JPMorgan Chase (JPM) Chair and CEO Jamie Dimon released his annual letter to shareholders Monday, giving his perspective on a range of topics from the rise of artificial intelligence (AI) to the health of the economy and its outlook.
The influential CEO also touched on America’s role in international conflicts, climate change, and JPMorgan’s plans to support a number of initiatives related to diversity and inclusion, among other things.
JPMorgan shares were up about 0.5% at $198.44 in early trading Monday after Dimon’s letter was released, as well as the company’s annual proxy statement in which it said a transition to a new CEO is a “top priority” for the medium term.
Growing Role of AI
Amid a boom in demand in AI, Dimon highlighted the “critical impact” of the technology, and said that JPMorgan has taken a number of steps to expand its capabilities with AI.
Dimon said the company currently uses AI in over 400 different ways, from fraud detection to finding new marketing strategies, with plans to explore whether using generative AI for things like customer service or software development could help the business.
“While we do not know the full effect or the precise rate at which AI will change our business—or how it will affect society at large—we are completely convinced the consequences will be extraordinary and possibly as transformational as some of the major technological inventions of the past several hundred years: Think the printing press, the steam engine, electricity, computing and the Internet, among others,” Dimon wrote.
Soft Landing Could Be Less Likely Than Markets Expect
While the markets are currently pricing an a 70% to 80% chance of the economy executing a “soft landing,” with modest growth and declining inflation and interest rates, Dimon said “I believe the odds are a lot lower than that.”
Dimon said JPMorgan is prepared to weather a wide range of circumstances, including interest rates from 2% to 8%, and a recession to a strong economy. He also warned against focusing too much on monthly inflation data or slight changes to interest rates, when pressures like high government spending and restructuring of global trade could keep inflation high.
Rising Regulatory Requirements
In his letter, Dimon noted the financial industry has seen thousands of new rules introduced since the Dodd-Frank Act enacted after the 2008 financial crisis, and argued in favor of reevaluating some regulatory steps taken.
“It would probably be an understatement to say that some are duplicative, inconsistent, procyclical, contradictory, extremely costly, and unnecessarily painful for both banks and regulators,” he said, writing many banks from smaller banks to larger regional banks “may not have the resources to handle all of these regulatory requirements.”
Greater collaboration between banks and regulators, Dimon said, “would reduce confusion and uncertainty and would lead to better outcomes for banks, their shareholders, and their clients, customers and communities.”
Update on First Republic Acquisition in Aftermath of 2023 Banking Crisis
After nearly a year since its purchase of First Republic Bank, Dimon said JPMorgan expects to have most of its integration of First Republic Bank’s systems with JPMorgan’s policies and existing systems complete by later this year. JPMorgan now projects First Republic will add about $2 billion to its annual revenue, compared to initial estimates of $500 million.
“By purchasing First Republic Bank, we brought much-needed stability to the U.S. banking system,” Dimon wrote, noting “when we purchased First Republic in May 2023 following the failure of two other regional banks, Silicon Valley Bank (SVB) and Signature Bank, we thought that the current banking crisis was over.”
However, Dimon warned that if interest rates rise or there is a recession, “there will be plenty of stress—not just in the banking system but with leveraged companies and others.”