JPMorgan Chase & Co., the biggest U.S. bank, will eliminate as many as 19,000 jobs in mortgages and community banking through through 2014 as Chief Executive Officer Jamie Dimon trims expenses.
The lender, employing about 259,000 people at the end of December, will cut 13,000 to 15,000 jobs in its mortgage unit and 3,000 to 4,000 in community banking excluding home lending through the end of next year, the company said today in presentations on its website. Firmwide headcount will shrink by about 4,000 people this year, mainly through attrition, while some employees are redeployed to other areas, said Kristin Lemkau, a spokeswoman.
Dimon, 56, is focusing on expense reductions after boosting net income to records for three straight years. Mortgage profits that drove banks’ earnings may fade this year as increased competition keeps the rates on new loans near all-time lows. Some firms also are cutting jobs after a settlement with U.S. regulators resolved obligations to review foreclosure documents.
With credit quality stabilizing, “banks can focus on operational efficiency,” said Chris Kotowski, a New York-based bank analyst with Oppenheimer & Co. “When credit problems are mounting, banks have to throw money at their problems. When the environment stabilizes, they can worry about operating efficiency.”
JPMorgan gave the forecasts as top executives began their annual Investor Day conference at the firm’s New York headquarters. The potential job cuts for mortgage and community banking amount to about 7.3 percent of the lender’s total headcount as of Dec. 31. The bank may also add people in other businesses, offsetting companywide reductions, Lemkau said.
Investment-banking compensation is “expected to remain relatively consistent,” the bank said.
JPMorgan fell 0.3 percent to $47.54 at 12:56 p.m. in New York. The company rallied 8.5 percent this year through yesterday.
Chief Financial Officer Marianne Lake said today that the bank is seeking to cut costs and expects to reduce adjusted expenses by about $1 billion in 2013. Net interest income will remain “flat,” and the firm will release about $1 billion in credit-card reserves back into earnings this year, she said.
“We know the work we have to do, and we’re comfortable doing it,” Lake said.
Costs in mortgage banking will fall by about $3 billion through 2014, the company said. Expenses in community banking, excluding home lending, may rise about 3 percent this year and 2 percent next year as the business expands. The firm said it may reduce same-store staffing 20 percent by 2015.
“We expect to achieve these efficiencies the same way we did in 2012, through attrition,” said Ryan McInerney, the CEO of consumer banking.
Citigroup Inc., the third-biggest U.S. bank, announced plans in December to eliminate 11,000 workers, with almost three-quarters of the cuts coming from its consumer banking unit and institutional clients group. The New York-based lender reduced its workforce by 7,000 to 259,000 in 2012 as it sought to lower expenses and boost profit.
Bank of America CEO Brian Moynihan, 53, said last year he would cut 30,000 jobs and $8 billion in annual costs by 2015. That’s 11 percent of the Charlotte, North Carolina-based lender’s workforce as of Dec. 31.
JPMorgan is seeking to cut expenses tied to mortgage servicing as it resolves regulatory probes and provides borrower relief including home-loan modifications. In January, it dismissed more than 800 workers focused on foreclosure reviews.
Most job cuts in the mortgage bank will probably come from servicing operations, which banks expanded to deal with fallout from the housing crisis, said Guy Cecala, publisher of Inside Mortgage Finance, an industry publication based in Bethesda, Maryland. Positions being cut aren’t akin to high-paying investment-banking posts, he said in a phone interview.
“It’s basically customer service,” Cecala said. “Is it any more complicated than being an airline representative? Probably not.”
The company has a long-term plan to cut quarterly servicing expenses to less than half the fourth quarter’s adjusted total, the bank said last month.
The figure of $725 million in the last three months of 2012 was “obviously still very high relative to our longer-term guidance of $300 million to $350 million a quarter, but we expect that to continue to trend down,” Lake said in a Jan. 16 conference call.
Reduced staffing may also signal an expectation that refinancings will decline after surging last year, said Keith Gumbinger, vice president of HSH.com, a Riverdale, New Jersey-based mortgage-information website.
“It’s a pretty good bet that the refi boom will be coming to an end” as mortgage rates climb, he said in a phone interview. “Add regulations on top of that, and it doesn’t get any better.”