JPMorgan Chase CEO Jamie Dimon To Defend Bank's Size

* Bank's shares have lagged stock market, smaller firms

* Analyst questions value of being a big, global bank

* Investors want evidence spending will deliver growth

* Dimon to make his case at investor day on Tuesday

By David Henry

NEW YORK, Feb 27 (Reuters) - With the financial crisis in the rear-view mirror, investors and analysts are turning their attention to JPMorgan Chase & Co's languishing stock price, setting the stage for a tough investors meeting on Tuesday for Chief Executive Jamie Dimon and his team.

At least one widely followed Wall Street analyst has raised questions about whether it makes sense for the largest U.S. bank to be so big, pointing out that more narrowly focused financial institutions are fetching higher stock valuations for shareholders.

Dimon, who won wide acclaim for successfully managing JPMorgan through the worst of the financial crisis, will likely face difficult questions as he and his team give stock analysts and professional investors outlooks for the bank's six major operating units and the profit potential for the entire company.

Analysts are expected to press for plausible scenarios for profit growth because JPMorgan stock has lagged the broader stock market and trades at lower multiples of book value and earnings than shares of smaller competitors, such as Wells Fargo & Co, American Express Co, and money manager T. Rowe Price Group.

Although JPMorgan's shares have done better than other global banks, its stock traded on Monday at just pennies more than in 2004, when Dimon joined the company after it took over Bank One Corp where he was previously CEO. Over the same period, Standard & Poor's 500 stock index is up 22 percent.

"In short, if JPM is best-of-breed and it still under performs, perhaps the breed is not so good," bank analyst Mike Mayo of CLSA said in a research note last week.

Mayo, author of the book "Exile on Wall Street: One Analyst's Fight to Save Big Banks from Themselves," said that at the least "the company needs to better explain the synergies whose benefits are missing from the share price."

JPMorgan is made up of the top-ranked investment bank by revenue, the third-largest consumer bank by deposits, and the number one credit card issuer by receivables, Mayo observed. It also is second in processing transactions, as well as a major money manager.


BIGGEST U.S. BANK

With $2.27 trillion in assets, last year it became the biggest bank based in the United States, surpassing Bank of America Corp, which has been shrinking to recover from problems with home mortgage loans.

But investors in the stock market apparently do not see compelling benefits of such scale and diversity of businesses.

JPMorgan trades at 7.2 times estimated earnings for 2013, which is less than the valuations Wall Street puts on separate baskets of companies more tightly focused on its different business lines, according to Mayo.

For example, a group of eight representative commercial and retail banks trades at 9.5 times earnings, and a group of money managers trades at 12.3 times.

If JPMorgan's parts were valued at multiples like those of smaller companies, the stock would be 30 percent higher, concluded Mayo, who recommends the shares.

JPMorgan spokesman Joe Evangelisti declined to comment.

In the past, JPMorgan executives have argued that company's diversification has served its investors well. Its relatively steady consumer business, for example, has offset volatility in investment banking results. And, when losses on consumer loans were hitting the company hardest, its investment bank did relatively well.

JPMorgan's hardy balance sheet put the company in prime position to buy investment bank Bear Stearns and consumer bank Washington Mutual when they collapsed in 2008 and the government needed another firm to take them on to stabilize the financial system.

More recently, JPMorgan bank has been among those taking market share from weakened European banks which have retreated from making loans in the United States.

Now investors want to see if JPMorgan will build on the strength it showed during the crises to deepen its customer relationships and sign new accounts, analyst Jason Goldberg of Barclays Capital said in a preview of Tuesday's investor conference.

"As the global economies begin to normalize, it remains to be seen if some of its competitive advantages still hold," Goldberg said.

Dimon in the past has emphasized that the company has continued to invest in its businesses while the economy languished. For example, the bank has built new branches, growing five percent in 2011 for a total of 5,508. And, it has ramped up credit card television advertising, rewards programs and mailings to sign up wealthier customers.

Technology and communications costs in the retail branches went up 7 percent last year. Investors want to know if that kind of the spending will bring growth, or if it is just additional cost to do business, analyst John McDonald of Bernstein Research wrote ahead of Tuesday's conference.

JPMorgan's seventh annual investor day presentations will be held from 8:30 a.m. to 4:15 p.m. (1330-2115 GMT) at the bank's Park Avenue headquarters in New York.

The shares rose 2 percent on Monday to $39.06 and are up 17.5 percent this year.

Comments

[Carl Caroli]

04:37 PM on 02/28/2012

Bust them up. Make 100 banks where there was one. Reduce Dimon's and the other megabank CEOs income and influence a hundred fold. It's time to take our country back from the 1%.

[szweir]

03:22 PM on 02/28/2012

Baby first cries about nobody being nice to the rich and now he thinks the old magic (lies,lies, and more lies) will make people believe him.

Maybe he should quit and we could get a person we could believe.

[castlemike]

03:08 PM on 02/28/2012

http://dealbook.nytimes.com/2012/02/26/investigators-scrutinize-mf-global-wire-transfers/

Federal investigators examining the final days at MF Global and how customer money went missing are poring over scores of wire transfers in and out of the brokerage firm, including the possible movement of $325 million that may have belonged to customers, according to people briefed on the matter.

Federal authorities have traced hundreds of millions of dollars in customer money to an array of destinations, including $165 million that may have gone to JPMorgan Chase and other transfers that went to MF Global’s trading partners and securities customers.

Such transfers violated a cardinal rule on Wall Street: never mingle customers’ money with the firm’s funds.

Investigators are focusing in part on the Chicago office because that is where commodity customers’ funds were safeguarded.

No one at MF Global — including Ms. O’Brien, Ms. Vavra, Ms. Serwinski or Mr. Corzine — has been accused of any wrongdoing.

[OldTulsan]

01:37 PM on 02/28/2012

JPM account holders with less than $ 100,000 need to move to a small bank or credit union...

http://www.bloomberg.com/news/2012-02-28/jpmorgan-views-clients-with-less-than-100-000-to-invest-as-unprofitable.html
JPMorgan Sees Clients With Less Than $100K as Unprofitable- Bloomberg

"JPMorgan Chase & Co. (JPM), the largest U.S. bank by assets, said about 70 percent of customers with less than $100,000 in deposits and investments will be unprofitable following regulations that cap lenders’ fees.

“I’m trying to give you a proxy for what the banking industry has to look forward to if you don’t take into account business bank clients and getting more of the affluent wealth wallet,” Todd Maclin, chief executive officer of consumer and business banking at the New York-based company, said today at an investor presentation.

The biggest U.S. banks are grappling with lost revenue from regulations such as those that cap debit interchange fees and overdraft charges, making customers with low deposits more expensive for lenders to manage. JPMorgan, run by CEO Jamie Dimon, sees its greatest opportunity with affluent customers that have more banking relationships with the company, Maclin said..."

[lofttypeofaview]

05:13 PM on 02/28/2012

I had read months ago that it costs a large bank two hundred dollars a year to maintain a checking account. If everyone were to open a no fee, no minimum checking account (where available) at these banks and just deposit one cent and continue to deposit and withdrawal one cent monthly to keep the account active, then we can bankrupt these banks by $199.99 a year for each account.

[william 123]

12:06 PM on 02/28/2012

Yeah, bank size is dangerous, but I care less about size than the continued linkage of government insured deposits, to these behemouths! Consolidated growth and control of deposits, that's the danger folks. We need to let these high flying capitalists and their investors, fly alone. Take away government backing through insured deposits and cheap, dubiously. secured loans from the Fed and see how big the banksters grow on their own. I could care less about their size then. When they stub their toe, and sooner or later they will, they can sink all on their own.

[vinyl1]

12:11 PM on 02/28/2012

The bulk of the deposits at large banks are not insured. Large corporations keep hundreds of millions of dollars on deposit to pay their daily expenses. If they thought there was any danger, the money would disappear so fast you wouldn't believe it.

[ruolivert]

12:17 PM on 02/28/2012

Yup, like in MF Global where the money "vaporized"
Large corporations know they deposits are safe because they know governments won't let the banks that hold their money fail. Where would large corporations keep the funds to pay their expenses if there were runs on banks?

[william 123]

12:31 PM on 02/28/2012

It's not just direct insurance. It's also "implied safety and liquidity" from easy access to the Fed window. Corporate deposits are quite fluid and heavily "worked" as any good corporate treasurer knows.

[George Costanza]

11:48 AM on 02/28/2012

Jamie "Stop picking on us" Dimon is a clueless plutocrat. His message to investors should be that JPM is refocusing on specific vertical markets to add value to their brand, while de-emphasizing areas of the market that haven't proven to be as profitable.

But he won't do that, because he's a clueless plutocrat. I thought the description of him in this article was high-larious: "Dimon, who won wide acclaim for successfully managing JPMorgan through the worst of the financial crisis..."

Really? Hooray for Jamie Dimon's mad management skillz? How hard is it to run your bank into the ground, then tell your buddy Paulsen that if he doesn't bail you out, JPM is going under and taking THE ENTIRE GLOBAL ECONOMY WITH IT? JPM took $25 Billion in TARP money.

I'm pretty sure Peaches the Chimp could manage JPM Chase out of a disaster with an influx of $25B in free cash.

[ruolivert]

12:19 PM on 02/28/2012

Nobody in his position gets there by being clueless. I agree with everything else you say. These men know exactly what they are doing and can say the things they say because they know there will be no consequences save for free cash when they need it.

[George Costanza]

11:40 PM on 02/28/2012

You're kidding right? Jamie Dimon isn't clueless? He routinely goes in front of TV cameras and whines about America being mean to the poor helpless bankers.

He took home $23M in compensation last year, and JUST TODAY he went in front of reporters and chastised the news industry, saying reporters' pay was totally outrageous. (reporters earn, on average, just over $40k. The AVERAGE JPM Chase employee earned over $341k last year)

Yeah. He's not out of touch or anything. It's like he's trying to get America to hate him.

[frank adam]

03:02 PM on 02/28/2012

I look forward to seeing him on Dancing With The Stars. Who would be his partner? I vote for Tom Delay.

[George Costanza]

03:06 PM on 02/28/2012

I vote for Peaches the Chimp.

[David Fiderer]

11:45 AM on 02/28/2012

JPMorgan didn't exactly grow organically.
The government helped JPMorgan expand in its acquistions of Bear Stearns and Washington Mutual. When a faltering bank is too big to fail, it is quickly acquired by another bank that is too big to fail.

[Lindytindy]

11:41 AM on 02/28/2012

Obama is Dimon's punk. Why he didn't break up the too big to fail banks when he was in the perfect position to do so.

[cats530]

11:39 AM on 02/28/2012

“Giving debt relief to people that really need it, that’s what foreclosure is,” Dimon said. They (Homeowners) are probably better off going somewhere else, because they get relieved almost 100% of the debt through foreclosure.” Oh, no he didn’t. Did he just say what I thought he said? He has got to be the most astonishingly arrogant, out-of-touch, uncaring jack@ss I have ever come across. I don’t even think The Donald would say something like that. Foreclosures weren’t bad for people… they were more like a gift… a way of providing much needed relief from the burdens of having a home in which to live. Foreclosures weren’t debt collection… they were debt forgiveness. Rejoice, people, rejoice! Rejoice and revel in the fact that you’ve got thirty days to pack your crap and move out of your house!"

http://mandelman.ml-implode.com/2011/06/bringing-up-the-rear-%E2%80%93-jamie-dimon-chairman-ceo-jpmorgan-chase-co/

[blackranger]

11:04 AM on 02/28/2012

So this CEO has been very richly awarded over the years from 2004 for doing what for its stockholders? Hmm, a low percentage increase over that long term would be a red flag in my investment portfolio. Who would be satisfied with that growth, how does the bank justify the huge payouts to their executives. Just another example of robbing investors who are mostly institutional with no one watching the store.

[big tom]

09:24 AM on 02/28/2012

the bigger you are the more you can steal...

[Indigo1941]

09:04 AM on 02/28/2012

Resolve: Big banks, like big cars, are mere allegories of phallo-centric enlargement fantasies. Discuss.