In recent years, JPMorgan Chase Investor Days, especially on the consumer banking side, have been celebratory as much as revelatory, with the nation’s largest bank strutting its stuff, talking up strengths like its excess capital and its fortress balance sheet, and painting grand plans for the future.
The 2024 event had plenty of that, and it’s worth reviewing. But Chairman and CEO Jamie Dimon also wrapped up the event with some sobering observations on the potential near future for banking, the economy and consumers.
Some of these warnings picked up on themes that he explored in his annual shareholders’ letter earlier this year. He said he expected that Chase itself would adapt and overcome each particular concern. But, then, Dimon heads the deep-pocketed largest bank in America.
Here are five takeaways from the annual event, starting off with some of the clouds.
1. Why Jamie Dimon is ‘Cautiously Pessimistic’
It wouldn’t be the first time that Dimon suggested the economy was headed for trouble and it didn’t quite turn out that way. So analyst Mike Mayo of Wells Fargo Securities asked him: “What do you see that the $7 trillion investment-grade bond market doesn’t see?”
Dimon pointed out that his consumer banking team had put up a chart of the forecasted interest rate curve earlier in the day.
“The most important thing is how dead wrong it’s been,” Dimon said.“So, I’ll tell you, the investment-grade credit spread, which is almost as low as it’s ever been, will be dead wrong, too. … I’m cautiously pessimistic.” Beyond the unreliability of the curve, The Wall Street Journal a few days later said that the inverted yield curve, a favored recession indicator, “looks broken.”
“We have the most complicated geopolitical situation that most of us have seen since World War II, if you study history,” Dimon added.
Two other macroeconomic developments concern Dimon:
“We do know the consumers are running out of excess money. Small businesses are running out of excess money,” said Dimon. “We don’t know when it’s going to end, but it looks like sometime early next year.”
An ongoing worry for Dimon is the national deficit, and, in a related vein, the possibility that the Federal Reserve may not be able to control inflation much going into 2025.
“Inflation is going down, but it almost doesn’t matter,” said Dimon. “It’s possible that inflation is embedded in the system as 4% for next year, and there’s not a damn thing anyone can do about it.”
Dimon noted that the bank doesn’t bet on rates, but he worries about rates rising again.
“If rates go up a little bit more, like with the 10-year bond to 5.5% to 6%, spreads gap out a little bit — that’s a different world. That’s a different world for real estate. It’s a different world for assets. It’s a different world for private credit. It’s a world that a lot of people in the world have not seen.”
— Jamie Dimon, JPMorgan Chase
From the archives: Why Chase Bank’s CEO Loves Branches, Admires Bezos & Questions Facebook
2. Private Credit Continues to Worry the #1 U.S. Banker
Dimon has been expressing concerns about private credit markets in his annual shareholder letters and other forums for some time, but his concerns have grown. At the same time, he took pains to say he didn’t think this was a systemic risk at this point.
Private-credit lending at present chiefly consists of private-equity firms making commercial loans to middle-market companies. In April, the International Monetary Fund reported that the market comprised $2.1 trillion in assets and committed capital globally, with about three quarters of the debt being in the U.S. “This market emerged about three decades ago as a financing source for companies too large or risky for commercial banks and too small to raise debt in public markets,” IMF analysts wrote.
Dimon worries that panics in the private credit market could cause economic problems. Among the risks are that companies that need to roll over private-credit debt may not be able to, which he said would leave them financially stranded.
“It’s growing rapidly. Anything that’s growing that rapidly — if you look at almost every major financial crisis, it was new financial products — often around real estate — but new financial products, almost every single time,” said Dimon.
He said some of the people putting together private credit deals “are very smart, they’re very good, they know exactly what they’re doing. But my experience in life is that it’s not true of all of them. The problem isn’t caused by the good ones. It’s caused by the bad ones, and when the bad ones cause a problem, what’s going to happen?”
The rules on bank loan accounting don’t apply to private credit, such as marking them to market, according to Dimon. This may make for a rude awakening for investors in the private-equity funds making many of these loans.
“That little old lady [investor] is going to say, ‘I didn’t know they didn’t have the same transparency as public markets’,” said Dimon. (In a subsequent analyst presentation, Dimon suggested some investors might clamor for Congress to get their money back.)
Dimon did say that he could see Chase entering this market, possibly to the tune of hundreds of billions of dollars, making off-balance-sheet loans. (Potentially, the company could acquire a private-credit lender, which Bloomberg reported a few days later was under consideration. Such reports have surfaced multiple times in the last couple of years.) In his Investor Day opening remarks, Daniel Pinto, president and COO at JPMorgan Chase, said that ideally the bank would offer a choice between traditional syndicated credit, in which multiple bank lenders participate, and private credit choices.
Read more: JPMorgan Chase’s Jamie Dimon: What It Takes to Be an Effective Banking Leader
3. Chase’s Branch System Continues Optimization and Expansion — and Consumers are Using Them
A highlight of the consumer banking segments of the bank’s investor day presentations has been updates on the company’s efforts to expand and optimize its branch network. The Consumer and Community Bank team fleshed out the latest numbers and unveiled a new goal.
Chase is seeing active participation in both digital and branch channels, according to Marianne Lake, CEO of consumer and community banking.
“75% of all of our customers are 90 days digitally active, and two-thirds of our banking customers visited a branch last year,” said Lake. “On average, 900,000 people walk into our branches every day.” She said that of these customers 20% more met with a Chase banker in 2023 to open or upgrade an account, seek financial advice or obtain investment help. The bank serves 42 million consumer bank customers.
Notably, the bank reported that routine branch transactions fell 20% at the end of 2023, versus 2019, suggesting that a growing portion of traffic represents people seeking consultations or to open accounts.
As shown in the chart below, between 2019-2023 the bank was building new branches at the same time as it was consolidating portions of the existing branch network and adding branches from its First Republic acquisition. At year end, the overall count was down about 3%, but the bank announced in February that it would be building 500 new branches over the next three years and refreshing 1,700 locations. At the end of 2023, according to Chase, 21% of its branch network was less than a decade old. (Dig Deeper: Moves By Chase and PNC Reignite the Branch Versus Digital Debate)
Jennifer Roberts, CEO of consumer banking, told analysts that 40% of the company’s gains in deposit market share are attributable to investments made in new branches. Roberts said that Chase has a greater than 15% deposit share in 33 of the country’s top 125 markets. The target overall is 15% of national retail deposit market share, versus the bank’s 11.3% share at yearend 2023.
Chase is the only bank with branches in the 48 contiguous states. In 2023 the bank announced plans to reach 70% of the country’s populations by being within a 10-minutes drive of Chase branches.
Roberts said that as time has gone on the bank has expanded on this goal in recognition that customers in rural areas are used to longer drives for necessities, such that Chase is aiming “to cover 75% of the U.S. population within an accessible drive time.”
“And to ensure we serve more Americans in smaller cities and towns across America’s heartland,” said Roberts, “we’re setting a new objective of covering over 50% of the population in each of the 48 states.”
Lake believes the effort is paying off in multiple ways. Overall consumer and small business customer growth hit 4% at the end of 2023, versus 2022. In the same period, digitally active customers increased by 6% and branch actives by 4%. Significantly, customers with relationships over multiple lines of business increased by 9% in 2023 versus 2022. Lake added that two-thirds of consumer bank and branded new card accounts for Chase are held by Millennials and Generation Z.
“So we are adding more customers, they are more digitally active, and we’re deepening with them at a faster rate. That’s the trifecta.”
— Marianne Lake, JPMorgan Chase
Read more: Philly Fed Says ‘Banking Deserts’ Are Growing. Does It Matter — and How Much is a Mirage?
4. Artificial Intelligence Continues to Penetrate the Chase Consumer Banking System
Beyond these quantitative measures, officials discussed strategies built on artificial intelligence and machine learning.
The bank has designed its account enrollment process so it can be picked up again remotely if the consumer leaves a branch or other interaction point without finishing the process. The incomplete application doesn’t just sit in storage, however.
Lake said that AI is used to track incomplete applications. When one is detected the software sends a “nudge” to the consumers. Lake said that this is producing improvements of 10%-20% in completion rates.
Lake said this was just one example of the productivity improvement the bank has been seeing as it adds new AI assistances to its processes and procedures.
“We’re on the precipice of a step change in productivity,” said Lake. “We’re just grinding out more value everywhere.”
The official tried to put the potential for AI into perspective for the analysts. “I know you’re all going to want to hear the thing that we saw 50% [improvement] on, but it is like a thousand points of light,” said Lake. “Everything is getting 2%, 5%, 10% better everywhere — and it’s not just generative AI.”
Consumer banking processes at Chase that have been adapted for AI, or targeted for it, include two areas. One is revenue-related, including personalization, underwriting, sales effectiveness, and marketing effectiveness. The other concerns efficiency and risk, including such functions as fraud detection, predictive servicing, credit risk and ongoing branch optimization.
Read more of our ongoing coverage of artificial intelligence in banking:
- Why the AI Revolution Is Being Led from Below
- AI Copilots Can Push Bottom-Up Innovation — But At What Cost?
- AI is Set to Shake Up Banks’ Employee Ranks – But Maybe Not How You Think
5. Chase Card Growth Strategies Continue to Blur Boundaries between Banking and Commerce
There’s absolutely no doubt that JPMorgan Chase is in the financial services business. But the company is increasingly expanding customer experience and service into areas that once weren’t considered bank territory. Broadly, Chase refers to these efforts as “connected commerce.”
“Getting this right is essential for the premium customers who pay high subscription fees for our products, giving them access to a franchise that provides value beyond thinking,” said Allison Beer, CEO of card services and connected commerce.
The concept is to connect millions of Chase premium card customers with brands that they like, ranging from travel to dining to shopping. This includes efforts like the Chase Travel service and creation of “The Edit,” a collection of approximately 800 premium hotels that provide upgrades and other benefits to Chase card holders.
The announcement of Chase Media Solutions in April was just one of the latest expansions. Building on an earlier service, the bank began enabling merchants to provide offers that are served up to Chase digital account holders based on their past purchase patterns. The advertisers only pay when someone buys the product or service. Call it a “retail media network.” (Revolut launched its own effort soon afterward, and in late May PayPal announced PayPal Ads.) (Dig Deeper: Will Banks and Fintechs Become Retail Media Networks?)
“These investments kickstart a flywheel that brings value to customers, to merchants and, of course, Chase,” Beer explained.
She said that the connected commerce push is still considered in its early days, though in total it produced $20 billion in volume in 2023. Beer said that the bank projects that connected commerce will produce volume of $30 billion in 2025.
The net effect of these efforts is to turn Chase into a “lifestyle brand,” in Beer’s words. “When we get this right, we become a trusted advisor to our card members as they look to us for experiences that inspire them because we know them,” said Beer.
Customers who are in the bank’s “ecosystem” can be given relevant content and experiences, which in turn support the annual fees charged. Part of those fees gets plowed back into the content and experiences, per the plan, maintaining the flywheel effect.