JPMorgan announced at Investors Day on Tuesday massive savings that will meet government capital rules.
New U.S government regulations stipulating that banks have to hold a certain amount of capital to bear any losses that may have been swallowed by public funds in the past. The bank now expects to make $1.4 billion savings to meet the new conditions by reducing spending from $58.4 billion recorded in 2014 to a 2015 figure of roughly $57 billion. Targets for cost cutting in the corporate & investment banking divisions are $2.8 billion.
Shares in the largest U.S bank by assets climbed 2.5% on the day, but ending with a slight reversal from intraday gains. Shares currently stand at $60.72, the highest price achieved since the end of January this year, but not close yet to the $63.38 highs of December 2014.
The savings will come from a variety of sources; jobs and pay, phone lines, hotel bills and black car transportation, technology and operational costs will all be cut, according to Daniel Pinto, chief executive for JPMorgan's corporate and investment bank, as reported by Reuters. The bank has already cut 23,200 jobs from the retail bank in 2014, 7,000 more than expected, and plans to reduce its 5,600 branches by 300 by the end of 2016.
The savings are necessary due to weak revenues. The last fourth quarter results showed disappointing figures with net revenue at $10.9 billion, a decrease of $490 million, or 4%, compared with the prior year.
In an effort to lower the new regulatory requirements on the amount of capital held by complex and multi-divisional banks, JPMorgan will also ‘shed up to $100 billion of non-operating deposits, extra cash clients keep in accounts’, as reported by Reuters.
Despite revenue losses, JPMorgan was still able to achieve total capital return of $10 billion in 2014.
JPMorgan Chase overview, Sustained tangible book value growth, presented at Investors Day February 24, 2015
MT4 chart: JPMorgan
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