Jamie Dimon says CEOs `should not be crybabies about it’

Jamie Dimon says CEOs `shouldn't be crybabies about it'

JP Morgan CEO Jamie Dimon speaks on the Boston School Chief Executives Membership luncheon in Boston, Massachusetts, U.S., November 23, 2021.

Brian Snyder | Reuters

Banks have been one of many foremost beneficiaries of excessive inflation lately as a result of their revenue margins are inclined to develop when increased costs power central banks to boost rates of interest.

Not less than, that was the pondering as buyers bid up financial institution shares whereas charges climbed and inflation reached multi-decade highs. Now, megabanks together with JPMorgan Chase and Citigroup are disclosing that sizzling inflation in a single space — worker wages — is casting a shadow over the subsequent few years.

Shares of JPMorgan fell greater than 6% on Friday after the financial institution stated that bills will climb 8% to roughly $77 billion this yr, pushed by wage inflation and expertise investments. Greater bills will probably push the financial institution’s returns in 2022 and 2023 under current outcomes and the lender’s 17% return-on-capital goal, based on CFO Jeremy Barnum.

“We have seen a considerably elevated attrition and a really dynamic labor market, as the remainder of the economic system is seeing,” Barnum stated. “It’s true that labor markets are tight, that there is a little little bit of labor inflation, and it is necessary for us to draw and retain the very best expertise and pay competitively.”

The event provides nuance to the bull case for proudly owning banks, which usually outperform different sectors in rising-rate environments. Whereas economists anticipate the Federal Reserve to boost charges three or 4 occasions this yr, boosting the finance trade, there’s the danger that runaway inflation may truly wipe out these beneficial properties, based on Barnum.

“On steadiness, a modest inflation that results in increased charges is nice for us,” the CFO informed analysts in a convention name. “However underneath some situations, elevated inflationary pressures on bills may greater than offset the charges profit.”

Citigroup CFO Mark Mason stated Friday that there was a “lot of aggressive strain on wages” as banks jostle for expertise amid the growth in offers and buying and selling exercise.

“We’ve got seen some strain in what one has to pay to draw expertise,” Mason stated. “You’ve got even seen it at a few of the decrease ranges, I ought to say entry ranges within the group.”

At JPMorgan, the most important U.S. financial institution by property, it’s the financial institution’s skilled class particularly — buying and selling personnel, funding bankers and asset administration staff — who’ve seen pay swell after two straight years of sturdy efficiency. The corporate additionally raised wages at branches final yr.

“There’s much more compensation for high bankers and merchants and managers who I ought to say did a rare job within the final couple years,” chairman and CEO Jamie Dimon informed analysts throughout a convention name.  “We shall be aggressive in pay. If that squeezes margins a bit of bit for shareholders, so be it.”

Dimon stated that whereas total inflation would “hopefully” begin to recede this yr because the Fed will get to work, will increase in “wages, and housing and oil should not transitory, they will keep elevated for some time.”

In reality, Dimon informed analysts that wage inflation can be a recurring theme amongst companies this yr. Some firms will navigate the change higher than others, he stated.

“Please do not say I am complaining about wages; I feel wages going up is an effective factor for the individuals who have the wages going up,” Dimon stated. “CEOs should not be crybabies about it. They need to simply take care of it. The job is to serve your consumer as greatest you possibly can with all of the components on the market.”

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