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 per cent 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