Dimon: JPM ‘Simplifying’ Its Business, Improving Compliance

 

Dimon: JPM ‘Simplifying’ Its Business, Improving Compliance

SEP 17, 2013 10:42am ET
 

WASHINGTON — JPMorgan Chase (JPM) is focusing on simplifying its businesses and improving compliance with regulatory requirements, Jamie Dimon said in an e-mail to employees on Tuesday.

The bank’s chairman and chief executive said that its recent exit from the student lending business and elimination of its physical commodities sales and trading businesses was an attempt to “refocus our priorities.”

“We have been asking our senior people to eliminate products and services that are not essential to serving our customers and are not core to our business,” Dimon wrote.

In the lengthy e-mail, Dimon said the bank is also working to confront the regulatory challenges facing it, including reviewing its foreign correspondent banking business, improving oversight of outside vendors, and adding regulatory compliance staff.

The e-mail comes as JPMorgan Chase nears a $750 million to $800 million settlement with regulators related to last year’s “London Whale” trading scandal. An announcement could come as early as this week.

It also is yet another sign of a newly resurgent Dimon who, after the criticism he took over the Whale incident, successfully fought off an attempt by shareholders to strip him of his chairman title earlier this summer. Since then, he has become more outspoken about the issues facing the industry and his institution.

The regulatory settlement is expected to include an admission of wrongdoing by the bank. Although Dimon did not reference it directly, he said in his e-mail that if “you don’t acknowledge mistakes, you can’t fix them and learn from them.”

“So now, as in the past, we are recognizing our problems, rolling up our sleeves and fixing them,” Dimon wrote.

That includes a renewed focus on the bank’s foreign correspondent banking business, an area that has gotten several large banks, including HSBC and Standard Chartered, into trouble recently with U.S. regulators.

JPMorgan Chase was slapped with a consent order from the Office of the Comptroller of the Currency in January over “critical deficiencies” with respect to its anti-money laundering practices. Many observers expect regulators to impose a monetary penalty on the bank soon over those failures.

Dimon said JPMorgan Chase is strengthening its internal controls “particularly around ‘Know Your Customer’ and transaction monitoring.”

He also said the bank is stepping up supervision of outside vendors, yet another area that has tripped up the bank.

“If a vendor or partner engages with our customers, we need to be as vigilant about their practices as we are about our own, particularly if they interact directly with customers,” Dimon wrote. “We are also proactively trying to decrease the number of vendors we have, which reduces complexity in our business and creates more jobs internally.”

Earlier this summer, JPMorgan Chase halted most sales to third-party collectors of credit card debts amid regulatory concerns over how it pursues payments from customers who are delinquent.

Dimon said that the bank has significantly boosted compliance resources, adding roughly 3,000 employees this year that are dedicated to risk, compliance and control efforts. The bank has also provided 750,000 hours of regulatory and control-related training related to topics like anti-money laundering and Dodd-Frank implementation, he said.

Dimon added that he has also tried to build a “more open and transparent relationship with our regulators.” He held town halls for examiners with the Office of the Comptroller of the Currency, Federal Reserve Board, and Federal Deposit Insurance Corp. in May and June. He also held a corporate town hall with bank employees who “regularly interact with regulators.”

“We discussed our culture of transparency, stressing the necessity of fully and accurately reporting material issues to our regulators in a timely manner and responding promptly to their requests,” Dimon said.

Dimon concluded by pledging to create a “best-in-class operating system” for the bank.

“Never before have we focused so much time, effort, brainpower, technological power and money on a single, enterprise-wide objective,” Dimon wrote. “Make no mistake — we are going to get this right.”

 

J.P. Morgan Set to Launch Sale of Commodities Business Bank Plans to Kick Off Process in September

 

MARKETSAugust 19, 2013, 12:52 p.m. ET

J.P. Morgan Set to Launch Sale of Commodities Business

Bank Plans to Kick Off Process in September

By CHRISTIAN BERTHELSEN CONNECT

J.P. Morgan Chase & Co. has told potential buyers of its commodities assets that it expects to kick off sale efforts in early September.

 

The bank plans at that time to circulate a memo that details the balance sheets and profitability of its physical-commodity assets, according to people familiar with the sale process.

 

J.P. Morgan said in July it was pursuing strategic alternatives for these assets, which range from metal warehouses to pipeline leases and power plants, including a possible sale. The bank hopes to sell the assets as one package, but depending on the interest of buyers it may have to sell them piecemeal.

 

Tightening regulations in the wake of the financial crisis have made it more difficult for banks to reap big profits from their commodities operations, as have softening commodity markets. Recently, U.S. regulators have increased their scrutiny of metal warehousing amid complaints from industrial consumers that long waits for metals such as aluminum and copper are driving up prices.

 

Dozens of firms have approached the bank to express tentative interest in J.P. Morgan’s assets, these people said. Their ranks include big international commodity traders, private-equity firms and foreign banks.

 

J.P. Morgan, the largest U.S. bank by assets, is among a handful of giant banks that expanded into physical commodities to complement their trading in financial derivatives in those markets.

 

Among the assets on the auction block are Henry Bath & Son Ltd., a global network of metals warehouses; agreements to control the output from a handful of power plants in the Southeast, as well as ownership stakes in power plants elsewhere; leases on oil fields, terminals and pipeline capacity in Canada; and leases for petroleum-storage tanks in the Gulf Coast, these people said.

 

One asset attracting heightened interest from some buyers is a contractual agreement J.P. Morgan has with Philadelphia Energy Solutions, a venture between Sunoco Inc. and the Carlyle Group that owns and operates a refinery. The bank provides cash and crude to the refinery, and then purchases the refined product to trade and resell into the market. The arrangement is regarded as an attractive asset because there are multiple ways to make money from it. Any transfer of J.P. Morgan’s interest in the agreement would have to be approved by other parties to the agreement.

 

Other assets may be more difficult to unload at a profit. J.P. Morgan is currently paying more to rent storage facilities for oil products than such leases would fetch on the open market. The value of these leases has declined in the last two years due to shifts in futures prices that no longer make storage profitable. “Some have value, and some have negative value,” one person said.

 

The people familiar with the sale process said they didn’t expect the bank to set opening prices on the assets. Rather, interested parties are expected to make offers based on the financial information provided, and the bank will evaluate bids on a case-by-case basis.