LITTLE ROCK — JPMorgan Chase & Co., the biggest U.S. bank, plans to reduce headcount by as many as 19,000 people in its mortgage and community banking businesses through 2014 as Chief Executive Officer Jamie Dimon cuts expenses.
The lender, employing about 259,000 people at the end of December, will cut 13,000 to 15,000 jobs in its mortgage unit and 3,000 to 4,000 in community banking excluding home lending through 2014, the company said Tuesday in presentations on its website. The bank’s payroll will shrink by about 4,000 people this year, mainly through attrition, said spokesman Kristin Lemkau.
Dimon is focusing on expense reductions after increasing net income to records for three straight years. Mortgage profits that drove banks’ earnings may fade this year as increased competition keeps the rates on new loans near all-time lows. Some firms also are cutting jobs after a settlement with U.S. regulators resolved obligations to review foreclosure documents.
With credit quality stabilizing, “banks can focus on operational efficiency,” said Chris Kotowski, a New Yorkbased bank analyst with Oppenheimer & Co. “When credit problems are mounting banks have to throw money at their problems. When the environment stabilizes they can worry about operating efficiency.”
JPMorgan gave the forecasts as top executives began their annual Investor Day conference. The potential job cuts for mortgage and community banking amount to about 7.3 percent of the firm’s total headcount as of Dec. 31. The New York-based firm may also add people in other businesses, offsetting company wide reductions, Lemkau said.
Investment-banking compensation is “expected to remain relatively consistent,” the bank said.
The stock fell 10 cents to close Tuesday at $47.60 in New York trading.
Chief Financial Officer Marianne Lake said Tuesday that the bank is seeking to cut costs and expects to reduce adjusted expenses by about $1 billion in 2013. Net interest income will remain “flat,” and the bank will release about $1 billion in credit card reserves back into earnings this year, she said.
“We know the work we have to do, and we’re comfortable doing it,” Lake said.
Costs in mortgage banking will fall by about $3 billion through 2014, the company said. Expenses in community banking, excluding home lending, may rise about 3 percent this year and 2 percent next year as the business expands. The firm may reduce same-store staffing 20 percent by 2015.
“We expect to achieve these efficiencies the same way we did in 2012, through attrition,” said Ryan McInerney, the CEO of consumer banking.
JPMorgan is seeking to cut expenses tied to mortgage servicing as it resolves regulatory investigations and provides borrower relief including home-loan modifications. In January, it said it dismissed more than 800 workers focused on foreclosure reviews.
Most job cuts in the mortgage bank will probably come from servicing operations, which banks expanded to deal with fallout from the housing crisis, said Guy Cecala, publisher of Inside Mortgage Finance, an industry publication based in Bethesda, Md. Positions being cut aren’t akin to high-paying investment banking posts, he said in a phone interview.
“It’s basically customer service,” Cecala said. “Is it any more complicated than being an airline representative? Probably not.”
The company has a longterm plan to cut quarterly servicing expenses to less than half the fourth quarter’s adjusted total, the bank said last month.
The figure of $725 million in the last three months of 2012 was “obviously still very high relative to our longerterm guidance of $300 million to $350 million a quarter, but we expect that to continue to trend down,” Lake said during a Jan. 16 conference call.
Reduced staffing may also signal an expectation that refinancings will decline after surging last year, said Keith Gumbinger, vice president of HSH.com, a Riverdale, N.J.-based mortgage-information website.
“It’s a pretty good bet that the refi boom will be coming to an end,” as mortgage rates climb, he said. “Add regulations on top of that, and it doesn’t get any better.”
Business, Pages 28 on 02/27/2013