JPMorgan Chase’s Jamie Dimon discusses succession, acquisitions, expenses at Investor Day

“Most important about the future of JPMorgan Chase’s future is the discipline and culture in place,” Chairman and CEO Jamie Dimon said on Monday at the company’s Investor Day event when asked about succession. As usual, he did not provide any timeframe for how much longer he’ll lead the company.

“We have built a very deep bench,” he said, listing a raft of names that are up-and-coming executives at the bank. “It’s prudent for the board to think about succession.”

Earlier, Troy Rohrbaugh, co-CEO of the Commercial & Investment Bank, said he’s seeing Q2 investment banking fees down in the mid-teen from a year ago. Markets fees, meanwhile, are up mid-to-high single digits Y/Y in Q2.

Acquisition approach: As for the company’s own growth, “we should always be thinking about acquisitions…Maybe we could do something overseas,” he said. “Maybe, there are some adjacencies. That does not mean I want to overpay.” The other option is to invest in JPMorgan’s own businesses, he added.

“Expense and investments are artificial constructs that can lead to the wrong place,” Dimon said. There are some expenses that can be good, and some revenue can be bad. “Almost every single major financial institution almost didn’t make it,” many during the 2008 financial crisis, he noted.

“There’s a lot of competition, and you have to be prepared every day. I’m convinced we will do it, but we’re not going to do it by resting on our laurels.”

JPMorgan’s (NYSE:JPM) tech spend is ~10% of revenue, which is lower than some other companies. He thinks the mistake that people make is that “transformation is not done… It’s a permanent thing.” Management teams need to discuss what “they need to do in technology to do a good job for your client.”

Bitcoin: He said JPMorgan (NYSE:JPM) will make bitcoin (BTC-USD) ownership available to clients, but the bank won’t custody it. Overall, he doesn’t think it will matter much.

Regulatory environment: A lot of capital requirements were “never well thought through,” Dimon said. “Silicon Valley Bank wasn’t a capital issue, First Republic wasn’t a capital issue.” Those were liquidity issues.

“Whether they fix SLR (supplementary leverage ratio) or not, will not affect JPMorgan’s results,” he noted. Rather those constraints will hurt lower income Americans.

He thinks some of the new heads of regulators brought in the Trump administration will be able to fix some of the things that they think are broken.

The Fed’s stress tests “went so far beyond was reasonable, that they should be embarrassed,” Dimon said.

“I would limit interest rate exposure more, I would limit HTM (held to maturity securities) more, I would make sure that deposits are spread out in a certain way,” he said.

He also noted that all banks will benefit if regulations are improved. JPMorgan (JPM) won’t benefit more than other companies.

He thinks earnings estimates will come down, and with that, price/earnings ratios.

America’s place: “I do believe in American exceptionalism.” He also “never believed that Europe was as bad as people were saying.”

“I don’t think, in general, they (Europe) has a stronger economy than the U.S.”

If the U.S. wants to bring manufacturing back, it will take at least three to four years to make a difference, Dimon said.

Geopolitical risk is “very, very high,” he said. As he has said before, the company draws up a number of scenarios. “We’ll be fine” through any of them, he added.

Private credit thoughts: “Private credit is more expensive, lacks transparency, people don’t have a lot of liquidity against it,” “We are agnostic,” Dimon said. “We want to offer our clients direct loans, syndicated loans, as long as we’re underwriting the risk properly and doing it properly, we can do them too.”

“Personally, I am not a buyer of credit today. I think credit today is a bad risk,” he said.

JPMorgan (JPM) stock fell 0.9% in Monday midday trading. Earlier, it had dropped as much as 2.1% after Rohrbaugh’s comments on investment banking fees. Goldman Sachs (GS) fell 1.4%, and Morgan Stanley (MS) dipped 0.9%.