JPMorgan Chase & Co. JPM will be slashing more jobs with an aim to trim expenses and improve efficiency. As per a Wall Street Journal report, the bank plans to lay off 5,000 employees across the board by 2016.
Notably, job cuts are already in motion as JPMorgan intends to move toward automation. With increased usage of Internet and mobile banking, the company will be overhauling nearly 5,500 of its branches to become more resilient and less dependent on human tellers.
At an investor conference in New York, JPMorgan CEO James Dimon recently stated that on an average, Chase branches would be laying off at least one employee over the next two years. Last February, at Investor Day conference, the company had come up with figures which showed that automated branches will be much more cost effective.
As per figures provided by JPMorgan, it costs 65 cents per deposit when done with a teller, while ATM deposits costs 8 cents and its 3 cents for deposits done by mobile app. Therefore, increased automation will aid expense savings and enhance profitability as revenue growth has remained subdued for some time.
Nevertheless, lay-offs will be impacting all four segments of JPMorgan. Further, employees in legal and compliance divisions are likely to be affected. From junior analysts to managing directors, all employees will come under the line of fire. While some of them will be reassigned to other divisions, those who are not ready to move will be laid off.
Over the past one year, JPMorgan has trimmed nearly 6,000 positions as per its April regulatory filing. However, job cuts does not necessarily mean that the overall headcount will continue to decline; since the bank hires nearly 40,000 employees annually to fill up vacant positions and add new analysts.
Though JPMorgan had not publicly disclosed any plans to trim workforce, it had projected a decrease in expenses to nearly $57 billion in 2015 from $58.4 billion last year.
At a time when banks are struggling to improve top lines owing to low rate environment, cutting costs remains one of the ways to maintain profitability. Recently, at an investor conference, U.S. Bancorp’s USB chairman and chief executive, Richard Davis said, “If we’re wrong and rates actually aren’t going to move up…trust me, we will cut expenses.”
Moreover, over the past several years, many banks including Bank of America Corporation BAC, Citigroup Inc. C and Wells Fargo & Co. have been trying to lower expenses through streamlining operations. We believe that unless there is considerable growth in the overall top lines, banks will have to undertake measures to cut expenses so as to remain profitable.
Currently, JPMorgan carries a Zacks Rank #3 (Hold).
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