JPMorgan chief Jamie Dimon tries to rekindle the shine on Wall St on Investor Day
Jamie Dimon’s reputation as a Wall Street favorite will be tested next week as the JPMorgan Chase chief executive hosts the company’s first Investor Day in two years, amid criticism over his salary package and his spending plans for America’s largest bank.
The showdown was scheduled for February after analysts raised concerns over Dimon’s announcement the previous month that JPMorgan would spend $15 billion on new investments this year. Dimon was so flippant in answering questions about his strategy that Mike Mayo, a veteran Wells Fargo banking analyst, called it his worst investor call in nearly a decade.
With presentation preparations underway, JPMorgan’s woes grew. In March, it suffered a trading loss of $120 million as consideration for a disastrous sale of nickel by Chinese metals group Tsingshan on the London Metal Exchange.
Then last week, JPMorgan shareholders reprimanded Dimon’s salary, which included a special award estimated at around $50 million over the next five years on top of his regular compensation of $34.5 million. Although 93% of shareholders backed his re-election to his current role at the company’s annual meeting, less than a third voted in favor of the bank’s executive pay in 2021, the highest level of support. low since she began holding such votes more than a decade. from.
Dimon, 66, has a chance to move on from 8 a.m. Monday, using the communication skills that have set him apart on Wall Street for decades. Banking analysts want details of JPMorgan’s investment plans and the bank promises more details.
“As we said, investors asked good questions,” a JPMorgan spokesperson said.
This trying year for JPMorgan and Dimon is an unusual pocket of turbulence for a bank that, under his leadership since 2005, has outperformed much of the banking industry.
Shares of JPMorgan have fallen about 25% this year, a steeper decline than the 19% drop in the broader KBW banking index. JPMorgan’s valuation to book value, however, remains higher than peers such as Bank of America and Citigroup.
“JPM’s Investor Day is always a big event for the financial industry, but we believe Monday’s event is more critical than normal,” Keefe, Bruyette & Woods analysts wrote in a research report, noting the inability of the bank’s share price to follow. the KBW index.
The stock market’s performance sharpened investors’ attention to JPMorgan’s spending plans, which appear outsized relative to their peers. The group is spending about $6 billion this year on new technology initiatives, for example, compared to $3.6 billion for BofA.
JPMorgan said capital spending will go towards initiatives such as cloud computing capabilities, hiring and marketing campaigns. Investors are eager to hear more details about the market share gains and the tangible benefits the investments will bring.
“Investor commentary has focused a lot on these investments and just understanding the returns,” said Robert W Baird research analyst David George.
Dimon defended the spending plans at JPMorgan’s annual general meeting, saying the bank has “always invested for the future.”
JPMorgan said it would provide details of its expansion last year into the UK retail market with a digital-only bank, a move questioned by investors at a time when some rivals are reining in retail branch networks to the stranger.
Another issue will be a series of eclectic acquisitions over the past 12 months, which include UK digital wealth management platform Nutmeg, college financial planning tool Frank and a deal for The Infatuation, a food blog that owns the Zagat restaurant review guide.
“Investor Day will be an opportunity for them to further detail the initiatives they’ve outlined so far,” said Ken Usdin, research analyst at Jefferies.
Dimon warned in January that spending plans could mean missing a tangible return on equity target, a key measure of profitability, this year and next. He made the prediction as investors expected a more modest pace of interest rate hikes from the Federal Reserve.
With rates now expected to rise more steeply this year, which should allow lenders such as JPMorgan to extract more revenue from the loans they make, analysts expect Dimon to raise its forecast for the bank’s net interest income for 2022.
The bank previously said it expects the NII in 2022 to be above $53 billion, up from $44.5 billion in 2021. Deutsche Bank analysts expect JPMorgan’s new NII target to be 55 at $56 billion.
Dimon will likely have time to prove whether his investments will materialize – JPMorgan’s board has told him they want him to remain CEO for at least five years.