JPMorgan CEO Dimon, Mike Mayo Have a Little Chat on Economics

JPMorgan CEO Dimon, Mike Mayo Have a Little Chat on Economics
By World Economic Forum (Flickr: The Global Financial Context: James Dimon) [<a href="">CC BY-SA 2.0</a>], <a href="">via Wikimedia Commons</a>

JPMorgan Chase & Co. (NYSE:JPM) chairman and CEO Jamie Dimon and CLSA Asia-Pacific Markets analyst Mike Mayo, came together once again during the company’s first quarter earnings conference call. The last time they faced each other, Dimon told Mayo why he is richer than the analyst.

JPMorgan CEO Dimon, Mike Mayo Have a Little Chat on Economics

JPMorgan Chase & Co. (NYSE:JPM)’s first quarter earnings and revenues both beat Wall Street expectations. Jamie Dimon said the U.S. economy is showing some positive signs as new home purchases have started rising and housing prices are improving. But he had some bad news as well.

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Dimon told that loan growth softened during the quarter. Small businesses aren’t investing their capital as they remain cautious about the economic recovery. That’s where Mike Mayo’s questions revolved around, that and London Whale, of course.

Mike Mayo asked how much of the softer loan growth was due to the economy and how much was due to the bank pulling back, to which Dimon responded by saying that a lot of softening was due to the company pulling back. JPMorgan Chase & Co. (NYSE:JPM) has done some deals with pricing and terms & conditions the bank is not comfortable with. That had an impact on the bank.

Loan utilization in the first quarter was almost flat when compared to the fourth quarter. So, why aren’t people borrowing more money? Dimon said that’s because the bank witnessed a decline in bank deposits. People are using their cash amid uncertain economy.

Then Mike Mayo dropped the bomb!

In JPMorgan Chase & Co. (NYSE:JPM)’s annual report, Dimon talked about some regulations and said we’ll see more of these in the future. Mayo asked what specifically Dimon meant by that. He said sarcastically that people’s imaginations wander in different directions, so some of them may think it’s about SEC, FBI or the Department of Justice. Was Dimon thinking about something in particular, because nobody knows the potential government moves related to JPMorgan Chase & Co. (NYSE:JPM)?

Jamie Dimon told him that the company is in constant dialogues with regulators, and the bank expects some more consent orders. What he said in the annual report’s Chairman’s Letter has no breaking issues that may surprise the stakeholders and people like Mayo. His discussion in the letter was related to issues that the bank has been working on for several years.

Mike Mayo did not stop there either. On the Wells Fargo earnings call he opened the Q&A with the following line:

Hi, back to net interest income, and you said that is a focus. But at least linked quarter it stunk. I know the day count, and you seem pretty confident that $10.6 billion is a bottom.

I am just trying to figure out what would make you so confident. Would it be anything to do with the accretable yield going forward, given better credit quality? The balance sheet repricing, maybe you only hurt 2 basis points, you feel better there?

Or is it really just you added all these securities opportunistically and that will play out for a full quarter; and we should see that in the second quarter?

Tim Sloan – Wells Fargo & Company – Senior EVP, CFO responded as follows:

Well, Mike, I am always careful not to disagree with you, but I wouldn’t say that $10.4 billion of net interest income stunk. I mean it was down; but if you just added two extra days — and that is an issue with the calendar — it would have been $10.6 billion. We actually think in the environment when you look at the entire industry, that that was very good performance.

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