JP Morgan Chase job cuts rise to 19,000

The American bank has decided to increase its planned job cuts by the end of 2014 by 4,000 to make further cost savings.

by Michael Northcott
Last Updated: 19 Aug 2013

JP Morgan’s original plans were to get rid of about 15,000 people at its mortgage banking unit, but in a presentation this afternoon, the US bank revealed that it wants to reduce headcount at its consumer and community bank unit by around 4,000, too. That's a total of 19,000 in all, and the firm hopes the additional cuts will shave a further $1bn off the pay roll.

You could be forgiven for thinking that the bank is doing badly, since cost cutting is so often the preserve of struggling firms trying to protect squeezed margins. But these cuts are a surprise to some analysts considering the bank has posted record profits for the past three years in a row.

According to the bank’s new chief financial officer, Marianne Lake, the cuts are purely to bolster the bank’s profits, rather than to combat any shrinkage. And it makes sense: ongoing economic woes mean that investment markets remain depressed and consumers definitely aren’t awash with cash. You can see, then, why the bank needs to look at other ways of boosting profits to keep the results looking rosy.

Lake said that budget cuts, less investment, and the end of pricey litigation hanging over from the mortgage crisis will all push profits up. ‘[The budget-cutting] gets you to about $27.5bn [net income] over time,’ she said. If she’s right, that compares pretty favourably with $21.9bn net income in 2012. 

In contrast to many other banks in the US (which have been cost-cutting too), JP Morgan is not cutting branch numbers. It has a large retail banking operation in America, and it is planning to open more branches, but staff them more efficiently. The Idea is that machines will do the routine stuff, freeing up staff to sell the higher value products (such as loans to SMEs) to local customers.

Nonetheless the top executives are seemingly not scared to use euphemistic jargon to describe swingeing job losses: the chief executive of consumer banking, Ryan McInerney, said that whilst the firm is going to add 100 branches per year, staff per branch will fall 20% by 2015 through ‘attrition’. Nicely put.

At the end of 2012, JP Morgan Chase – the US’s largest bank by asset value – employed more than quarter of a million people, so in the wider picture, these cuts are a fraction of the whole business. With that in mind, whilst the announcement is bad news for employees, shaving a billion off the wages bill will definitely help that bottom line. At least in the short term…

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