After it reported a 3% decline in revenue, JPMorgan is insisting its managers trim the fat from operations across the board, as reported by Reuters. Overall income fell by 7%, and this was one reason shares fell 3.45%. One thing plaguing JPMorgan is legal expenses, but even backing out the $1 billion in legal fees, the bank still spent 61% of its revenues on expenses. CFO Marianne Lake expects this number to drop to 55%.
Another factor in the bank’s decline is the low interest rates that are cutting into the company’s profits from loans. Still, some question JPMorgan’s huge size, and if it is bleeding cash through inefficiency, perhaps the company should split itself up into smaller divisions. In addition, larger banks tend to catch the scrutiny of the government and are often the targets of greater regulation.
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CEO Jamie Dimon said the upsurge in spending was caused by the need to comply with new rules. JPMorgan outsourced the work to get it done fast, but the costs might have been too high. Dimon is confident the company can make its control systems more cost-efficient. Dimon denied plans of breaking up the company, and he thinks the diversity of JPMorgan provides a hedge against any one unforeseen decline; “The model works from a business standpoint.”
