JPMorgan to cut 8,000 jobs this year in bid to cut costs
By Joshua Freed, AP
February 27, 2014, 12:03 am TWN
AP-JPMorgan Chase plans to eliminate 8,000 jobs this year as its mortgage business shrinks and the giant bank aims to control costs at its branches.
About half of those job cuts had already been announced. JPMorgan Chase now plans to cut more jobs — about 3 percent of its workforce of 251,000 — as it tries to reduce US$2 billion in consumer banking expenses by the end of 2016. But the bank said it would add about 3,000 jobs in other areas this year.
The new job cuts announced Tuesday are in its mortgage and retail banking businesses. The bank also cut 16,500 jobs last year in those areas.
JPMorgan's mortgage business, like that of other big banks, is declining as fewer Americans refinance their home loans. In the years following the recession, low interest rates caused a boom in mortgage refinancing. But interest rates began rising midway through 2013.
“We're seeing much lower volumes as we're going through the first quarter of 2014,” said Gordon Smith, who runs the company's consumer and community banking business. The company said its mortgage business will lose money this year. Smith and other JPMorgan executives spoke at the company's investor day in New York, which was webcast.
In November his company agreed to pay US$13 billion to settle a civil inquiry into its sales of low-quality mortgage-backed securities that collapsed in value. It also announced a US$4.5 billion settlement with 21 major institutional investors over mortgage-backed securities issued by it and Bear Stearns between 2005 and 2008. JPMorgan acquired Bear Stearns in 2008.
“It's been the most painful business ever,” said Jamie Dimon, the company's chairman and CEO. He added that it would be reasonable for investors to ask why they're in the mortgage business at all. But mortgages are critical for most Americans and they're an important product for the bank, he said.
“If I had a choice, I would never be in default servicing again,” he said. “I would tell anyone who's got a mortgage with us, 'you're 60 days late, we're selling the mortgage, and we don't want to do any business with you anymore.' It's just far too painful.”
The company is also reducing the number of mortgage options it offers. It's getting rid of some home equity loans with fixed payments. It's also getting rid of some interest-only mortgages, which have the effect of forcing borrowers to make bigger payments later in the loan. By the end of this year it will have cut its mortgage and home equity options from 37 down to 15.