses this year in its noncredit home equity portfolio, whose loans that had not been marked down.
Next year home equity losses should level off but remain high, he said. In the subprime mortgage portfolio, JPMorgan Chase is likely to record quarterly losses ranging from $375 million to $475 million this year, he said.
However, Michael Cavanagh, the company's chief financial officer, reinforced comments made by Mr. Dimon earlier in the week by saying the company should be profitable this quarter. Mr. Dimon made his comments Monday after announcing a dividend cut.
JPMorgan Chase is also integrating other Wamu businesses. Gordon Smith, the chief executive for card services, said during his presentation that the company will move Wamu's credit card business on to its own platform next month.
Wamu has a $28 billion card portfolio, which it largely gained from the 2005 purchase of Providian Financial Corp. Chargeoffs in the book should reach 15% in the first quarter, Mr. Smith said; in comparison, JPMorgan Chase expects an overall chargeoff rate of 7% this quarter for its credit cards.
And Todd Maclin, the chief executive officer for commercial banking, said that the company is proceeding with plans to build middle-market lending in key Wamu markets. For now, the focus will be on cities such as Los Angeles, San Francisco, Seattle, Atlanta, and Portland, Ore., as well as Florida.
