Photo: Getty Images/ Mark Wilson
Citi financial services analyst Keith Horowitz took a trip to JPMorgan to sit down with Jamie Dimon, and pick his brain about the state of his company, the world of financial services, and the broader, global economy.In their conversation, Dimon revealed a few of the things that are on his mind these days.
Dimon noted four main risks that he worries about… 1) Geopolitical fat-tail risks such as Middle East unrest, 2) Europe – which has made progress, but still could surprise as politicians have reduced, but not removed risks, 3) Uncertainty regarding the end to QE3 stimulus, and 4) US policy, long-term fiscal imbalances and entitlement programs.
What’s interesting is what he’s not worried about:
… And not citing regulatory risk was interesting. He even pointed out that while margins may come down, market share may increase due to a “bigger moat” – We were surprised that regulatory risk was not mentioned as one of the key risks. In Dimon’s eyes, higher capital rules, Volcker, and OTC derivative reforms longer-term make it more expensive and tend to make it tougher for smaller players to enter the market, effectively widening JPM’s “moat.” While there will be some drags on profitability – as prices and margins narrow, efficient scale players like JPM should eventually be able to gain market share.
This last part is really interesting, and will be used by people who think that ultimately regulation serves to benefit, not encumber, existing players.
And even if large, systemically important financial institutions (SIFIs) face a surcharge/capital fee, Dimon believes that the “synergies” of a large organisation will help overcome these financial burdens.
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