By David Henry
NEW YORK Dec 4 Despite the prospect of low
lending rates for years to come, JPMorgan Chase & Co
will continue to build new branch offices to take in more
deposits to make loans and support some of its business
franchises, a top bank executive said on Tuesday.
"Even in the current rate environment, deposits are a very
good business," Chief Financial Officer Doug Braunstein said at
an investor conference after being asked by a stock analyst if
the company would consider spending less on new branches.
The company's 5,600 U.S. branches, second in number only to
Wells Fargo & Co's, have been important to the company's
18 percent growth in deposits, to $1.1 trillion, over the last
18 months, Braunstein said. Thi s year the company has been
adding 150 branches to its total.
Besides catering to individuals with bank accounts, credit
cards and home loans, branches support the company's services to
small and mid-sized companies and its offerings of investment
products to the affluent.
"Branches are core to our business," Braunstein said.
Stock analysts and institutional investors have been
increasingly pressing bank executives to justify building and
maintaining branches when profit margins on deposits are at
historic lows and when the Internet and mobile phones allow
people to make more purchases without cash or make deposits
without going to a bank. Some banks, notably Bank of America
Corp, have been closing branches to save money.
But Braunstein, speaking at a Goldman Sachs conference,
argued that this is a time for JPMorgan to spend to take market
share of deposits and use branches to cement its relationships
with customers. When the Federal Reserve allows lending rates to
rise again, JPMorgan will make more money, he said.
"To the extent the rate environment normalizes over time -
and it may take some time to do so - there is going to be
significant upside," he said.
Taking questions on other topics, Braunstein said that big
banks are in better shape to undergo next year's round of
Federal Reserve stress tests of their capital plans, which can
call for spend cash dividends and stock buybacks.
Compared with past stress tests, bank portfolios are of high
quality because a lot of bad loans have been written off. Banks
have also had time to earn money and build up their capital
cushions. And they have learned how to improve their test scores
by going over past results and talking with examiners, he said.
The chance of failing the stress tests has also been reduced
because in the current round the Federal Reserve will allow
failing banks a chance to submit a more cautious plan, he noted.
The Fed has said it will publicly disclose plans that are
rejected and resubmitted. Bank of America Chief Executive Brian
Moynihan, at the same conference earlier in the day, said he
plans to avoid having to redo his bank's plan.
Braunstein also said that fourth-quarter revenue from
capital markets is running 15 percent to 20 percent below that
of the third quarter but should still be higher than a year
He reaffirmed past assessments from JPMorgan CEO Jamie Dimon
that JPMorgan should be able to make $24 billion in annual
profit in more normal times. In recent years the company has
fallen short of the goal as it recognized losses on mortgages
and credit card loans, and received lower rates of interest on
In 2011, JPMorgan reported $19 billion in net income.
JPMorgan shares were down 0.6 percent at $40.57 on Tuesday
at the close of trading on the New York Stock Exchange.