Reuters logo
JPMorgan may cut 14,000 jobs
February 26, 2009 / 2:02 PM / 9 years ago

JPMorgan may cut 14,000 jobs

<p>People walk past the JPMorgan Chase &amp; Co building in New York March 17, 2008. REUTERS/Chip East</p>

NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N) said on Thursday it is cutting up to 14,000 jobs, more than previously disclosed, as it tries to reduce costs in the face of a slumping economy and higher credit losses.

The second-largest U.S. bank said it now expects to shed as many 12,000 jobs from integrating the former Washington Mutual Inc WAMUQ.PK, up from 9,200 announced in December. It also expects to cut up to 2,000 investment banking jobs.

JPMorgan announced the cuts in an all-day presentation to investors. The New York-based lender expects the cost cuts to help it weather the current economic turmoil, as customers struggle with falling house prices, tight credit and increasing mortgage and credit card defaults.

“We are scared about the future like everybody else,” but the bank has “enormous earnings power,” Chief Executive Jamie Dimon said. “I always remind myself that we really have no idea what 2009 is going to look like, but we’re going to make an awful lot of money in 2011.”

JPMorgan expects $2.75 billion of savings from Washington Mutual, offset by $750 million of new investments. Retail banking chief Charlie Scharf expects most of the savings by the end of 2009, sooner than originally thought.

The bank in September paid $1.9 billion for the banking units of Washington Mutual, the largest U.S. bank or thrift ever to fail.

The combined company is shutting several hundred branches, but plans to open 120 new branches this year. JPMorgan has more than 5,000 branches, up from 539 as recently as 2003.

STRESS TEST

Meanwhile, JPMorgan’s investment bank expects to reduce its 28,000-person staff to between 26,000 and 27,000 by year-end, with cutbacks focused in technology and infrastructure, the unit’s co-chief executive, Steve Black, said.

Staffing could fall further if market conditions worsen, though it is “hard to imagine” a worse year for the unit than 2008, he said.

Financial companies have announced close to 350,000 job cuts since August 2007, outplacement firm Challenger, Gray & Christmas has said.

The bank got $25 billion of capital last fall from the government’s Troubled Asset Relief Program, and Dimon said it is possible JPMorgan could repay that this year.

On Monday, JPMorgan unexpectedly cut its dividend 87 percent to help save $5 billion a year.

Referring to the government plan to subject large U.S. banks to “stress tests” to see how well they hold up in a worsening economy, Dimon said: “We think we’ll do fine under any stress test measurement,” even without “heroic” cost cuts.

JPMorgan shares closed up $1.32, or 6.1 percent, at $23.05 on the New York Stock Exchange on Thursday. The KBW Bank Index .BKX of large U.S. lenders rose 4.8 percent.

HOME EQUITY, CREDIT CARDS UNDER PRESSURE

JPMorgan said that excluding Washington Mutual, it expects losses of $1 billion to $1.4 billion in each quarter this year from home equity loans to more creditworthy borrowers.

It said as many as 41 percent of these borrowers will owe more than their homes are worth by the end of 2010, up from 27 percent at the end of 2008.

Scharf said California’s housing market is showing signs of a bottom in home price deterioration, but Florida’s is not. He also said that “we know New York is going to deteriorate.”

He added: “There will be an end in sight, just figuring out where it is not the easiest thing as we sit here today.”

Housing problems and rising unemployment are also boosting losses in JPMorgan’s credit card business and may result in lower sales volume.

Executives expect card losses to increase “materially” and are preparing for a 9 percent U.S. unemployment rate by year end from January’s 7.6 percent. Dimon said “I’ll be happy” if the business makes money in the next year; it lost $371 million in the fourth quarter.

“The American consumer feels much poorer than in previous recessions,” credit card chief Gordon Smith said.

Editing by John Wallace; Phil Berlowitz

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below