One on One with Jamie Dimon, Chairman and CEO of JPMorgan Chase
Thursday, February 14, 2008
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SUSIE GHARIB: CEOs of big American companies expect their industries to struggle over the next six months as economic growth slows. That's the result of a survey of the Business Council. The group of corporate leaders is meeting in Fort Lauderdale, Florida this week, and also says it expects the economy in the U.S. and Europe to worsen over the next six months. But when I talked today with JPMorgan Chase Chairman and CEO Jamie Dimon, he said his bank is doing OK, whether the economy is in recession or not.
JAMIE DIMON, CHAIRMAN & CEO, JP MORGAN CHASE: We're going to be in good shape regardless. And we're going to be out there selling consumer loans and doing mortgages and dealing with our clients and trying to gain share. Earnings may be down a little bit but we have the capital and the wherewithal to create job service to clients. I hope we can take advantage of it.
GHARIB: Jamie, looking at your business, whether we are talking about credit cards or home equity loans, how would you describe the financial health of consumers?
DIMON: We don't see a very strapped consumer. And your delinquencies are going up and charges are going up, but they're still rather low. And they're going up in the places of the country you expect them to go up. So while we're looking for, we don't really see it. They seem still to be spending money and income growth seems to be up. So so far we don't quite see that.
GHARIB: I understand that JPMorgan has boosted its share of the mortgage market. Is this the right time to be lending? Is there a downside risk?
DIMON: Going into these issues we have like a five percent share of the mortgage market. Now we are a little north of 10. And we want to gain share in the market. So we are taking advantage of our capital base and our ability to create loans including jumbo loans and sub-prime because there are still good sub-prime loans to gain share. I'm not sure it is the best time in the world but we would rather do a great job with the consumer and grow share right now. It is still the largest market in the United States of America and the most, probably the most important consumer product.
GHARIB: We know that the sub-prime mortgage market has been tough for everyone. But what about people with prime mortgages? Are you seeing that they are having a difficult time making their payments?
DIMON: Prime mortgage delinquencies are up a little bit but not terribly. I think if the economy deteriorates, you will see more issues in housing and mortgage delinquencies et cetera, but I think for prime it's going to be very much dependent on the economy.
GHARIB: We have seen so many interest rate cuts by the Federal Reserve. Are you writing more loans as a result of that?
DIMON: I think will you see applications go up, refis go up. I think it does make it easier for consumers to finance certain things. And for some finance institutions to carry assets and earn a better spread. But I think as a bank we're generally matched interest rates. So all things being equal, that will just help us a little bit.
GHARIB: Many banks seem to be less willing to lend money even with all of these rate cuts. Do you think that banks are worried about taking on more risk?
DIMON: Yes, I think a lot of banks because of what has happened, mortgages are tightening up, mortgages in all consumer products. And they're probably a little more careful about commercial real estate loans, commercial loans, corporate type loans. And so I do think that that people are being more conservative.
GHARIB: JPMorgan has come through this whole sub-prime mortgage crisis in pretty good shape, a survivor compared to many financial institutions. But still, has the bank changed the way that it measures risk?
DIMON: Obviously when it comes to mortgages and sub-prime we have tightened up several times how we underwrite. But in reality, you know, to me good risk management is people transparent with numbers, that you have a disciplined review of them, that you share them with the smart people in the company, that people have the right to ask questions. That we haven't changed. That we have been doing for years.
GHARIB: As you know, there is a lot of anxiety out there that the financial crisis is not over, that there is another shoe to drop. What is the next big thing you are worried about in terms of credit quality?
DIMON: We go through this every five or six years and you can just go back in history. They are always a little bit different. But there are a lot of commonalities: Fear, specter of recession, credit assets, re-price, spreads re-price, etcetera. You've seen sub-prime, SIV, CDOs, CLOs (ph) and now it is monolines, municipals, wraps. But at the end of the day, those things will resolve and our system has resolved a lot of them. A lot has been de-leveraged. A lot has been paid off. A lot of problems have popped up are now gone. It's not over yet, but you know, I would be surprised if the financial part of this isn't over by the end of the year.
GHARIB: The other day I was talking to the chairman & CEO of General Electric, Jeffrey Immelt and he was saying that this choppy economic period is actually a good time to be making acquisitions. Are you going to take advantage of this turbulence and make some acquisitions as well?
DIMON: If you were prepared you could be predator and not prey and that could be asset purchases, people just be more aggressive, marketing. And it could be acquisitions. I don't feel like JPMorgan has to do an acquisition to be successful. We can grow and do a great job for our clients and shareholders for a long time without doing one, but if there is a proper one for us, yeah, we certainly would be willing to do that.
GHARIB: There is a lot of speculation that JPMorgan Chase pick up Citi Smith Barny or Bear Stearns, even Merrill Lynch. Do any these make financial sense to you?
DIMON: It is always my job, when people bring ideas to you and say would you think about this, if it is available. We would think about it. We would think about just about anything.
GHARIB: But does it make sense for you to make a big acquisition, something in financial services?
DIMON: If the price is right, it had a lot of business logic and we had the ability to make it work for or shareholders, yeah it would make sense.
GHARIB: JPMorgan stock has performed better than most financials. But what do you think it's going to take to pick up the stock from here?
DIMON: We're really confident we are building a really great company that for our shareholders and for the employees, et cetera. And you know, I am not going to guess the short run because the stock could easily go down in the short run. We brought back a lot of stock at price when we think it is cheap. We have enormous financial capability, enormous innovative capability and technology and to me, the stock will do fine.
GHARIB: Jamie, thank you so much for your time and great seeing you again.
DIMON: Good seeing you again too. Thank you.
