Headcount, AI, M&A: Highlights and Insights from the Big Banks’ Q4 Earnings
Top officials focused on rightsizing employee numbers, AI adoption, succession planning, and M&A possibilities under Trump. Plus, Citi's new take on retail accounts.
By Steve Cocheo, Senior Executive Editor at The Financial Brand
That the country’s largest banks had a strong 2024 is a matter for the daily business news. But beneath the earnings headlines, here are four issues to watch, gleaned from some of the largest banks’ earnings briefings.
1. Headcount vs. Artificial Intelligence at Chase, BofA and Citigroup
JPMorgan Chase CFO Jeremy Barnum told analysts that, with some key exceptions, managers will be asked to hold the line on headcount in 2025.
Barnum said, "Over the last few years, we have grown a lot and it has been for very good reasons. And it has contributed quite a bit to our growth and to our ability to run the company efficiently. But any time you have that rate of headcount growth, you have to believe, all else equal, that some amount of inefficiency has been introduced."
Barnum said in 2025, managers have been asked "to support the growth of the company while living within their means on the headcount front. So we’re going to try to run things … on roughly flat head count and have that lead to people generating internal efficiencies as they get creative with their teams."
Barnum wasn’t specific on the "how," although Chase is a leading adopter of artificial intelligence, having elevated it to a position on the company’s management committee under Teresa Heitsenrether.
The CFO said that among the exceptions to the policy to hold the line on headcount were branches — Chase has been pursuing a multi-pronged effort to expand its branch network — and "non-negotiable areas of risk and control like cyber."
Bank of America’s Brian Moynihan addressed headcount both during his yearend earnings discussion and in a subsequent interview on Bloomberg.
Moynihan said that the bank runs with 30,000 fewer employees than it did a decade ago. Going forward, he thinks what staffers do will be impacted moreso than how many of them there are.
"That is all digitization," said Moynihan of the difference in staffing levels. "AI is an extension of automation, digitization, models, etc. The idea is if we’re good, we’ll keep adjusting where the teammates end up. So, it might not be the same 213,000 people doing the same thing ten years from now. My guess is that our employment levels will stay relatively static. It will be more towards stuff that can’t be replicated near term by AI."
In comments at a December analyst meeting, Moynihan had said that the bank’s best calculation indicates that the Erica virtual assistant, based on AI and introduced in mid 2018, has saved the employment of 3,000 people.
Citigroup has also been in the process of "right-sizing" its headcount. Related to this are efforts to modernize the bank’s technology. Several examples came up during the company’s earnings briefing.
One is the bank’s providing 140,000 employees with two GenAI tools. One is "Stylus," providing document intelligence, and the other is "Assist," an internal virtual assistant. Another GenAI effort entails giving 30,000 Citi developers GenAI tools to assist in more efficient coding. The bank said this reduced administrative burdens and was enabling it to bring products to market more quickly.
Read more about Artificial Intelligence in Banking:
- Can GenAI Restore the ‘Humanity’ in Banking that Digital Has Removed?
- Maximizing AI Payoff in Banking Will Demand Enterprise-Level Rewiring
- Why Your AI Strategy Should Align With DC’s Policy Priorities in 2025
2. Speaking of Heads: What’s Jamie Dimon’s Succession Plan?
The question of how long JPMorgan Chase’s Jamie Dimon will continue to lead the nation’s largest bank came up again in the wake of the mid-January announcement that Daniel Pinto, president and COO, will retire at the end of 2026, and give up his current duties in mid-2025. At the same time, the company announced that Jennifer Piepszak, co-chief executive officer of the commercial and investment bank, would become COO immediately, working closely with Pinto.
During the earnings call, Dimon, chairman and CEO, said that Piepszak does not want to be CEO. (Piepszak, along with Marianne Lake, has long been considered a potential heir apparent. Lake continues for now in her existing role as CEO of consumer and community banking.)
Wells Fargo analyst Mike Mayo asked Dimon who his successor would be and when he would turn over the reins. He noted that investors would like Dimon to stick around longer.
He also noted that with the return of Donald Trump to the White House, some of Dimon’s major concerns about regulation were going to be addressed.
"So why not stay around a bit longer if investors want you to do so? And what would you do otherwise anyway?" asked Mayo. "You don’t play golf. You aren’t going to be Treasury Secretary. Seems like your work is your hobby, right? So how much longer would you stay around?"
Dimon’s answer provided more color than detail. Regarding his own status, he was cagey and said it was up to the Chase board. He noted that he will be turning 69 and that he has had a couple of health issues. Whether he would continue to serve in another capacity is an open matter, he said.
Regarding his successor, he said it had not been determined.
"This is an unfortunate thing for any big company like this, where these people have to be in the spotlight all the time and always to-ing and fro-ing," said Dimon.
Dimon added that "We have several exceptional people. You guys know most of them. There’s maybe one or two you don’t know."
After more of this, Mayo said: "So, you’ll stay around maybe for a few more years, base case right now?"
"Basic case, yeah," said Dimon.
Read more about JPMorgan Chase:
3. Mergers & Acquisitions: Is Wells Finally Going to be a Player After All?
During Wells Fargo’s earnings briefing, officials touched on growth, and the possibilities opened in early 2024 when the Comptroller’s Office ended the 2016 consent order pertaining to Wells’ consumer banking sales practices. Current management inherited the Wells sales scandals.
Charlie Scharf, president and CEO, noted that this wasn’t the end of the regulatory orders Wells must comply with. However, the lifting of the order had potentially beneficial effects on future results.
In the immediate aftermath of the order, Wells had to drop much of the apparatus of growth, such as sales incentives and goals, according to Michael Santomassimo, CFO and senior executive vice president.
"As we saw that consent order go away, we’ve been able to more fully roll out a standard sort of incentive framework across the branches. We had been piloting it for a while in a small subset," said Santomassimo. "And as you would expect, you would see different performance and better performance in those pilot branches. That’s across new checking growth, credit card accounts, and the like."
The CFO said he expects results to come on-stream this year and further on.
Meanwhile, as the bank has made progress implementing controls, there are expectations that a federal cap on its asset size, imposed in 2018, will be lifted this year.
Later in the call, Gerard Cassidy, analyst at RBC Capital Markets, noted that Wells has "plenty of excess capital." In addition, the passage of time during the imposition of the cap has brought about a curious state of affairs.
Cassidy pointed out that under federal law (the Riegle-Neal Act) no bank is allowed to buy another depository if the resulting merger would produce an institution with over 10% of domestic insured deposits. This precludes the likes of JPMorgan Chase and Bank of America from making bank acquisitions in the U.S. — under ordinary circumstances. (Chase wound up getting First Republic in 2024 as part of a rescue.)
Before the pandemic and before the cap, Cassidy said, Wells could not have made a deal. "But now, with the growth in the industry’s deposits, and you guys having been flat, you’re below 10%." he continued. So, once the cap is gone, he said, would Wells consider an acquisition?
Santomassimo said this wasn’t the plan. "We’re 100% focused on all of the organic growth opportunities we have across each of the businesses," he said, reflecting efforts like the sales incentive program.
However, analysts are constantly probing the merger matter — especially given the acknowledged willingness of the Trump administration to be more liberal about financial mergers.
When he was asked about the potential for deals, PNC Financial’s William Demchak said that theoretically the new stance in Washington should favor them. But then he fell back on an observation he’s made in recent earnings sessions.
"The challenge is, and you are going to hear this on every earnings call, everybody is an acquirer, nobody’s a seller," said Demchak. "There is wind at the back on bank earnings as a function of the rate turnover. Credit is not bad. So, I think the mindset you run into is, ‘Hey, we will hang out. We’ll make more money next year, and we’ll worry about whether we have a long-term franchise somewhere later. It is not our problem today’."
Demchak remains convinced that more, larger deals are inevitable.
"The structural issues in the banking industry are just violently apparent when you look at the deposit shifts to the largest banks, the growth in DDA accounts," Demchak said. "By the way, we grew DDA this year at a pace we haven’t maybe ever. But we are one of a handful of banks across the whole industry that was actually able to do that."
At U.S. Bank, Andy Cecere, chairman and CEO, said M&A wasn’t a priority.
"The combination of the purchase accounting marks (mark-to-market requirements), the regulatory approval process, may improve but it isn’t clear yet. Large bank M&A may return over the longer term, but we’re very focused on our organic growth opportunities, because we have a lot of them," Cecere said.
In fact, during U.S. Bank’s earnings session, officials had resisted one analyst’s suggestion that management consider spinning off its payment activities after an off quarter. They told analyst John McDonald of Truist that payments activities represent 25% of the bank’s total net revenue.
"In this environment," said Cecere, "the interconnectedness of banking and payments is as important as it’s ever been. And the concept of moving money together with storing money and lending money is all intertwined."
Added Gunjan Kedia, president: "Payments is the one product where we have frequent, deep and embedded interactions with our clients. And it anchors the client value proposition and client retention in a way that is very hard to do from some of the banking and other routine products."
Read more: The Great M&A Debate: Regional Bankers Argue the Need to Buy Scale in 2024
4. Citi Sees Growth in ‘Simplified Banking’
As part of its ongoing transformation project Citigroup has been moving its consumer banking system towards a product line called "Simplified Banking." The new framework was outlined in 2023. New customers could avail themselves of it immediately, and the bank began converting existing customers to it in 2024.
During the bank’s earnings presentation Jane Fraser, CEO, said that four million U.S. customers have been converted over to Simplified Banking.
Under the program, customers with up to $30,000 in combined average monthly balances qualify for "Everyday Benefits." This provides some free services and grants the ability to avoid certain monthly service fees if they make "Enhanced Direct Deposits" of $250 or more a month.
Notably, such direct deposits include not only the usual types of transfers, but also direct transfers via person-to-person payment services such as Zelle, Venmo or PayPal when they use the automated clearing house. "This policy helps to remove a barrier that workers may face who primarily receive income through peer-to-peer payments," Citi said at the time the service was introduced. The new product scheme followed the removal of certain retail banking fees in 2022.
Beyond the $30,000 threshold, customers can unlock relationship tiers under the Citi Priority, Citigold and Citigold Private Client rosters of benefits and services.
This is helping Citi attract and retain customers. "We get a much more streamlined customer proposition that’s driving more of a relationship-based banking approach as opposed to a transactional one," said Fraser.