JPMorgan Chase & Co., the world’s biggest investment bank, may have to cut jobs and reduce compensation if trading revenue fails to rebound as expected, Chief Financial Officer Marianne Lake said.
With results holding at current levels, “compensation will come down,” Lake said today at an investor conference in New York. “Then in the longer term, the question is whether we will have too much capacity.”
JPMorgan warned investors last month that second-quarter fixed-income and equities trading would probably drop about 20 percent from a year earlier amid low volatility across asset classes. Lake, 45, affirmed the New York-based bank’s forecast today and said the slowdown appeared to be cyclical, rather than a permanent shift.
“Over time, we should expect to see these cyclical headwinds abate and get replaced with tailwinds,” including stronger global economic growth and higher interest rates, Lake said.
The bank’s size allows it to withstand market lulls without overreacting, she said, while acknowledging the possibility that job cuts could be needed over the longer term. Rivals including Morgan Stanley have reduced staff and Zurich-based Credit Suisse Group AG is weighing the sale of additional stakes in an electronic interest-rates trading unit.
“It is possible that reductions may be required in response to market evolution, but it will take time to play out,” Lake said.
Deposits may drop by about $100 billion at JPMorgan after the Federal Reserve reverses steps it took to prop up banks and markets after the financial crisis, Lake said. Rising interest rates could also draw deposits as consumers move to money-market funds, she said. The bank has drawn $350 billion in additional deposits since the end of 2009, much of it because of Fed actions, Lake said.