NEW YORK– Jamie Dimon, CEO of the country’s largest bank, JPMorgan Chase, has released his annual letter to shareholders in which he offered thoughts on everything from the effect the war in Ukraine could have on the global economy and on the bank itself, to the economy, inflation and more.
While optimistic, Dimon also said he sees “challenges at every turn.
One reason for optimism, at least for JPMorgan: the bank head a big year in 2021, earning $48.3 billion in net income on revenue of $125.3 billion, vs. $29.1 billion on revenue of $122.9 billion in 2020. Included in the $48.3 billion is $9.2 billion after tax in reserve releases due to the volatility introduced by the new current expected credit loss accounting standard, Dimon said.
In total, Dimon said JPMorgan Chase extended credit and raised capital of $3.2 trillion for large and small businesses, governments and U.S. consumers.
Given an environment in which big corporations are frequently criticized for not paying taxes, Dimon further noted the bank over the past decade has paid $42 billion in federal, state and local taxes in the United States and $17 billion in taxes outside of the United States. It also paid the Federal Deposit Insurance Corporation $11 billion.
The Big Themes
Among Dimon’s comments on specific issues:
- War in Ukraine: The conflict is already having a “substantial economic impact,” Dimon wrote, and it could worsen in unpredictable ways, particularly if more sanctions are imposed on Russia and commodity supplies are further disrupted
- JPMorgan’s exposure to Russia: Dimon said the bank could lose $1 billion “over time,” but it’s not something he’s worried about. He described complying with sanctions as an “enormous undertaking.” JPMorgan and Goldman Sachs said last month that they were winding down their businesses in Russia
- Energy Security: “We need a ‘Marshall Plan’ to ensure energy security for us and our European allies,” Dimon wrote, a point he made to President Biden directly last month. Dimon called on the U.S. to boost investments in liquefied natural gas that can be exported to Europe to reduce the continent’s dependence on Russian energy
- The U.S. economy: Consumers and businesses are flush with cash, but inflation is mounting and persistent, Dimon said. As such, Dimon wrote that JPMorgan is “prepared for drastically higher rates and more volatile markets.”
- Return to office: Dimon has softened his earlier stance on wanting all JPMorgan employees back in the office as soon as possible. Instead, he now expects that about 40% of JPMorgan’s roughly 271,000 employees may move to a hybrid working model, and an additional 10% could end up working from home full-time. But he also said there were “serious weaknesses” to remote working, which “eliminates much spontaneous learning and creativity
Other Points
Other points discussed in greater detail in the letter include:
- The U.S. economy is strong.
- Persistent inflation will require rising interest rates and a massive but necessary shift from quantitative easing to quantitative tightening.
- The Ukraine/Russia war could affect geopolitics for decades. Dimon called for confronting Russia with “bold solutions.”
- While America has flaws, its essential strengths endure.
- “To maintain our competitiveness, our country must regain its competence — and our principles, including free enterprise, need to be nurtured.”
- Government, with its unique powers, has an essential role in managing the economy — but it needs to be realistic about its imitations on what it can and cannot do.
- A strong America need not fear a rising China.
- There are compelling reasons for global trade restructuring.
- “We can have a path forward for U.S. policy: Agree on what we want, then execute.”
- Banks performed magnificently during the COVID-19 crisis.
- The role of banks in the global financial system is diminishing.
- “Possibly more important: The role of public companies in the global financial system is also diminishing.”
- More regulation is coming. “Ten years after the crisis, we are still rolling out Basel IV — and we need more thoughtful calibration of the rules.”
- Banks need to acknowledge the dramatically changing competitive landscape.
- Some investments generate predictable returns.
- Acquisitions should pay for themselves — and each one has its own logic.
- We want to build upon our global footprint.
- We make extensive investments in technology for a broad range of reasons, from improving operations and security to enhancing our products and services.
- Perfect your Picasso — have something to strive for and motivate you.
- Recognize the tremendous value of work.
- Nurture the extraordinary value of trust.
- Combat the enemy within.
- Drive high performance, the right way.
- Retaining talent is important and so is life outside of work.
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