CNBC Exclusive: CNBC Transcript: JPMorgan CEO Jamie Dimon Speaks with CNBC’s Wilfred Frost Today
WHEN: Today, Tuesday, November 5th
WHERE: CNBC’s “Squawk on the Street”
Q3 2019 hedge fund letters, conferences and more
Following is the unofficial transcript of a CNBC interview with JPMorgan Chairman and CEO Jamie Dimon on CNBC’s “Squawk on the Street” (M-F, 9AM-11AM ET) today, Tuesday, November 5th. Following is a link to the full interview on CNBC.com:
Watch CNBC’s full interview with JPMorgan Chairman and CEO Jamie Dimon
All references must be sourced to CNBC.
David Faber: welcome back to squawk on the street our string of big interviews continues to wilfred frost in london with a special guest.
Wilfred Frost: as you say I’m here in london, with the Chairman and CEO of JPMorgan. Jamie Dimon. Thanks for having us great to be with you.
JPMorgan CEO Jamie Dimon: great to be here.
Frost: we’re in london and I have to start with a question on the state of play here how much is your optimism on and commitment to london and the uk more widely weighing since brexit and the three years of political mayhem since.
JPMorgan CEO Jamie Dimon: we love being here. This is a fabulous city a global melting pot, unbelievable talent and stuff like that. We’re devoted to london. Obviously the british people will decide what form brexit takes and, you know, the negotiations even after brexit I think would be very tough and complicated and we’re devoted here over time brexit will cause a diminishing of the financial center, it will still be a financial center but not be quite the powerhouse it was.
Frost: switching focus to earnings and JPMorgan more broadly. Your recent revenues rose 8% year over year most of your rivals were flat. In fact, that kind of continued a theme of the last few years of your out performance is it harder to make those market share gains moving forward?
JPMorgan CEO Jamie Dimon: yeah. I’ve said the competition is fully back remember revenues for one quarter depend on a lot of things over the last years, a little luck, literally the weather sometimes. I think you have major competitors everywhere I think it’s a good thing. People competing and investment banking, globally, credit card, it’s going to be harder to eek out gains and hope we can try to do that.
Frost: one thing I think was consumer in the U.S. Seems strong, perhaps cooperate optimism less so overall your theme on the call was more bearish than you’ve been recently is that fair
JPMorgan CEO Jamie Dimon: a little bit. The consumer 70% of the gdp is still quite strong thir balance sheet, setiment, income, wages going up housing in short supply. Credit is quite good the business side, business sentiment has dropped dramatically, confidence, cap x has dropped and a lot around the complex geopolitical issues and in particular trade. I think trade has made a lot of ceos question when they should investment how they should invest and slowed it down an probably slowed down the economy a little bit it doesn’t mean we’re going into a recession. It may mean a slow down.
Frost: china has been in the news, of course, recently with its trade and other actions. To what extent are some of their actions whether that is limiting democracy in hong kong or other things bad enough that U.S.’ companies should be criticized for making profits in china?
Dimon: well, I don’t think it should be criticized for making profits. I think there were legitimate issues for the better part of 10 or 20 years, american companies, the american government, didn’t pay that much attention to all the things taking place in china. This administration came out and said these are issues that have to be resolved the business community supports that there’s nothing wrong with doing business in china. These are trade disputes we hope get resolved in ways good for everybody. I think there’s legitimate criticism you should have done it sooner that’s probably true.
Frost: as it goes with hong kong there’s been a lot of debate around the nba business there. If your employees spoke out based in hong kong spoke out in either favor or against protests there, would that be something you wouldn’t mind them doing
Dimon: it’s not up to me. The citizens of hong kong can do what citizens do we don’t want them to do it on behalf of JPMorgan but this issue is serious. Number one, we want a peaceful resolution there we think collaboration, resolution, peace is a very good thing. But it does point out some very differences between the chinese system, which is state capitalism and censorship and the american system. Those don’t have to end up in a cold war but they cause a tremendous amount of complexity for, in particular, american business and trade policy and other related policies
Frost: in terms of the fed, you said 70% of the economy is strong, unemployment is very low, equity markets are at record high do you agree with the three rate cuts that the fed has done this year
Dimon: I think so. I think the fed, very smart people, trying to act wisely, they also can’t completely predict the future the fact is the american economy is growing at 2% or thereabouts and dropped rate a little bit, kind of an insurance for extending the recession, inflation is rather low, 1.3 or 1.5% I’ll leave the specific judgments to them but I think they are pretty wise people and probably pause a little bit, may not be a bad idea either.
Frost: when we consider some of the factors in the interest rate markets of late, a spike in the repo rate, the fact that after the september rate cut, the following week libor so far and the effective fund rates all actually increased initially before they then fell. Has the fed lost some of its power, some of its control
Dimon: no. The fed is a very powerful institution. They have a lot of tools at their disposal, including their voice, their capability, their ability to act strong and tough in multiple ways financing markets, rates, et cetera I think the technical thing about rates going up, they missed there are issues there they’re technical. What happened to reserve balance sheets and bank’s ability to finance repo and stuff like that they are aware of the issues I think there should be permanent fixes not just temporary fixes. Let them work on all of it and they will finish their deliberations and decide.
I think it’s important for the american public, this is not about what’s good for bank not about regulations. This is good about proper function of markets. Whether they change it or not for JPMorgan we’re fine either way. I think you’re going to see issues like this happen increasingly if we’re not careful because of certain constraints put in place.
Frost: I want to move on and talk about wework we were discussing it a little bit before the interview started. Firstly, it had a $47 billion valuation there or thereabouts, whatever the precise number was and has around an $8 billion valuation. How many more companies are out there like that in the private market is there a bubble in that part of the market?
Dimon: first of all I don’t agree it had a $47 billion valuation because I would never say because someone paid the last price it’s worth that price.
Frost: but it’s fallen significantly.
Dimon: that’s not price discovery. Price discovery is when a lot of smart people around the world knowing all the facts can kind of buy and sell all the time I think it would be cautious they’re all different. You know, some of these companies have unbelievable technology some are venture, may work or not work some are, you know, trying to grow so fast that they cause cash problems for themselves but they have a good underlying model they’re all different.
I think there are lessons to be learned about the valuations and how you go public and how you treat the public shareholder those lessons should be learned by everybody who wants to go public.
Frost: do you feel sorry for adam neumann in all of this
Dimon: I’m not going to go there I don’t know
Frost: but he was advised by some, including your bank, that a higher valuation than has currently been achieved was possible so is there some level to which he was misled by some advisors like JPMorgan and Goldman Sachs and others
Dimon: you don’t know the private advice we gave him or the company and when it became aproblem, JPMorgan did what it always did,in fact I got a letter from someone saying when we were being criticized saying you did what JPMorgan does when a client has a problem you rolled up your sleeves and you tried to find a solution. At the end of the day we did, we offered them a bought fully financed kind of deal that can get them to the next stage of life and they all have a future life we want them to.
We don’t want them to lay off 14,000 people or have bankruptcy or something like that. So a lot of lesson to be learned by everybody involved and so I’ve learned a few myself
Frost: what have you learned in particular.
JPMorgan CEO Jamie Dimon: some we knew before but I think companies going public should have proper corporate governance before they file an s1 you should have your independent board before an s1 you have to make sure you take a lot of time to go through how you disclose the stuff to the public and be responsive to the shareholders they should be treated like partners they shouldn’t be treated like what’s the highest price I can get.
An investment bank can guide on price but at the end of the day the price discovery is where you get hundredses of people in a room like this, smart people different way of analyzing things but quite intent, going through the companies, looking at its prospect, future, discounted cash flows, growth prospects and that is real price discovery. A bank should help guide that but because someone says we’re different than that does not make that true.
Frost: do you pledge here and now that you won’t put your company’s name on another s1 with that level of corporate governance questions
JPMorgan CEO Jamie Dimon: no I would never make a pledge to you or anybody else like that I don’t make pledges I do the best I can every time I can.
Frost: but you said it should have had better corporate governance, all male board directors, you talk passionately yourself about that not being the case at JPMorgan the founder owned buildings where the company was a tenant the founder had multiple person loans against its own —
JPMorgan CEO Jamie Dimon: a lot of those things were prior. Some of those things were changed going forward. If I remember correctly the company promised to put a female — they had a female board member
Frost: the frist s1 —
Dimon: I understand that but you don’t know allthe conversation that took place on the first s1 —
Frost: you said they should happen before the s1.
Dimon: one of the lessons —
Frost: going forward is that something you don’t want to put JPMorgan’s name on the s1.
JPMorgan CEO Jamie Dimon: I would never tell you something like that.I will decide on every specific case when the specific case if we don’t want to do it as a client we can not do business with them, give them advice they take and still do business on occasion we give advice and they don’t take it and we won’t do business with them. I’m not going through the details what we did in this particular one I think we helped wework get to a proper conclusion which is very important I would have — I really would have been bothered and upset mostly by if that company had been a failure and had a chance to succeed and now it has a chance to succeed
Frost: moving to markets broadly jamie, lots of headwinds out there, record all time highs in the market, very low volatility, a bit of complacency, do you think?
JPMorgan CEO Jamie Dimon: I don’t know. Markets, guessing the market is really hard to do I think there are a lot of valuable companies, rates are very low it looks like the stock markets are forecasting a pretty – rosy outcome and the bond market it’s hard to say because a lot of bonds being bought by central banks. It’s hard to tell what that means when rates are this low in an environment not so bad?
Frost: in terms of your forecasts for the year ahead, a lot of analysts have eps growth, but part of that is because they expect buybacks to continue. Are we at the point in the cycle with the rate where it is it’s plausible that 2020 net income could be lower than 2019 net income.
Dimon:of course that’s always plausible. I don’t know what 2020 will be if you have a recession yeah we’re affected by interest rates, credit, things around the world. You know, believe it or not for your viewing public I don’t worry about that as much as opposed to building the business. Hiring great people, build great product, admit your mistakes, fix them, move on and, you know, that will be what it is. I can’t affect — I actually can’t affect 2020 very much even today if I could only by doing some pretty stupid stuff.
Frost: should people expect the pace of buybacks to slow up a little bit with your shareholder price at a record valuation since the crisis compared to your rival’s? Is the pace of buybacks going to slow down now?
Dimon: I can’t answer that question. We always going forward look at that I’m not going to tell you what we’re going to look at and not look at. It’s not a fair disclosure I understand the point even more important I would rather use our capital to grow our business and the constraints on that are multitude about how you can use capital at a bank. If I had my druthers I wouldn’t do buybacks at all I would be building my business. If I had my complete druthers I would have a dividend.
Frost: tech and banking. There’s been a couple of high profile partnerships of late facebook has explored partnerships with a number of banking companies finance companies most high-profile apple and goldman sachs. Does a partnership like that make sense for JPMorgan.
Dimon: we have many partnerships obviously we have a partnership with visa and master card, branded cards in southwest, united airlines. Fairly great partners over years. We —
Frost: a company like facebook, a pure tech company.
Dimon: I would explore or entertain anything and the facts will tell so, you know, you can have a relation which goes from white labeling, bank as a service, allthe way to you’re their bank or something like that and there might be something in that continuum we might consider. I can’t tell you right now because I don’t know what that might be.
Frost: do you think in ten year’s time a company like facebook as big a competitor to JPMorgan as wells fargo are today?
Dimon: it could be not in the form they’re in it would be hard to be a bank holding company. They would have to find a way to do part of banking but people do that banking as a marketplace or service. They might find ways to incorporate banking in a way that competes with us and so again, I applaud capitalism, I applaud competition and I do expect it to be coming , so I tell people don’t get complacent, we have great current competitors and great competitors we don’t know about yet. We better keep our eye on all of them.
Frost: you mentioned recently that libra was a neat idea that won’t happen, your words mark zuckerberg said in a hearing in congress, quote, if america doesn’t innovate our financial leadership is not guaranteed are the banks, are JPMorgan, not capable of innovating themselves
Dimon: no. We do a tremendous amount. I agree with him that, you know, we — that the american banks are preeminent around the world and need to compete with the chinese. I told you their concept I think libra was a neat concept payment systems if you have a problem you want to fix like cross border transmission, I agree with him I don’t think that in this day and age it will be them. That’s not meant as an insult that’s my own belief.
We already have a JPMorgan coin, a tokenized coin where we can move money and stuff like that we haven’t opened it up to a lot of people. We haven’t made a consumer yet banks build a real time p to p system called zelle wholesale payment system rtp through the clearing house organization we have to innovate to win I totally agree with that concept I think there are fin tech type of solutions for specific problems that libra was intend go after that someone is going to do by the way.
Frost: on the health care partnership with berkshire and amazon, it’s going to start rolling out to your employees in arizona and ohio imminently. Is that something that’s just going to work for your employees and for JPMorgan or is it something that if it works well, could be rolled out to help all of america
JPMorgan CEO Jamie Dimon: yeah. Our job is to make – have better outcomes for employees. Better outcomes should be live longer, get better medicine, lower cost, higher satisfaction.
So we decided to do is have some very smart people, you know, intensely involved in data analytics, testing certain things, modifying certain things, so the program you’re mentioning there are two, making sure people with primary care, what’s the long-term effect on chronic health, outcomes, et cetera with transparency, another one is high deductible plans have been hard for people so we’re testing — not testing, we’re doing a low deductible plan that people that our employees might prefer and might buy more preventative medicine that way and we will find out.
Whatever we learn we intend to share with the world this is not — it was never meant to be a for profit type of thing even though it’s a corporation.
Amazon is doing its own thing and berkshire, but hopefully we’ll learn something here and share it we all should acknowledge there’s a lot of things that could be improved in our health care system. We have the best in the world, doctors, pharma, surgeons, hospitals, you name it, we also have some of the worst 40 million uninsured, very high cost structures.
Too much fraud, administrative costs. Too lack of transparency, too lack of preventative medicine. We don’t teach for the most part health and wellness in k to 12 how to eat properly and get exercise to me there are a lot of things to do to make america a far healthier society and fix our health care. Keep the best and fix the part not working well.
Frost: I wanted to ask you what you made of the fact that one of your former lieutenants is now for the first time a direct rival of yours, charlie sharp, of course at wells fargo what do you make of that
JPMorgan CEO Jamie Dimon: just got off the phone with charlie. Look, I have enormous respect for charlie and wish him the best and I think he will do a great job. I’m proud of our people. We have two great copresidents we’ve got other potential successors we’ve had people left who are doing quite well I’m proud of that.
Frost: I mean, to that extent I was going to say are you proud of the fact that you created somewhat of a ceo factory, you mentioned some of the others outside, the talent coming up. How do you manage that
JPMorgan CEO Jamie Dimon: yeah. It’s d listen, first of all it doesn’t mean everyone at JPMorgan is good we have our things we haven’t always done that well either someone told me a long time ago that if you become a really good company, that’s really good news but one of the negatives that people think you’re a good company, they recruit your people that’s the cost of doing business but the talent we have is extraordinary. I mean literally extraordinary you’ve met a lot of them and I’m very proud of them and I get to travel the world with them and I’m kind of shocked at their capability the and what they can do.
Frost: you shuffled the pack internally and switched roles between jen and mary ann, to the extent that marketplace now suggests in the three to five-year timeline you’ve given yourself they’re
Two frontrunners is that fair?
JPMorgan CEO Jamie Dimon: I would never acknowledge who is a front runner or not but it’s very possible women will end up running this company at some time in the future.
Frost: okay. Fair enough.
JPMorgan CEO Jamie Dimon: but remember this is a board level decision not like I’m going to decide also the board wants to see people move around a little bit, in different jobs, get different experiences. So when you take a bigger job or my job you have a fairly broad experience
Frost: jamie, we are going to hit the pause button for a moment.
JPMorgan CEO Jamie Dimon: okay.
Frost: before continuing to record a portion for closing bell on things like the business round table statement and elizabeth warren’s response to that. But for the live portion, thanks as always, jamie, guys “Squawk
On the street,” I’ll send it back to you.
