JPMorgan Chase & Co.
) became the latest global bank to announce job cuts to improve
profitability. The company will be eliminating overall 19,000
jobs (about 7.3% of the total workforce as of Dec 31, 2012) by
the end of 2014. The announcement was made by management during
the company's Investors Day presentations.
The majority of the job cuts are expected to be in JPMorgan's
Consumer & Community Banking segment. Here, about 17,000 jobs
will be slashed, with 4,000 being removed this year and the
remaining next year. The retrenchment will be largely in the
mortgage banking division of the segment.
Chase Bank is going to be the other area, which will witness job
elimination. With the increased used of online banking platforms,
JPMorgan will be trenching workers in many of its branches. This
way, the company will be able to slash workforce by another 6,000
by 2014. However, the company is planning to open nearly 200
branches in 2013 and 2014.
JPMorgan strategizing to offset the job cuts by hiring nearly
4,000 people in credit card, commercial and investment banking,
and asset management divisions. This would aid the company to
improve its market share in these areas of operations.
Apart from bringing down workforce, JPMorgan anticipates roughly
$1 billion reduction in overall expenses this year. Further, the
company expects mortgage banking costs to decline $3 billion by
2014 and expenses at community banking division to rise about 3%
in 2013 and roughly 2% next year.
Moreover, management at JPMorgan provided updated guidance for
net interest income (NII) and net income. NII is expected to
remain stable driven by growth in interest-earning assets, while
net income will be approximately $27.5 billion by 2014, mainly
driven by the abovementioned cost cutting initiative, assumption
of lower litigation costs and marginal rise in interest rates.
In a challenging operating backdrop, lower returns and stringent
capital norms, bolstering revenue has become a challenge. Hence,
many Wall Street banks are downsizing operations and announcing
layoffs. We believe that until a recovery in revenue occurs,
sustaining and elevating profitability through cost reduction
measures, including layoffs, will continue.
In Dec 2012,
) came up with the decision to restructure its operations, which
would ultimately result in over 11,000 layoffs. This will result
in expense savings of $900 million this year, while from 2014 the
annual cost savings is projected to surpass $1.1 billion.
Bank of America Corp.
Goldman Sachs Group Inc.
) have also announced job cuts to improve overall efficiency.
Currently, JPMorgan retains a Zacks Rank #3 (Hold).
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