J.P. Morgan Chase CEO Jamie Dimon — known for financial discipline and being among the most respected Wall Street bankers — is being called out by investors for his lack of transparency on new project spending, Financial Times reported on Wednesday (March 23), citing unnamed sources in attendance at a recent event.
The biggest bank in the U.S. is planning to increase spending on new projects by 30% — almost $15 billion — with technology getting the largest slice of the spending pie.
Shareholders let Dimon and his leadership team know that the bank’s aggressive spending plan combined with the lack of candor about where the money is being directed is not acceptable, three unnamed sources in attendance at a meeting in Florida told FT.
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Investors also told Dimon that they wanted a thorough explanation regarding the bank’s move last year into the retail banking sector with a digital bank in the U.K., the sources said. Not only is the space highly competitive, but the decision is also questioned as Citigroup reduces its international footprint, per the report.
One of JP Morgan’s biggest shareholders told FT that investors have expressed uncertainty that the digital-only banking project in the U.K. had merit because there was no data to support its success right now.
The bank has so far only indicated that investment spending would go towards cloud capabilities, new hires and marketing, investors said. That spending, could, however, cause the bank to miss a key profitability target — tangible common equity. The bank has increased its spending on new investments by more than 50% from 2019 to the present, J.P. Morgan Chase data shows.
Wells Fargo banking analyst Mike Mayo told FT that every worldwide investor he’s spoken to is in agreement that better transparency is needed about where the new project money will be spent and for what purpose.
The lack of transparency and increased spending makes Dimon’s previously unquestionable reputation for financial discipline very questionable, Mayo said.
Related: JPMorgan: ‘Digital as a Culture’ Must Be More Than a Talking Point
Dimon steered the bank aggressively into tech spending after expressing frustration that it lost out to tech-savvy newcomers who grabbed market share J.P. Morgan should have gotten.
J.P. Morgan declined to comment, but sources told FT that more information would be forthcoming at the bank’s upcoming investor day set for May 23.
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