JP Morgan to cut 5,000 jobs, profitability target in 2014

JPMorgan Chase & Co , the largest U.S. bank, said on Tuesday that it is reducing both its target for profitability and its headcount in 2014.

The bank trimmed its target for a key measure of profitability, return on tangible common equity, to a range of 15 percent to 16 percent, down from 16 percent previously. The bank announced the changes in a presentation tied to its annual investor day conference.

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At the conference, Chief Financial Officer Marianne Lake said the bank could potentially post an annual profit of $27 billion once interest rates normalize. The bank reported $18 billion net income in 2013, but Lake said excluding significant and one-time items its core performance was $23 billion.

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Addressing the company’s interest in buying back stock in the future, Lake said the company believes JPMorgan shares are currently 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.

JPMorgan also 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.

Chief Executive Jamie Dimon told reporters before the conference that such changes 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.”

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 Kevin Watters said at the conference the pretax income of JPMorgan’s mortgage production business would be negative in 2014.

The job cuts in the branches and in the credit card network were also up from the 4,000 announced in 2013.

Gordon Smith, the head of JPMorgan’s consumer bank, said at the conference he expected the number of employees who work in the bank’s branches will have declined 20 percent in 2015 from 2011.

Shares of JPMorgan were down 0.8 percent at $57.55.

Reuters