JPMorgan Chase & Co. Chief Government Officer Jamie Dimon mentioned synthetic intelligence could be the greatest difficulty his financial institution is grappling with, likened its potential influence to that of the steam engine and mentioned the expertise may “augment virtually every job.”
The CEO devoted a bit of his annual shareholder letter to the importance of AI for the Wall Road large’s enterprise and for society at massive. The financial institution has recognized greater than 400 use instances for the expertise throughout advertising, fraud and threat, amassed 1000’s of AI consultants and knowledge scientists and begun exploring deploying generative AI, Dimon mentioned.
“We are completely convinced the consequences will be extraordinary and possibly as transformational as some of the major technological inventions of the past several hundred years,” Dimon mentioned within the letter. “Think the printing press, the steam engine, electricity, computing and the Internet, among others.”
Dimon delivered his verdict on AI’s significance in an expansive dispatch that additionally lambasted a set of regulatory proposals, sounded a stark warning on geopolitics, took goal at shareholder advisory corporations and provided a spirited protection of the function of market making within the monetary system. And as anticipated, the 68-year-old weighed in on the financial system, reiterating his concern that dangers of persistent inflation, quantitative tightening and the continued wars in Ukraine and the Center East loom massive even because the US financial system stays strong.
“These markets seem to be pricing in at a 70% to 80% chance of a soft landing — modest growth along with declining inflation and interest rates,” Dimon wrote. “I believe the odds are a lot lower than that.”
Revenue File
Dimon launched his letter after JPMorgan notched the best annual revenue within the historical past of American banking final 12 months. The lender, which experiences first-quarter earnings on Friday, benefited from turmoil amongst regional lenders that started simply over a 12 months in the past, sending depositors looking for the protection of bigger monetary establishments. JPMorgan performed a significant half as these occasions unfolded, in the end staging a rescue of First Republic after it failed.
The deal “was not something that we would have done just for ourselves,” Dimon wrote. On the time, JPMorgan mentioned the acquisition would add greater than $500 million to earnings yearly, acknowledging that was most likely conservative. In his letter, Dimon mentioned that determine would possible be “closer to $2 billion.”
The regional banking turmoil unfolded as regulators put the ending touches on proposals anticipated to saddle US banks with harder capital necessities, often known as Basel III Endgame. Dimon, an outspoken critic of the proposals, devoted a complete part of his shareholder letter to what he mentioned was the necessity for a critical assessment of the financial institution regulatory and supervisory course of. He additionally reiterated earlier criticisms concerning the potential for the proposals to trigger financial hurt.
Market Making
The proposed guidelines may additionally injury market making, the place banks assist traders purchase and promote securities, in line with the CEO. Dimon devoted a number of pages defending the function banks play in that enterprise, which he mentioned some regulators appear to view as speculative, hedge-fund like exercise.
“This thinking is what might be leading them to constantly increase capital requirements,” he wrote.
JPMorgan earns about $100 million in every day income from the enterprise, which has solely misplaced cash on 30 buying and selling days over the past decade, in line with Dimon. The proposed guidelines, which Federal Reserve Chair Jerome Powell signaled final month can be scaled again, may hurt market stability, Dimon wrote.
Proxy Votes
Dimon additionally used his letter to take goal at proxy advisers — corporations which traders like state pension funds and different massive asset managers pay for suggestions on how they need to vote their inventory on contentious subjects comparable to govt compensation.
Dimon has lengthy chided shareholders for casting votes solely primarily based on suggestions from these corporations as lazy and irresponsible. However he went a step additional on Monday, calling out the 2 major US advisers, Institutional Shareholder Companies and Glass Lewis & Co., for having what he deemed an excessive amount of sway figuring out the end result of shareholder elections.
“While asset managers and institutional investors have a fiduciary responsibility to make their own decisions, it is increasingly clear that proxy advisors have undue influence,” Dimon wrote.
Dimon through the years has needed to fend off numerous resolutions the 2 corporations backed. He famous Monday that ISS is owed by German agency Deutsche Boerse AG, whereas Canadian personal fairness agency Peloton Capital owns Glass Lewis, and questioned if American company governance must be decided by for-profit establishments with “their own strong feelings about what constitutes good corporate governance.”
Dimon additionally mentioned the financial institution is taking steps to decrease the function of proxy adviser suggestions. By the top of this 12 months, JPMorgan Asset Administration could have largely eradicated third-party proxy adviser voting suggestions from its voting techniques, he mentioned. The agency can even work with third-party proxy voting advisers to take away their voting suggestions from analysis experiences they supply to the division by the 2025 proxy season.
Different highlights from the letter:
- On the rising personal credit score business: “Frequently, the weaknesses of new products, in this case private credit loans, may only be seen and exposed in bad markets, which private credit loans have not yet faced,” Dimon wrote. “When credit spreads gap out, when interest rates go up and when some leveraged companies suffer in the recession, we will find out how those loans survive stress testing.”
- Dimon addressed JPMorgan’s recent decision to exit Local weather Motion 100+, an investor group shaped in 2017 to battle local weather change. His agency “invested in our own in-house experts and matured our own risk management processes over the years,” he wrote. “As a result, we are going to go our own way and make our own independent decisions.”
