UPDATE 3-JPMorgan to cut 8,000 jobs, lowers 2014 profit target

Tue Feb 25, 2014 6:09pm EST

By David Henry and Peter Rudegeair
    Feb 25 (Reuters) - JPMorgan Chase & Co, the largest
U.S. bank, announced thousands of job cuts on Tuesday as the
mortgage lending business slows, and said it was lowering its
profitability target.
    The company said it expected total headcount to fall by
5,000 to 260,000 in 2014. Around 6,000 full-time and contractor
jobs in JPMorgan's home loans unit and 2,000 jobs in its branch
and credit-card network will be cut. At the same time, the bank
expects to add 3,000 new jobs in its control function, including
areas like compliance.
    Speaking at the bank's annual conference with investors,
Chief Financial Officer Marianne Lake said the bank could post
higher profit, possibly up to $27 billion a year, once
short-term interest rates rise. The bank reported $18 billion
net income in 2013, but Lake said excluding significant and
one-time items its core performance was $23 billion.
    But because the bank cannot fund as many of its assets with
debt, a measure of the profit it generates from equity will
likely be lower. In particular, return on tangible common equity
will likely be somewhere between 15 percent and 16 percent, down
from the bank's prior estimate of 16 percent, Lake said.
    Even with this lower rate of profitability, Lake said the
company believes its shares are now trading at a 20 percent
discount to their "theoretical value." She also said the company
believes it will generate enough excess capital to operate
without an additional buffer capital over regulatory
requirements.
    Chief Executive Jamie Dimon told reporters before the
conference that the job cuts are part of the adjustments the
company has to make continually as its business changes. 
    "You're always trimming the sails. That's business," Dimon
said. "Obviously headcount is coming down in some of the
businesses. That is life."
    Shares of JPMorgan closed down 1.7 percent at $57.03 on the
New York Stock Exchange on Tuesday.
    
    MORE WEAKNESS IN MORTGAGE, SALES AND TRADING
    The newly announced job cuts in mortgage banking raise the
total number of mortgage cuts the company originally called for
by year-end 2014 to 17,000. Many big banks, including Wells
Fargo & Co and Bank of America Corp, have been
laying off mortgage workers as higher interest rates in the
second half of 2013 made refinancing less attractive to
homeowners. 
    Mortgage lending at JPMorgan fell 8 percent in 2013 to $166
billion, but refinancing fell three times as much. 
    Weakness in that business would persist into this year.
Mortgage banking Chief Executive Kevin Watters said at the
conference the pretax income of JPMorgan's mortgage production
business would be negative in 2014. 
    Sales and trading was another business where JPMorgan
executives expected weakness in the near-term. Daniel Pinto,
co-chief executive of JPMorgan's corporate and investment bank, 
 said that markets revenues since the start of the year were
down 15 percent compared with the same period of 2013. 
    The first quarter is generally the strongest for banks'
sales and trading units, and executives did not attribute the
lower levels to any specific development. 
    "We don't know exactly why," Dimon said, adding that the
drop-off in activity did not worry him. 
    The job cuts in the branches and in the credit card network
were also up from the 4,000 announced in 2013. 
    Gordon Smith, the head of JPMorgan's consumer bank, said at
the conference he expected the number of employees who work in
the bank's branches will have declined 20 percent in 2015 from
2011.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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