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Jamie Dimon Says CEOs ‘Shouldn’t Whine About This’

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Jamie Dimon Says CEOs ‘Shouldn’t Whine About This’

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Jamie Dimon, CEO of JPMorgan Chase & Co.

Julia Marchi | Bloomberg | Getty Images

Banks have recently been a major beneficiary of high inflation, as their profit margins tend to rise when higher prices force central banks to raise interest rates.

At least, that was the thought as investors pushed bank stocks higher as rates soared and inflation hit multi-decade highs. Today, megabanks including JPMorgan Chase and Citigroup reveal that hot inflation in one area – employee wages – will cast a shadow over the next few years.

JPMorgan shares fell more than 6% on Friday after the bank said spending would rise 8% to about $77 billion this year, driven by wage inflation and technology investments. Higher spending will likely push the bank’s returns in 2022 and 2023 below recent results and the lender’s 17% return on capital target, according to chief financial officer Jeremy Barnum.

“We saw somewhat high attrition and a very buoyant job market, like the rest of the economy,” Barnum said. “It’s true that labor markets are tight, there’s a bit of labor inflation, and it’s important for us to attract and retain top talent and pay competitive.”

This development adds nuance to the bullish scenario for proprietary banks, which typically outperform other sectors in rising rate environments. While economists expect the Federal Reserve to raise rates three or four times this year, boosting the financial sector, there is a risk that runaway inflation could actually wipe out those gains, according to Barnum.

“Overall, modest inflation leading to higher rates is good for us,” the chief financial officer told analysts on a conference call. “But in some scenarios, elevated inflationary pressures on spending could more than offset the rate advantage.”

Citigroup Chief Financial Officer Mark Mason said on Friday there was “a lot of competitive pressure on wages” as banks jostle for talent amid booming deals and business activity.

“We’ve seen some pressure on what you have to pay to attract talent,” Mason said. “You’ve even seen it at some of the lower levels, I should say the entry levels in the organization.”

At JPMorgan, the largest U.S. bank by assets, it was the banking professional class in particular – trading staff, investment bankers and asset management employees – that saw the wages increase after two consecutive years of strong performance. The company also raised wages at branches last year.

“There’s a lot more compensation for top bankers, traders and managers who, I should say, have done an amazing job over the past two years,” CEO Jamie Dimon told analysts on a conference call. “We will be competitive in terms of compensation. If that cuts into shareholder margins a bit, so be it.”

Dimon said that while headline inflation will “hopefully” start to decline this year as the Fed gets to work, increases in “wages, housing and oil are not transitory, they will stay elevated for a while.” time”.

In fact, Dimon told analysts that wage inflation will be a recurring theme among companies this year. Some companies will adapt to change better than others, he said.

“Please don’t say I’m complaining about wages; I think increasing wages is a good thing for people who have rising wages,” Dimon said. “CEOs shouldn’t whine about it. They should just deal with it. The job is to serve your customer the best you can with all the factors that exist.”

Jamie Dimon Says CEOs ‘Shouldn’t Whine About This’

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