JPMorgan Chase & Co. (NYSE:JPM) is planning to cut its workforce by almost 19,000 employees by 2014. The move was part of the initiative of its CEO Jamie Dimon to reduce the expenses of the company.
According to a report from Bloomberg, the largest bank in the United States will cut jobs in its community and mortgage businesses.
As of December 2012, JPMorgan Chase & Co. (NYSE:JPM) has approximately 259,000 employees. The bank intends to lay off around 13,000 to 15,000 employees in its mortgage division while 3,000 to 4,000 workers in its community banking unit. The bank revealed its plan in a presentation on its website.
JP Morgan Chase aims to save around $3 billion from its mortgage business unit as the company tries to settle a regulatory investigation by providing borrower relief such as home loan modification. The company allocated about $300 million in quarterly mortgage serving expenses as part of its long-term plan.
According to Kristim Lemkau, spokesperson for JPMorgan Chase & Co. (NYSE:JPM), the headcount of Firm-wide will decrease by approximately 4,000 people this year.
Over the past three consecutive years, Dimon was able to boost the net income of JP Morgan Chase, which was driven by strong results from its mortgage business. However, the bank expects its earnings in the business unit to decline this year because of very low rates on new loans and strong competition. Dimon focused his strategy in reducing the expenses of the bank to maintain growth and profitability.
Chris Kotoski, analyst at Oppenheimer & Co opined that banks can focus on operational stability when credit quality stabilizes.
“When credit problems are mounting banks have to throw money at their problems. When the environment stabilizes they can worry about operating efficiency,” he said.
Marianne Lake, chief financial officer of JPMorgan Chase & Co. (NYSE:JPM) explained that the bank is expecting to reduce its adjusted expenses by 1 billion this year. According to Lake, the bank’s net interest income is expected to remain flat and it will return approximately $1 billion in credit-card reserves into its earnings. Lake said, “We know the work we have to do, and we’re comfortable doing it.”
Bernstein analyst John McDonald believes that Dimon’s cost cutting measures will generate additional $0.20 earnings per share for every billion of cuts above its $3 billion cost savings target.
The stock price of JPMorgan Chase & Co. (NYSE:JPM) is down by 1.22 percent to $47.12 per share as of this writing.