JPMorgan Chase & Co. Chief Govt Officer Jamie Dimon mentioned synthetic intelligence stands out as the greatest problem his financial institution is grappling with, likened its potential impression to that of the steam engine and mentioned the know-how might “increase nearly each job.”
The CEO devoted a bit of his annual shareholder letter to the significance of AI for the Wall Avenue large’s enterprise and for society at giant. The financial institution has recognized greater than 400 use instances for the know-how throughout advertising, fraud and danger, amassed hundreds of AI consultants and knowledge scientists and begun exploring deploying generative AI, Dimon mentioned.
“We’re utterly satisfied the results shall be extraordinary and probably as transformational as a few of the main technological innovations of the previous a number of hundred years,” Dimon mentioned within the letter. “Assume the printing press, the steam engine, electrical energy, computing and the Web, amongst others.”
Dimon delivered his verdict on AI’s significance in an expansive dispatch that additionally lambasted a set of regulatory proposals, sounded a stark warning on geopolitics, took purpose at shareholder advisory corporations and supplied a spirited protection of the function of market making within the monetary system. And as anticipated, the 68-year-old weighed in on the economic system, reiterating his concern that dangers of persistent inflation, quantitative tightening and the continued wars in Ukraine and the Center East loom giant even because the US economic system stays strong.
“These markets appear to be pricing in at a 70% to 80% probability of a tender touchdown — modest development together with declining inflation and rates of interest,” Dimon wrote. “I imagine the chances are lots decrease than that.”
Revenue Report
Dimon launched his letter after JPMorgan notched the best annual revenue within the historical past of American banking final yr. The lender, which reviews first-quarter earnings on Friday, benefited from turmoil amongst regional lenders that started simply over a yr in the past, sending depositors in search of the security of bigger monetary establishments. JPMorgan performed a serious half as these occasions unfolded, in the end staging a rescue of First Republic after it failed.
The deal “was not one thing that we might have accomplished only for ourselves,” Dimon wrote. On the time, JPMorgan mentioned the acquisition would add greater than $500 million to earnings yearly, acknowledging that was in all probability conservative. In his letter, Dimon mentioned that determine would probably be “nearer to $2 billion.”
The regional banking turmoil unfolded as regulators put the ending touches on proposals anticipated to saddle US banks with more durable capital necessities, often known as Basel III Endgame. Dimon, an outspoken critic of the proposals, devoted a complete part of his shareholder letter to what he mentioned was the necessity for a critical assessment of the financial institution regulatory and supervisory course of. He additionally reiterated earlier criticisms in regards to the potential for the proposals to trigger financial hurt.
Market Making
The proposed guidelines might additionally injury market making, the place banks assist buyers purchase and promote securities, based on the CEO. Dimon devoted a number of pages defending the function banks play in that enterprise, which he mentioned some regulators appear to view as speculative, hedge-fund like exercise.
“This considering is what is likely to be main them to always improve capital necessities,” he wrote.
JPMorgan earns about $100 million in day by day income from the enterprise, which has solely misplaced cash on 30 buying and selling days during the last decade, based on Dimon. The proposed guidelines, which Federal Reserve Chair Jerome Powell signaled final month shall be scaled again, might hurt market stability, Dimon wrote.
Proxy Votes
Dimon additionally used his letter to take purpose at proxy advisers — corporations which buyers like state pension funds and different large asset managers pay for suggestions on how they need to vote their inventory on contentious matters similar to government compensation.
Dimon has lengthy chided shareholders for casting votes solely based mostly on suggestions from these corporations as lazy and irresponsible. However he went a step additional on Monday, calling out the 2 important US advisers, Institutional Shareholder Companies and Glass Lewis & Co., for having what he deemed an excessive amount of sway figuring out the end result of shareholder elections.
“Whereas asset managers and institutional buyers have a fiduciary accountability to make their very own choices, it’s more and more clear that proxy advisors have undue affect,” Dimon wrote.
Dimon through the years has needed to fend off plenty of resolutions the 2 corporations backed. He famous Monday that ISS is owed by German agency Deutsche Boerse AG, whereas Canadian non-public fairness agency Peloton Capital owns Glass Lewis, and questioned if American company governance needs to be decided by for-profit establishments with “their very own robust emotions about what constitutes good company governance.”
Dimon additionally mentioned the financial institution is taking steps to decrease the function of proxy adviser suggestions. By the tip of this yr, JPMorgan Asset Administration can have largely eradicated third-party proxy adviser voting suggestions from its voting techniques, he mentioned. The agency may even work with third-party proxy voting advisers to take away their voting suggestions from analysis reviews they supply to the division by the 2025 proxy season.
Different highlights from the letter:
- On the rising non-public credit score business: “Continuously, the weaknesses of latest merchandise, on this case non-public credit score loans, might solely be seen and uncovered in unhealthy markets, which non-public credit score loans haven’t but confronted,” Dimon wrote. “When credit score spreads hole out, when rates of interest go up and when some leveraged corporations endure within the recession, we’ll learn the way these loans survive stress testing.”
- Dimon addressed JPMorgan’s current resolution to exit Local weather Motion 100+, an investor group fashioned in 2017 to battle local weather change. His agency “invested in our personal in-house consultants and matured our personal danger administration processes through the years,” he wrote. “Because of this, we’re going to go our personal manner and make our personal impartial choices.”