J.P. Morgan: Strategic Shifts Amidst Changing Consumer Behavior

Chase Mobile Banking Application

Today, J.P. Morgan & Chase updated its forecast regarding employment cuts, announcing expected reductions of 8,000 jobs from its mortgage operations and retail branches over the course of 2014. These cuts are over 2,000 more than original projections.Furthermore , this employment reduction is on top of the 16,500 cuts made last year by the U.S. banking giant. 

However, total employment will be reduced by only 5,000 jobs due to the addition of 3,000 new jobs to the bank's compliance department. Compliance departments of major banks have become increasingly crucial since the '07-'08 global financial crisis. J.P. Morgan has agreed to over twenty billion dollars in settlements over just the past year, with other federal probes waiting in the wings. However, it is an acknowledged reality that demand for compliance expertise currently exceeds the pool of qualified personal, suggesting that money, and perhaps jobs, will be shifting gradually toward that area.

Legal issues aside, a great deal of J.P. Morgan’s strategic shift can be attributed to changing consumer behavior amidst advents in consumer banking technology. In addition to the employment cuts the bank also announced today that it would be curbing the expansion of its branch network. Over the past three years, J.P. Morgan added 360 new physical locations. However, customers’ growing reliance on paperless banking and automated teller machines has undercut the utility of the once essential brick-and-mortar banking stations. Moreover, the recent spike in online banking, namely the ability to cash checks through photos on encrypted mobile applications, has reduced demand for representatives and teller transactions.
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Arthur Gosnell

New Era of Regulation or Business As Usual?

After decades of expansion and high returns, the past handful of years following the global financial crisis have been uncertain at best. Whether its been JP Morgan, Goldman Sachs, or any major firm in between, every week it seems like there’s another settlement in the papers breaking into 10 figures. Today’s victims/villains: Morgan Stanley settled its bond suit with the top U.S. Housing Regulator to the tune of $1.25 billion. In 2011, the Federal Housing Finance Agency filed suit against 18 major financial firms concerning the firms’ roles in the selling of over $200 billion in subprime securities, in addition to misreporting the quality of the loans backing those securities. The sum represented the largest financial crisis related legal settlement for the Morgan Stanley. Of the 18 firms, Morgan Stanley is now the eighth to settle these particular claims. The sum ranks third in worth, behind only the $1.9 billion and $4 billion Deutsche Bank and J.P. Morgan Chase paid in the fall, respectively.

J.P. Morgan CEO Jamie Dimon (R) and family pictured in their Christmas card, which has been called "tone-deaf" for its opulence; a sign of generous compensation amidst regulatory struggles and accountability concerns

Despite the evident tightening of regulation and supervision in the industry, the legal expenses surrounding the major firms come in sharp contrast to the executive paychecks and bonuses. In 2013, Morgan Stanley CEO James Gorman received a stock bonus of $5 million, double that of the previous year. Perhaps most shocking was the executive compensation given to J.P. Morgan’s Chairman and CEO, Jamie Dimon. Last week Dimon took home his base level salary of $1.5 million, coupled with board-voted addition of $18.5 million in restricted stock. This was a raise of nearly 75%. Critics have been quick to condemn the decision, alleging that the raise reflects the continued lack of accountability on Wall Street. The board has various reasons behind the decision. Namely, Dimon’s leadership in guiding the firm through the legal mess, as well as J.P. Morgan’s stock beating the S&P 500, which climbed 30% on the year. Perhaps more polarizing is notion, popular among J.P. Morgan executives, that the firm is receiving unfair treatment for the wrongdoing of other firms, specifically Bear Stearns. Nevertheless, the executive compensations reflect the general idea that, despite record legal settlements, business is indeed running as usual.
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Arthur Gosnell