JPMorgan plots ‘astonishing’ $12bn tech spend to beat fintechs – News Couple

JPMorgan plots ‘astonishing’ $12bn tech spend to beat fintechs

JPMorgan Chase, the largest bank on Wall Street, said it plans to significantly increase spending on technology and talent to bolster its competitive position, raising investor concerns about US bank earnings in 2022.

As it reported record earnings last year, JPMorgan surprised analysts with its forecast that expenditures will increase 8 percent this year to about $77 billion, meaning it will likely miss its main profitability target in 2022, and possibly 2023.

Part of the higher expenditure is due to higher wages, with an additional $2.5 billion being earmarked for compensation and travel expenses. But JPMorgan also said it plans to increase new investment this year by $3.5 billion, or 30 percent, to nearly billion. كورة عالنت She said that spending on technology in 2022 will reach $12 billion in 2022.

“Global tech spends about $12 billion, which is an astonishing number,” said James Shanahan, an analyst with Edward Jones. “It is likely to weaken the cumulative dollar value of the investment for all the fintech companies in the world that are trying to disrupt it.”

Shares of JPMorgan, which have nearly doubled from the depths of the pandemic, fell 6.15 percent on Friday. This also dragged down the shares of other major banks that are due to report earnings next week, with Morgan Stanley down 3.6 percent, Goldman Sachs down 2.5 percent and Bank of America 1.7 percent.

Jamie Dimon, 65, best known for controlling costs as CEO of JPMorgan since 2005, told analysts the bank would need to “spend a few dollars” to beat rivals.

However, the spending plans prompted Mike May, the banking analyst at Wells Fargo who has recommended JPMorgan to clients over the past seven years, to downgrade the bank’s stock, in the absence of any performance metrics associated with the spending increase.

“Even Jamie Dimon, one of the best bankers of his generation, doesn’t get a free pass to halve investment spending over three years without giving more details about the expected benefits,” Mayo said.

JPMorgan is ramping up spending as a surge in deal-making activity that has produced record investment banking returns is losing steam. Investors had hoped that higher interest rates – and higher rates on loans – would help compensate, but instead, much of that benefit will now go to fund new investments. لعبة روليت

The large spending reflects pressure on banks to compete with fintech companies such as payments processor Stripe, lender Affirm and rival bank Chime.

Jeremy Barnum, chief financial officer of JPMorgan, said the bank is experiencing an “acceleration moment” in investment spending. مواقع يانصيب مجانية “Part of the reason for that is how much competition there is in the market,” Barnum said on a call with reporters, “particularly from new entrants.”

JPMorgan is allocating new money to data centers and cloud computing as a sale as it expands into new markets such as the UK and for marketing costs.

Executives say that investments in technology today will eventually lead to lower operating costs. But these savings can take years to realize, and the lack of fine detail is a source of frustration for investors.

“You, as a shareholder, and as an outsider, will never be able to tell the difference between investment spending and plain old spending until three years later,” said Chris Kotofsky, banking analyst at Oppenheimer & Co.

After fourth-quarter earnings at Citigroup, which was already spending heavily to boost its technology under regulatory pressure in the wake of the bank’s mishaps, CFO Mark Mason described technology as a “very important growth line” in the bank’s expense base, without giving specific forecasts.

The bank’s shares closed down 1.25 percent on Friday.

Meanwhile, Wells Fargo shares rose 2 percent after the bank reported a 12 percent rise in revenue in the fourth quarter as it sought to recover from its false accounts scandal. The bank said its expenses will likely be lower than in 2021 even as it plans additional investments of $1.2 billion in technology and compensation.

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