JPMorgan Chase & Co. Presents at 10th Annual Global Financial Services Conference, May-26-2020 12:30 PM - NYSE:JPM

NYSE:JPM

James Dimon, the CEO of JPMorgan Chase & Co., made several key points during his presentation at the 10th Annual Global Financial Services Conference on May 26, 2020:

1. Banks as a Port in the Storm:

   • Banks are well-capitalized and have healthy earning streams.
   • Regulations have improved liquidity and capital adequacy.
   • Banks are actively lending, including through revolvers and bilateral loans, and participating in the Paycheck Protection Program (PPP).
   • Banks are taking care of employees and clients, with approximately 80% of U.S. employees working from home effectively.

2. Government Response:

   • The government responded quickly and aggressively to the COVID-19 crisis, with fiscal and monetary policies implemented within weeks.
   • The Federal Reserve's actions were comprehensive and swift compared to the gradual response during the 2008 financial crisis.
   • Programs like PPP and unemployment insurance have helped many people and small businesses.

3. International Response:

   • Responses in the UK, Europe, and Japan were roughly equivalent, focusing on creating liquidity and supporting employees and consumers.
   • Concerns exist regarding the impact on emerging markets due to potential leverage issues.

4. Consumer Spending Trends:

   • Credit card spending was down significantly, particularly in travel and restaurant sectors, but has partially recovered.
   • Debit card spending has returned to pre-pandemic levels, reflecting everyday spending.
   • The consumer remains relatively healthy, supported by government benefits and the expectation of returning to work.

5. Marriott Deal:

   • JPMorgan approached the deal with Marriott as a partnership, ensuring it worked for both parties.
   • JPMorgan considers its role to help clients through tough times, accepting some risk in the process.

6. Risk Management:

   • JPMorgan is well-capitalized and can bear significant risks, even in a prolonged downturn.
   • Regulatory measures such as CECL (Current Expected Credit Loss) and risk-weighted assets can become pro-cyclical, potentially limiting banks' ability to extend credit.

7. Credit Reserves and Stress Testing:

   • Credit reserves will likely increase substantially in the second quarter due to the forward-looking nature of CECL.
   • If the base case scenario materializes, banks may not need additional reserves in subsequent quarters.
   • The base case scenario involves unemployment decreasing gradually through the year.

8. Dividends:

   • JPMorgan aims to sustain its dividend, learning from the mistakes of the 2008 financial crisis.
   • Dividends represent a small portion of capital and should be maintained unless the economic situation worsens dramatically.

9. Stock Buybacks:

   • Buybacks should be considered after seeing signs of recovery and should be opportunistic.
   • Buybacks should occur at prices beneficial to remaining shareholders, not solely as a mechanism to return cash.

10. Regulatory Review:

    • Regulations were necessary post-2008 but need review for calibration and coordination.
    • Some regulations have unintended adverse consequences, such as on swap rates and repo rates.
    • JPMorgan suggests reviewing liquidity, operational risk capital, and G-SIFI (Global Systemically Important Financial Institutions) calculations.

11. Technology and Digitization:

    • Technology is crucial for serving clients better, faster, and cheaper.
    • The pandemic may accelerate remote working and digitization but will not fundamentally change the importance of technology in banking.

12. Market Speculations:

    • Speculations about changes in society and business operations are occurring, focusing on remote work and real estate implications.
    • Companies are raising capital to ensure they can weather the crisis.

13. Expense Management:

    • Expenses have been managed prudently, with lower headcount and reduced hiring.
    • Expense management has not impacted branch expansion or technology investments.

14. Forbearance Programs:

    • JPMorgan monitors forbearance requests and usage, noting that some high-net-worth individuals have requested forbearance.
    • About one-third of those requesting forbearance do not use it, suggesting it is often used as a precaution.

15. Customer Satisfaction:

    • The pandemic demonstrated the strength of banks' technological infrastructure and back-office operations.
    • Banks have improved customer satisfaction but continue to focus on making customers happy.

16. Market Valuations:

    • JPMorgan is a valuable company despite market downturns, maintaining profitability even in challenging times.
    • The stock market reflects varied impacts on different sectors, with some sectors performing well while others suffer.
    • Liquidity injected by the Federal Reserve supports asset prices, influencing stock market valuations.

17. Future Outlook:

    • JPMorgan is prepared for both a positive recovery scenario and a more prolonged downturn.

    • The bank hopes for a rapid recovery but acknowledges the possibility of a more challenging economic environment.