JPMorgan Chase sees 8% increase in expenses in ’24 on expansion, inflation, tech (JPM)

In addition to JPMorgan Chase’s (NYSE:JPM) stronger-than-expected earnings on Friday, the bank also issued its initial guidance for 2024. In the company’s earnings call, Chief Financial Officer Jeremy Barnum provided some details on its spending plan for the year.

The U.S. largest bank expects 2024 adjusted expenses to be ~$90B, an increase of $7B from the previous year. “Thematically, the biggest driver is what I might call business growth writ large,” he said during the call.

Its Consumer & Community Banking is “the biggest dollar driver overall,” with an 8% Y/Y expected increase in expenses, as the company continues to expand its geographic footprint. “In 2023, we built 166 new branches, and we’re planning about a similar number this year,” he said.

Marketing is part of the boost in expenses, as well. “We’re seeing great opportunities, great demand, and engagement in our card products, and so that shows up in marketing,” Barnum said.

He pointed out that JPMorgan Chase (JPM) is seeing earlier spending paying off. “For example, in 2023, we had 2M net new checking accounts, we had an 8% growth in active card accounts, and over the last three years, we’ve increased deposit market share by 180 basis points.”

In its Asset & Wealth Management business, continued client advisor hiring is contributing to that rise in costs. In addition, JPM needs to ensure that advisors and their new clients have the support that they need, he said.

Its Commercial Bank franchise added some key teams in 2023. The new clients and loans that it saw in the middle of last year require support “across the entire ecosystem, as well as the fact that that created an opportunity in the middle of the year to accelerate our long-standing and pre-existing innovation economy strategy,” Barnum said.

At its Corporate & Investment Bank, the expense growth is lower due to the bank’s strong market share and the fact that it has already invested very aggressively in the payments business for some time. With that effort paying off, “the biggest driver in the CIB is really generic inflation.”

He didn’t pull out technology, but rather said all of its business are investing in technology, and the drivers are “very consistent across the entire firm.”

Barnum didn’t go into any detail when asked about spending on artificial intelligence, but noted that the JPMorgan (JPM) has Teresa Heitsenrehter, its chief data & analytics officer, running the AI strategy for the company as a member of the operating committee.

While the company “is very excited” about the opportunities in AI, “we’re not going to be chasing shiny objects.” Rather, JPM wants to take a very disciplined approach. “The current focus is on making sure we have a contained, well-chosen list of high-impact use cases and that we’re throwing resources at those in the right way that’s extremely pragmatic and disciplined, and we’re holding ourselves accountable for actual results,” Barnum said.

Management will have more to say about its expense plans at its Investor Day on May 20. Recall that two years ago, the company’s hefty increase in expense guidance grabbed the attention of analysts and triggered lots of questions.