Ostensibly, things weren’t exactly great at J.P. Morgan’s investment bank in the first quarter of this year. Profits fell 22% at the combined corporate and investment bank and, as the chart below shows, revenues fell in every business are except M&A – in equity capital markets revenues fell massively. Even so, CEO Jamie Dimon and CFO Marianne Lake say J.P. Morgan’s investment bankers have nothing to worry about. Everything is just fine.
In one word, the reason for the complacency is, ‘comparables.’
In the first quarter of 2015, Dimon and Lake said J.P. Morgan’s investment bank did exceptionally well. In the first quarter of 2016, it still did well – just not compared to its out-performance the previous year.
“Being down mid-to-single digits given the out-performance last year is really quite good,” said Lake in today’s call. “Revenues of $5-$6bn in sales and trading in a quarter like this were a good performance,” added Dimon. “We only had six days’ of trading losses…that’s really good. I look at this as a healthy business.”
In the first quarter of 2015, J.P. Morgan benefited from high client flows and volatility when the Swiss franc was un-pegged from the Euro. In the past quarter, the Lake complained of “idiosyncratic events” and “sharp moves that were tough for clients.”
Even so, Dimon and Lake were adamant that they will be neither restructuring the trading business nor paying their traders and investment bankers any less. “We pay for performance and returns,” said Lake. “We’re paying our people properly,” said Dimon. “And consistently,” concluded Lake.