JPMorgan Aims at Prudent Cost Management - Analyst Blog

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At a time when the banking industry is struggling with slow top-line growth, banks are attempting to cut expenses in order to remain profitable. Wall Street biggies including JPMorgan Chase & Co. ( JPM ) are among the front runners.

Per a report from Wall Street Journal, JPMorgan is seeking avenues to slash wasteful expenditure. For the last several months, the company's chief operating officer (COO), Matt Zames has been endeavoring to develop effective cost-cutting measures.

JPMorgan is considering a wide range of area for the imminent cost slash. These include relocation of employees to less expensive offices, reviewing third-party contracts and external legal spending. Notably, these savings will not support bottom line.

Such moves are being undertaken by the bank mainly to counter rise in expenses related to compliance and litigations. Since the financial crisis, banking sector has been facing a spate of regulations leading to higher expenses. Hiring employees to take care of the regulatory compliances has increased compensation expenses for banks like JPMorgan.

Further, banks such as JPMorgan, Bank of America Corporation ( BAC ), Citigroup Inc. ( C ) and Morgan Stanley ( MS ), among others, are facing litigations and probes for their business conducts in the pre-crisis period. Despite settlement of several lawsuits in the past one year, JPMorgan still faces many other probes and cases.

Besides other measures, JPMorgan has already announced 8,000 job cuts by the end of 2014. Further, the company would be putting more emphasis on automated banking services as these are less costly. (Read More: Layoff Bells Toll at JPMorgan Again ).

We believe that JPMorgan's efforts to slash costs and improve efficiency will help it to overcome sluggish revenue growth. The company had announced a 20% decline in market revenues in the second quarter. Hence, with continued pressure on top line, such initiatives will aid the company in keeping up its profitability.

Currently, JPMorgan carries a Zacks Rank #3 (Hold).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: COO , JPM , MS , C , BAC

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