Jamie Dimon’s status as a favorite of Wall Street will likely be put to the take a look at subsequent week because the JPMorgan Chase chief govt holds the corporate’s first investor day in two years, amid criticism of his pay package deal and spending plans for the most important US financial institution.
The showdown was scheduled in February after analysts raised issues about Dimon’s announcement the earlier month that JPMorgan would spend $15bn on new investments this yr. So informal was Dimon in responding to queries about his technique that Mike Mayo, a veteran Wells Fargo banking analyst, known as it his worst investor name in nearly a decade.
With preparations for the presentation below approach, JPMorgan’s woes grew. In March, it suffered a $120mn buying and selling loss as counterparty in a disastrous brief nickel commerce by Chinese metals group Tsingshan on the London Metal Exchange.
Then final week, JPMorgan shareholders delivered a rebuke on Dimon’s pay, which included a particular award projected to be value round $50mn over the following 5 years along with his common compensation of $34.5mn. Although 93 per cent of shareholders backed his re-election to his present place on the firm’s annual assembly, lower than a 3rd voted in favour of the financial institution’s 2021 govt pay, the bottom degree of help because it began holding such votes greater than a decade in the past.
Dimon, 66, has an opportunity to show the web page beginning at 8am on Monday, utilizing the communications abilities which have set him aside on Wall Street for many years. Bank analysts need particulars of JPMorgan’s funding plans and the financial institution is promising extra specifics.
“As we’ve said, the investors have been asking good questions,” mentioned a JPMorgan spokesperson.
This chastening yr for JPMorgan and Dimon is an uncommon pocket of turbulence for a financial institution that below his management since 2005 has outperformed a lot of the banking business.
JPMorgan shares are down roughly 25 per cent this yr, a steeper drop than the 19 per cent decline within the broader KBW Bank Index. JPMorgan’s valuation relative to its e-book worth, nevertheless, stays above friends equivalent to Bank of America and Citigroup.
“JPM’s investor day is always a big event for the financial sector, but we believe Monday’s event is more critical than normal,” Keefe, Bruyette & Woods analysts wrote in a analysis report, noting the failure of the financial institution’s inventory value to maintain up with the KBW index.
The inventory market efficiency has sharpened the investor concentrate on JPMorgan’s spending plans, which seem outsized relative to friends. The group is spending about $6bn this yr on new expertise initiatives, for instance, in contrast with $3.6bn by BofA.
JPMorgan has mentioned the funding spending will go in the direction of initiatives together with cloud computing capabilities, hiring and advertising campaigns. Investors are keen to listen to extra particulars about what market share features and tangible advantages the investments will yield.
“Feedback from investors has centred a lot around those investments and just understanding what are the returns,” mentioned Robert W Baird analysis analyst David George.
Dimon defended the spending plans at JPMorgan’s annual normal assembly, saying the financial institution has “always invested for the future”.
JPMorgan has mentioned it can present particulars round its growth final yr into the UK retail market with a digital-only financial institution, a transfer questioned by buyers at a time when some rivals are reining in abroad retail department networks.
Another concern will likely be a string of eclectic acquisitions over the previous 12 months, which embrace UK digital wealth administration platform Nutmeg, faculty monetary planning software Frank and a deal for The Infatuation, a meals weblog that owns restaurant assessment information Zagat.
“Investor day will be an opportunity for them to further detail initiatives that they’ve given broad strokes on so far,” mentioned Ken Usdin, a analysis analyst at Jefferies.
Dimon cautioned in January the spending plans may imply it misses a goal for return on tangible frequent fairness, a key measure of profitability, this yr and subsequent. He made that prediction when buyers had been anticipating a extra modest tempo of rate of interest will increase by the Federal Reserve.
With expectations now for a steeper climb in charges this yr, which ought to allow lenders equivalent to JPMorgan to earn extra from the loans they make, analysts anticipate Dimon to carry steering on the financial institution’s web curiosity earnings for 2022.
The financial institution beforehand mentioned it anticipated NII in 2022 can be greater than $53bn, up from $44.5bn in 2021. Analysts at Deutsche Bank predict JPMorgan’s new NII goal will likely be $55bn-$56bn.
Dimon is more likely to have time to show whether or not his investments will play out — JPMorgan’s board has informed him it desires him to stay CEO for at the least one other 5 years.