JPMorgan Chase & Co, the largest U.S. lender, plans to spend more this year to grow its credit-card business and stay competitive in an industry that has become increasingly technology-focused.
In documents posted to its website on Tuesday as part of its annual investor day, JPMorgan predicted its costs will rise 3.4 percent to $58 billion, from $56.1 billion this year.
Even with higher costs, the bank maintained its long-term targets for a costs-to-revenue ratio of 55 percent and for return on tangible common equity goal of about 15 percent, signaling management's belief that the investments will pay off.
At the day-long confab, held at JPMorgan's headquarters in New York, top executives offer their visions for the bank's four major business lines and mingle with investors, analysts and the press. It draws large crowds of besuited money managers who get a chance to press Chief Executive Jamie Dimon and others about a wide range of topics, from geopolitics to return on common equity.
JPMorgan has been more inclined than rivals to spend to grow its businesses in recent years.
Dimon, who turns 61 next month, has tried to build a smooth-running bank, large and diverse enough to withstand downturns, take market share and earn relatively high returns on capital.
Although executives say the bank has a focus on efficiency, they have also pushed back against the idea that they should, for instance, cut branches to get a quick profit boost. Instead, they have advocated investing in key businesses, like credit cards, as well as technology that can help JPMorgan lure more customers and keep existing customers happy.
One of its slides characterized its approach to costs as: "Innovate, automate, and eliminate waste."
Innovation was a theme of the investor day, with displays highlighting JPMorgan's technology credentials in ATMs, cybersecurity and "trader experience," among other things. Bank employees inside booths spoke to investors about what they do.
JPMorgan is the biggest credit card issuer in the U.S. and has spent many millions of dollars in recent years to grow the business through products like the Sapphire Reserve card, which offers rich rewards to new customers. It has also made revenue-shaving concessions to airlines, hotels and retailers to renew co-branded cards.
Investors and analysts have at times questioned whether the bank has been giving up too much to grow. But in early research notes on Tuesday, analysts were generally positive about JPMorgan's new forecasts, noting that while it plans to spend more, its revenue and profit forecasts were encouraging.
JPMorgan's shares, part of the Dow Jones Industrial Average, were down 0.3 percent at $90.15 in early trading. They had risen about 29 percent since the U.S. presidential election on Nov. 8.
(Reporting by Sweta Singh in Bengaluru and David Henry in New York; Writing by Lauren Tara LaCapra; Editing by Sriraj Kalluvila and Nick Zieminski)